Despite a recent U.S. Supreme Court decision that encourages more fee-shifting in patent cases, the online retailer and enthusiastic “troll hunter” Newegg Inc. got trounced on Friday in a fee fight with the patent licensing entity Pragmatus Telecom.
In an eight-page decision, U.S. District Judge Richard Andrews in Wilmington, Del., refused to shift attorneys fees and costs in a patent case Pragmatus brought against Newegg relating to “live chat” customer service technology. Andrews didn’t even reach the question of whether the case qualified as “exceptional,” and thus appropriate for fee shifting under patent precedent. Instead, he ruled that Newegg failed to show it won the infringement dispute in the first place.
Led by well-known patent enforcers Anthony Grillo and Bill Marino, Pragmatus and related companies have brought a slew of infringement cases around the country, including a batch involving patents offloaded by the massive patent aggregator Intellectual Ventures. Pragmatus is represented by one of IV’s go-to outside law firms, Feinberg Day Alberti & Thompson.
Pragmatus sued Newegg in 2012, alleging it infringes three patents through live chat software supplied to it by Moxie Software Inc. and Liveperson Inc. Pragmatus voluntarily dropped the case in February 2014, acknowledging that Newegg is covered by licensing deals Pragmatus reached with the suppliers after the litigation began. Newegg’s lawyers at the Webb Law Firm, Daniel Brean and Kent E. Baldauf Jr., quickly moved for attorneys fees, claiming that the company had prevailed against a plainly meritless lawsuit.
While that motion was pending, the Supreme Court issued its April 29 decision in Octane Fitness v. Icon Health & Fitness, ruling that fee-shifting is appropriate in cases that “stand out from others with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated.” That’s a more defendant-friendly standard than the one previously put forward by the U.S. Court of Appeals for the Federal Circuit, and it’s been hailed as a deterrent to so-called patent trolls wielding weak patents.
Octane didn’t do Newegg any good in the Pragmatus case, however. In Friday’s ruling, Andrews ruled that Newegg couldn’t show that it was the prevailing party, making the strength of Pragmatus’ claims beside the point. The judge even suggested that if anyone won the case, it was Pragmatus for parlaying litigation against Newegg into “non-trivial” licensing deals with Newegg’s suppliers.
“Dismissal for a license obtained by a third party that protected Newegg does not settle a dispute in favor of Newegg,” Andrews wrote. “It cannot be correct that a party can benefit from a bona fide license agreement, obtained after the litigation began, and claim to be the prevailing party, without a single substantial court decision that favors that party.”
Newegg general counsel Lee Cheng didn’t return a call seeking comment on Friday.