Adjustacam v Newegg patent appeal case summary

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ADJUSTACAM, LLC, Plaintiff-Appellee v.
NEWEGG, INC., NEWEGG.COM, INC., ROSEWILL, INC., Defendants-Appellants
2016-1882
Appeal from the United States District Court for the Eastern District of Texas in No. 6:10-cv-00329-JRG, Judge J. Rodney Gilstrap.
Decided: July 5, 2017

The Federal Circuit reversed the denial of attorney’s fees by the Eastern District of Texas. AdjustaCam sued Newegg and dozens of other defendants for patent infringement. Just before summary judgment briefing, AdjustaCam voluntarily dismissed its infringement claims against Newegg with prejudice, Newegg’s right to seek fees after dismissal. The district court denied Newegg’s request for attorneys’ fees. On appeal, the Federal Circuit remanded the case to the district court in light of intervening Supreme Court precedent, Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014). The district court, this time with a different judge presiding, again denied Newegg’s motion for attorneys’ fees.

The Federal Circuit’s opinion states that the district court abused its discretion by failing to follow the mandate on remand to evaluate the totality of the circumstances under Octane. The Court stated that it “specifically instructed the judge on remand to ‘evaluate’ the merits of Newegg’s motion in the first instance based on the new Octane standard, which did not occur.” The Court indicated that “the district court adopted the previous judge’s factual findings wholesale.” The remand order also indicated that “Newegg’s argument had ‘significant merit.’”

The Court also opined that AdjustaCam had filed a weak infringement case against Newegg, which became “objectively baseless after the district court’s Markman order.” The patent-in-suit was directed to an apparatus for supporting a camera comprising a hinge member adapted to be rotatably attached to the camera, the camera rotating about a first axis of rotation relative to said hinge member; and a support frame rotatably attached to the hinge member and rotating about a second axis of rotation relative to the support frame. The district court’s claim construction found that “rotatably attached” objects rotate over a single axis. Newegg’s accused products use a ball-and-socket joint, which facilitated rotation about multiple axes.

The district court found that AdjustaCam’s litigation position was not exceptional because Newegg’s ball-and-socket products were constrained in such a way that AdjustaCam could reasonably argue they rotated on a single axis. According to the Federal Circuit, this finding was “a clearly erroneous assessment of the evidence,” noting that AdjustaCam did not advance that argument or introduce any evidence that Newegg’s ball-and-socket products were limited to a single axis of rotation. “We find no dispute that Newegg’s cameras rotate about at least two axes … therefore, AdjustaCam’s litigation position was baseless. These are traits of an exceptional case.”

Another factor in finding an exceptional case was that AdjustaCam litigated the case “in an unreasonable manner” by repeatedly serving expert reports and declarations at the last minute. AdjustaCam served a new expert report on Newegg the day of that expert’s deposition. On remand, AdjustaCam filed a supplemental declaration making new infringement arguments. In its briefing before the Court, AdjustaCam it did not disclose that the supplemental declaration was executed more than two years after the initial fees determination. “[T]he totality of the circumstances demonstrates other dubious behavior that, when considered collectively, warrants fees under § 285.”

Still another factor was a pattern of low and erratic settlements with other defendants in the litigation. “AdjustaCam asserted nuisance-value damages against many defendants, settled with them for widely varied royalty rates, and continued to press baseless infringement contentions well past an adverse Markman order and expert discovery.” This factor was “not determinative” under the “clearly erroneous” standard of review “[W]e would be inclined to affirm if AdjustaCam’s damages methodology were the only issue. In light of AdjustaCam’s frivolous infringement argument and unreasonable manner of litigation, however, we conclude that the district court clearly erred by failing to consider AdjustaCam’s damages methodology as part of a totality- of-the-circumstances analysis.”

While recognizing the “deference owed to district courts in deciding fees motions,” the Court considered “the totality of these case-specific circumstances” in holding that the district court abused its discretion in denying Newegg’s motion for fees.

Read more:  Federal Bar member attorneys may access the full case summary by Barnwell Whaley attorney Bill Killough in the August 2017 issue of Federal Circuit Case Digest. https://www.fedcirbar.org/IntegralSource/Case-Digest

Additionally, you may read the full opinion here.

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thumbnail headshot image of patent attorney BC KilloughB.C. “Bill” Killough is a registered patent attorney with Barnwell Whaley law firm with offices in Charleston, SC and Wilmington, NC. On behalf of his clients, Bill has obtained more than 275 United States patents, participated in prosecuting more than 100 foreign patent applications and he has filed more than 1000 trademark applications with the US Patent and Trademark Offices.