Ilor Llc v. Google Inc.

• Decision Date: 11 January 2011
• Docket Number: Nos. 2010–1117,2010–1172.,s. 2010–1117
• Parties: ILOR, LLC, Plaintiff–Appellant,v.GOOGLE, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

631 F.3d 1372

97 U.S.P.Q.2d 1597

ILOR, LLC, Plaintiff–Appellant,

v.GOOGLE, INC., Defendant–Appellee.

Nos. 2010–1117

2010–1172.

United States Court of Appeals, Federal Circuit.

Jan. 11, 2011.

David E. Schmit, Frost Brown Todd LLC, of Cincinnati, OH, argued for plaintiff-appellant.Frank E. Scherkenbach, Fish & Richardson P.C., of Boston, MA, argued for defendant-appellee. With him on the brief were Kurt L. Glitzenstein; and Shelley K. Mack, of Redwood City, CA.

Before RADER, Chief Judge, LINN and DYK, Circuit Judges.

DYK, Circuit Judge.

iLOR, LLC (“iLOR”) appeals from an order of the United States District Court for the Eastern District of Kentucky finding this case exceptional under 35 U.S.C. § 285 and awarding attorneys' fees and costs and expenses. iLOR, LLC v. Google, Inc., No. 5:07–CV–109, Doc. 93, 2009 WL 3367391 (E.D.Ky. Oct.15, 2009). This decision was based on a finding that iLOR's proposed construction of claim 26 of U.S. Patent No. 7,206,839 (“'839 patent”) was baseless, and that iLOR knew or should have known that the Google Notebook product did not infringe its patent. Id. at *4.

Because we hold that iLOR's proposed construction of claim 26 was not objectively baseless, we reverse.

Background

iLOR is an Internet company and assignee of the '839 patent. This patent is directed to a “[m]ethod for adding a user selectable function to a hyperlink.” '839 Patent at [54]. A hyperlink is a “string of text or a computer graphic that a user can ‘click’ with the mouse pointer” to open a new browser page. Id. at col.1 ll.24–26. Claim 26, the only claim at issue, provides:

A method for enhancing a hyperlink, comprising: providing a user-selectable link enhancement for a toolbar, the toolbar being displayable

based on a location of a cursor in relation to a hyperlink in a first page in a first window of an application, wherein said first page is associated with a first uniform resource locator (URL), wherein said hyperlink is associated with a second URL and a second page, wherein said user-selectable link enhancement is adapted to display a graphical element based on said first URL;

receiving an indication of a first user selection of said link enhancement; and

as a result of said first user selection,

capturing said first URL associated with said first page; and displaying a graphical element, said graphical element associated with said captured first URL, said graphical element adapted to cause said first page to be displayed as a result of a second user selection of said graphical element.

Id. at col. 12 l.59–col. 13 l.13 (emphasis added).

In its infringement suit against Google in the United States District Court for the Eastern District of Kentucky, iLOR alleged that the Google Notebook product infringed claim 26 of the '839 patent because the online application had a feature that allowed a user to right-click on a hyperlink while the cursor was positioned over that hyperlink. This action caused a toolbar to be displayed from which the user could select a “Note This Item” option to bookmark the URL address of the hyperlink for later viewing. Google counterclaimed, seeking a declaratory judgment of non-infringement, invalidity, and unenforceability based on inequitable conduct. Relying only on claim 26, iLOR moved for a preliminary injunction, requesting that Google be enjoined from using or inducing others to use Google Notebook in a way that infringed that claim.

In connection with the preliminary injunction motion, the only disputed limitation of claim 26 was “the toolbar being displayable based on a location of a cursor in relation to a hyperlink.” Id. at col. 12 ll.63–64 (emphasis added). Google argued that the “being displayable” limitation only covered methods where the toolbar was automatically displayed when a cursor was proximate to the hyperlink. iLOR contended that the claim also covered an embodiment where a right-mouse click was required to display the toolbar. The district court agreed with Google and construed the claim to mean that “the toolbar is ‘automatically displayed’ upon the placement of the cursor in proximity to a hyperlink with no further action on the part of a user.” iLOR, LLC v. Google, Inc., No. 5:07–CV109, Doc. 70, 2007 WL 4259586, at *6 (E.D.Ky. Nov.30, 2007).

