Amazon.com v. PersonalWeb Techs. (In re PersonalWeb Techs.)

• Docket Number: 2021-1858,2021-1859,2021-1860
• Decision Date: 03 November 2023
• Parties: IN RE: PERSONALWEB TECHNOLOGIES LLC, v. PERSONALWEB TECHNOLOGIES LLC, Defendant-Appellant AMAZON.COM, INC., AMAZON WEB SERVICES, INC., Plaintiffs-Appellees LEVEL 3 COMMUNICATIONS, LLC, Defendant PERSONALWEB TECHNOLOGIES LLC, Plaintiff-Appellant LEVEL 3 COMMUNICATIONS, LLC, Plaintiff v. TWITCH INTERACTIVE, INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Federal Circuit

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IN RE: PERSONALWEB TECHNOLOGIES LLC,

AMAZON.COM, INC., AMAZON WEB SERVICES, INC., Plaintiffs-Appellees v. PERSONALWEB TECHNOLOGIES LLC, Defendant-Appellant LEVEL 3 COMMUNICATIONS, LLC, Defendant PERSONALWEB TECHNOLOGIES LLC, Plaintiff-Appellant LEVEL 3 COMMUNICATIONS, LLC, Plaintiff v. TWITCH INTERACTIVE, INC., Defendant-Appellee

Nos. 2021-1858, 2021-1859, 2021-1860

United States Court of Appeals, Federal Circuit

November 3, 2023

Appeals from the United States District Court for the Northern District of California in Nos. 5:18-cv-00767-BLF 5:18-cv-05619-BLF, 5:18-md-02834-BLF, Judge Beth Lab-son Freeman.

J DAVID HADDEN, Fenwick & West LLP, Mountain View, CA, for Amazon.com, Inc., Amazon Web Services, Inc, Twitch Interactive, Inc. Also represented by RAVI RAGAVENDRA RANGANATH, SAINA S. SHAMILOV; TODD RICHARD GREGORIAN, San Francisco, CA.

MICHAEL AMORY SHERMAN, Stubbs Alderton & Markiles LLP, Sherman Oaks, CA, for PersonalWeb Technologies LLC. Also represented by JEFFREY F. GERSH, WESLEY WARREN MONROE.

Before LOURIE, DYK, and REYNA, Circuit Judges.

OPINION

REYNA, CIRCUIT JUDGE.

PersonalWeb appeals a district court award of $5,187,203.99 in attorneys' fees entered against it. PersonalWeb argues that we should reverse the award because the district court erred in finding that the underlying case was "exceptional" within the meaning of the term under 35 U.S.C. § 285. PersonalWeb also contends that, even if the case was exceptional and fees are appropriate, the district court erred in its calculation of the overall fee award. Because the district court did not abuse its discretion in finding this case exceptional or in calculating the total fees awarded, we affirm.

BACKGROUND

This is the third appeal from the same multidistrict litigation ("MDL"). See In re PersonalWeb Techs., LLC, 961 F.3d 1365 (Fed. Cir. 2020) ("PersonalWeb I"); In re PersonalWeb Techs., LLC, No. 20-1566, 2021 WL 3557196 (Fed. Cir. Aug. 12, 2021) ("PersonalWeb II"). In 2011, PersonalWeb sued Amazon in the Eastern District of Texas (Case No. 6:11-cv-658, referred to as the "Texas Action"), alleging that Amazon's S3 technology infringed PersonalWeb's patents. PersonalWeb I, 961 F.3d at 1370. The asserted pa-tents^[1] are generally directed to what the inventors termed the "True Name" for data items. Id. at 1369-70. After the district court construed the claim terms, PersonalWeb stipulated to dismissal, resulting in the district court dismissing with prejudice the infringement claims against Amazon and entering final judgment against PersonalWeb. Id. at 1372.

In 2018, PersonalWeb asserted the True Name patents against eighty-five Amazon customers (the "customer cases") across the country for their use of Amazon S3. Id.; Appellant Br. 4. Amazon intervened and filed a declaratory judgment action against PersonalWeb "seeking an order barring PersonalWeb's infringement actions against Amazon and its customers based on [the Texas Action]." PersonalWeb I, 961 F.3d at 1372. The customer cases and Amazon's declaratory judgment action were consolidated into an MDL and assigned to the Northern District of California. Id. PersonalWeb represented that if it lost its case against Twitch, a customer case, it would not be able to prevail in the other customer cases. Id. On that basis, the district court stayed the other customer cases so that only the Twitch customer case and Amazon's declaratory judgment action proceeded in parallel.^[2] Id.

In the declaratory judgment action, PersonalWeb counterclaimed against Amazon, alleging that Amazon S3 infringed its True Name patents. Id. Almost a year into the case, PersonalWeb accused another Amazon product, CloudFront, of infringement. J.A. 1188-1200. Amazon moved for summary judgment.

