The Software IP Report

Unreasonable Section 101 Arguments Support “Exceptional Case” Finding and Award of Attorney Fees Against Patent Plaintiff

Based on the plaintiff’s “unreasonable § 101 positions and vexatious litigation strategy,” Judge Gilstrap in the Eastern District of Texas found an exceptional case under 35 U.S.C. § 285, and granted a defense motion for attorney fees in eDekka LLC v., Inc., No. 2:15-CV-541 (E.D. Tex. December 17, 2015). At risk of overstating the matter, this case is a bellwether of sorts: a patent owner, oft-accused of unreasonably using the threat of litigation costs to extract settlements, has been taken to task by a court reputed to be the most plaintiff-friendly in the United States.  The fallout from Alice Corp. v. CLS Bank Int’l. continues, sometimes in interesting and unexpected ways.

The present case was a consolidation of Plaintiff eDekka’s hundreds of suits against alleged infringers of U.S. Patent No. 6,266,674. Most of the defendants were “online retailers that offer a shopping cart feature on their e-commerce websites.” Claims of the ’674 patent, alleged to read on the shopping cart feature, were directed to a process of receiving, labeling, and storing information. The court had previously held these claims invalid under 35 U.S.C. § 101 for claiming abstract subject matter; in ruling on the defendants’ Section 101 motions, the court found that the asserted claims were not drafted narrowly enough to be performed with anything other than a generic computer. The claims of the ’674 patent, said the court, “were clearly” directed to an abstract idea. The court found the ‘674 Patent to be “demonstrably weak on its face.”

After explaining that, under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014), the determination of an “exceptional case” under 35 U.S.C. § 285 is left to the court’s discretion based on a totality of the circumstances, the court turned to the plaintiff’s behavior. eDekka’s arguments for patent-eligibility, the court found, were “objectively unreasonable.”

Moreover, the litigation was conducted in an unreasonable manner: “eDekka repeatedly offered insupportable arguments on behalf of an obviously weak patent.” For example, eDekka admitted at the hearing on the defendants’ Section 101 motions that the asserted claims did not require a computer, but then argued that the claims “require a special purpose computer and provided two wholly conclusory declarations to support the assertion.” Additionally, “eDekka asserted that the patented claims ‘improve the functioning of technology . . . [but] offered only vague support for this contention.” Further, there was “absolutely no basis in the claim language to support eDekka’s newfound position.”

The court took into account eDekka’s history of an “aggressive strategy that avoids testing its case on the merits and instead aims for early settlements falling at or below the cost of defense.” Discussing this point, it is fair to say that the court all but accused eDekka of engaging in extortion. The court also took pains to note that it did “not view every plaintiff’s loss as an automatic indicator that the case is exceptional.” Here, however, eDekka’s meritless arguments and “vexatious litigation strategy” crossed “the threshold of exceptionality” and warranted an award of attorney fees.

Thanks to my colleague Daniel Schaffer for an initial draft of this post.