The district court supported its construction by looking to the ordinary meaning of the claim language, concluding that the language of claim 26 “means simply that the toolbar is displayable or capable of being displayed, put before the view of the user, or made evident based on the location of the cursor.” Id. at *4. The court also noted that the specification distinguished the current invention from Web browsers in which a user could open a new window by “right clicking on [a] link and then clicking on the ‘open in new window’ menu [item].” Id. at *5; see '839 Patent col.6 ll.22–27. The court was also persuaded by the prosecution history, which suggested that iLOR contemplated a display of the toolbar without further user action. iLOR, 2007 WL 4259586, at *6–8. The court thus concluded that the “displayable” limitation of claim 26 did not teach a right-click action in order to display a toolbar. Because it was undisputed that Google Notebook did not automatically display its toolbar, but instead required the user to right-click on the hyperlink, the district court granted summary judgment on non-infringement and dismissed the suit with prejudice. Id. at *9.

iLOR appealed, and we approved the district court's construction of claim 26, holding that the district court therefore did not err in denying a preliminary injunction. iLOR, LLC v. Google, Inc., 550 F.3d 1067, 1069 (Fed.Cir.2008). In that first appeal, we agreed that the language of the claim and the specification suggested that the toolbar display was automatic and “based on the location of the cursor” in relation to the hyperlink. Id. at 1073. We also found that the abstract and specification permitted an interpretation in which “user inaction ” (i.e., hovering the cursor over the hyperlink) may cause the toolbar to display, but nothing in the specification indicated that a further action, such as right-clicking, was required. Id. at 1074. For example, we noted that the abstract provides “[w]hen the cursor has remained near the hyperlink for a predetermined time period, a toolbar is displayed containing one or more link enhancements that the user may select.” Id. (quoting '839 Patent, at [57] ).

Finally, we agreed with the district court that there was support in the prosecution history that iLOR contemplated an automatic toolbar display. During the prosecution of the '839 patent's parent application, iLOR distinguished a prior art Newfield patent, which, it claimed, required further user action for a display, not merely locating the cursor near the hyperlink. The disclaimer stated, in relevant part:

First, Newfield does not teach detecting a cursor in proximity to a hyperlink. Instead, Newfield teaches that a user must click on or select a hyperlink to access the breadth-first search system of Newfield. In contrast, the present invention detects a cursor in proximity to the hyperlink. Therefore Newfield does not teach detecting a cursor in proximity to a hyperlink.

Joint App. 1465 (emphases altered) (internal citation omitted).

After the disposition of that first appeal, Google moved to recover its attorneys' fees and costs and expenses under 35 U.S.C. § 285. On October 15, 2009, the district court granted Google's motion, finding the case exceptional under 35 U.S.C. § 285 and awarding attorneys' fees and costs and expenses. In so ruling, the district court found that the case was “not close” on the merits (i.e., objectively baseless) and that iLOR had acted in subjective bad faith. iLOR appealed from the October 15, 2009, order. Thereafter, on December 23, 2009, the district court issued a final order increasing the attorneys' fee award to $627,039.25 and the total award to $660,351.93. iLOR again appealed, and we consolidated the two pending appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

Discussion

Under 35 U.S.C. § 285, a “court in exceptional cases may award reasonable attorney[s'] fees to the prevailing party.” We review an award of attorneys' fees for abuse of discretion. Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358, 1376 (Fed.Cir.2001). However, a finding that a case is exceptional under § 285 is reviewable only for clear error. See Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., 549 F.3d 1381, 1385 (Fed.Cir.2008). “A district court abuses its discretion when its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.” Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed.Cir.1998) (en banc).

The sanctions imposed under § 285 carry serious economic and reputational consequences for both litigants and counsel, and

[d]espite our reluctance to second-guess the judgment of trial judges who typically have intimate knowledge of the case, we have the responsibility, in light of the substantial economic and reputational impact of such sanctions, to examine the record with care to determine whether the trial court has committed clear error in holding the case exceptional or has abused its discretion with respect to the fee award. Where we have found error, we have reversed exceptional case findings and vacated attorney fee awards based on those findings.

Medtronic Navigation, Inc. v. BrainLAB Medizinische Computersysteme GmbH, 603 F.3d 943, 953 (Fed.Cir.2010).

I

A

Section 285 must be interpreted against the background of the Supreme Court's decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993). There, the Court recognized that the right to bring and defend litigation implicated First Amendment rights and that...