The district court granted partial summary judgment of non-infringement of the S3 product in favor of Amazon, based on the Kessler doctrine and claim preclusion. PersonalWeb I, 961 F.3d at 1373. We affirmed in PersonalWeb I. Id. at 1376-79. The litigation continued as to CloudFront. PersonalWeb II, 2021 WL 3557196, at *2. The district court granted summary judgment of non-infringe-ment as to the CloudFront product in favor of Amazon and Twitch because, under the district court's claim construction, PersonalWeb conceded it could not meet its burden of proving infringement. Id. at *3, *6. We affirmed in PersonalWeb II. Id. at *6.

The district court granted Amazon and Twitch's motion for attorneys' fees and costs under 35 U.S.C. § 285,^[3] determining that the case was exceptional. The district court found that:

(1) PersonalWeb's infringement claims related to Amazon S3 were objectively baseless and not reasonable when brought because they were barred due to a final judgment entered in the Texas Action;

(2) PersonalWeb frequently changed its infringement positions to overcome the hurdle of the day;

(3) PersonalWeb unnecessarily prolonged this litigation after claim construction foreclosed its infringement theories;

(4) PersonalWeb's conduct and positions regarding the customer cases were unreasonable; and

(5) PersonalWeb submitted declarations that it should have known were not accurate.

In re PersonalWeb Techs., LLC, No. 18-MD-02834-BLF, 2020 WL 5910080, at *20 (N.D. Cal. Oct. 6, 2020) ("Decision"). The district court calculated an award of attorneys' fees and costs totaling $5,401,625.06, of which $5,187,203.99 was attorneys' fees. See In re PersonalWeb Techs., LLC, No. 18-MD-02834-BLF, 2021 WL 796356, at *18 (N.D. Cal. Mar. 2, 2021) ("Fees Decision I") (finding "Amazon is entitled to $4,615,242.28 in fees for 9,263.43 hours of work and $203,300.10 in non-taxable costs"); In re PersonalWeb Techs., LLC, No. 18-MD-02834-BLF, 2021 WL 11113167, at *2 (N.D. Cal. Apr. 19, 2021) ("Fees Decision II") (finding "Defendants are entitled to $571,961.71 in fees for 926.92 hours of work and $11,120.97 in non-tax-able costs").

PersonalWeb appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

LEGAL STANDARD

"The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. To determine whether a case is exceptional under § 285, courts consider "the totality of the circumstances." Octane Fitness, LLC v. ICON Health &Fitness, Inc., 572 U.S. 545, 554 (2014).

We review a district court's exceptional-case determination and award of fees under § 285 for abuse of discretion. See Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 563-64 (2014). "To meet the abuse-of-discretion standard, the moving party must show that the district court has made 'a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings.'" In re Rembrandt Techs. LP Pat. Litig., 899 F.3d 1254, 1266 (Fed. Cir. 2018) (quoting Bayer CropScience AG v. Dow AgroSciences LLC, 851 F.3d 1302, 1306 (Fed. Cir. 2017)). We "give great deference to the district court's exercise of discretion in awarding fees." Energy Heating, LLC v. Heat On-The-Fly, LLC, 889 F.3d 1291, 1307 (Fed. Cir. 2018) (citation omitted).

DISCUSSION

PersonalWeb argues that the district court erred in finding this case exceptional under 35 U.S.C. § 285. Alternatively PersonalWeb contends that, even if the case was exceptional and an award of fees was appropriate, the district court erred in assessing $1,948,987.01 of the total $5,187,203.99 attorneys' fees award. We first address the exceptionality issue.

I. EXCEPTIONALITY

An exceptional case is "simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, 572 U.S. at 554. The district court's exceptional-case determination was based on the five findings discussed above. We review each finding in turn.

1. Objectively Baseless

PersonalWeb contends that the district court abused its discretion in finding that this case was objectively baseless. The district court relied on the Kessler doctrine and claim preclusion in concluding that "PersonalWeb's infringement claims related to the use of Amazon S3 were objectively baseless and clearly untenable based on established Federal Circuit precedent[s] and in light of the with-prejudice dismissal of the Texas Action." Decision, at *8.

PersonalWeb argues that the district court's finding of objective baselessness was in error because PersonalWeb I, "while adverse to [it], illustrates that the reach of Kessler had not been a well-settled issue" and "extended Kessler to situations where non-infringement had not previously been adjudicated." Decision, at *5 (citation omitted); see Appellant Br. 36-38; Reply Br. 2-3 (PersonalWeb arguing that the Solicitor General was invited to file a brief expressing its views on whether the Kessler doctrine should have applied in PersonalWeb I). For claim preclusion, PersonalWeb argues that the district court did not address its argument on privity. Appellant Br. 34-36.

We conclude that the district court did not abuse its discretion when considering Kessler in its assessment of ex-ceptionality.^[4] In Kessler, the Supreme Court reasoned that, after a "final judgment" of non-infringement in favor of the accused infringer Kessler allowing follow-up suits by the patentee against Kessler's customers over the noninfringing product "will be practically to destroy Kessler's judgment right." Kessler v. Eldred, 206 U.S. 285, 289-90 (1907); Rubber Tire Wheel Co. v. Goodyear Tire &Rubber Co., 232 U.S. 413, 418 (1914) (describing Kessler as having gone "no further than to hold it to be a wrongful interference with Kessler's business to sue his customers" over the...