On September 7, 2017, Judge Kinkeade issued an Order (available here) in SAP America v. Investpic. The Order granted SAP’s Motion to Find Case Exceptional and Award Fees. Under the Patent Act, the Court may award attorney’s fees to the prevailing party in exceptional cases. 35 U.S.C. § 285. “A case is exceptional if it stands out from other cases with respect to the substantive strength of a party’s litigating position considering both the governing law and the facts of the case or if the case stands out in the unreasonable manner in which the case was litigated.”
In the instant case, Judge Kinkeade found that the case was exceptional considering both Investpic’s litigation position and the manner in which Investpic litigated the case. As to Investpic’s litigation position:
[T]his case does stand out from the typical case in which claims of a patent were invalidated by a court. That is because Investpic was specifically warned by the USPTO, in an opinion issued in connection with a post grant review, that it looked very unlikely that these claims were directed toward patentable subject matter and very likely that the claims were invalid. The USPTO did not directly address this subject matter eligibility issue in that opinion because doing so would have been outside the authority of the USPTO for that particular proceeding. Instead the USPTO specifically invited Investpic to address this issue in another post grant review proceeding of the patent being conducted by the USPTO in which there was authority for the subject matter eligibility issue to be addressed. Instead of addressing this issue, after the USPTO created a serious cloud on the of the claims, Investpic ignored it and continued to assert its patent against companies like SAP. Which, eventually lead to the current lawsuit in which SAP sought and received a declaration that the claims of the asserted patent are invalid because they did not address patentable subject matter.
The Court also found that the case was exceptional with respect to the manner in which Investpic litigated–i.e., that it was not proper for Investpic’s owners to contact SAP’s sales people and pretend to be interested in purchasing SAP’s product to gather information thought to be useful in the lawsuit:
The Court also agrees that this case is exceptional in regards to the manner in which Investpic litigated this matter. While this litigation was on going, Mr. Lee Miller and Dr. Samir Varma, who are both owners of Investpic, reached out to SAP sales people and pretended to be potential purchasers of SAP’s product that is in contention in this matter. This was done under the guise of another company, Regulus International Capital Corp. (“Regulus”) which was operated by Mr. Miller. These two engaged in email and phone meetings with SAP’s sales people in which they inquired about SAP’s product. Those inquires directly related to the infringement contentions at issue in this matter. At the same time, Mr. Miller and Mr. Varma held themselves out to be only employees of Regulus and failed to disclose their relationship with Investpic and their interest in the outcome of this lawsuit. This interaction and pretense continued for at least three months in which Mr. Miller and Mr. Varma continued to gather infringement information about SAP’s product for the purpose of using this information in this litigation.
SAP’s counsel not aware of that this was going on until they were informed about this by Investpic’s counsel. In this conversation, Investpic’s counsel informed SAP’s counsel of the interactions between Invetpic’s owners and SAP sales representatives. Investpic’s counsel also asserted that Investpic intended to use the information in Investpic’s motion practice in this case. SAP argues that this amounts to an unreasonable manner of litigating this case, which makes the case exceptional. Investpic argues that this behavior does not make the case exceptional.
The Court is not persuaded by Investpic’s arguments that this behavior does not make this case exceptional. Investpic first appears to argue that the because of the ongoing litigation, SAP sales people should have been aware of Mr. Miller’s and Mr. Varma’s connection to and interest in this case. But, as pointed out by Investpic in other argument, the people being contacted at SAP were sales people. They were not people at SAP that would be expected to understand the details and nature of this case or of the patent asserted in this case. On the other hand, Mr. Miller and Mr. Varma, clearly knew about these issues and details because their inquiries were directed related to the infringement contentions that Investpic asserted in this case. They also clearly knew about these details and issues because of their connection to Investpic. They are both owners of Investpic; Mr. Miller is the operating manager of Investpic; and Dr. Varma is the inventor listed on the patent in suit in this matter. . . .
Considering the totality of the circumstances, the Court finds that the manner in which Investpic litigated this case and in particular the manner in which Mr. Miller and Mr. Varma conducted self help discovery under a pretense is sufficient to support a finding that this case is exceptional.
Of note, the Court declined to impose the attorney’s fees on Investpic’s principals:
SAP argues that the Court should not only hold Investpic liable for attorney’s fees but should also join Mr. Miller, Mr. Varma, and Regulus in this matter and hold each of these liable for attorney’s fees also. SAP argues that 35 U.S.C § 285 does not limit a court to awarding attorney fees against parties to the litigation but that a court may award those fees against any person or entity that caused the case to be exceptional. According to SAP this means that Mr. Miller, Mr. Varma, and Regulus should all be made parties and the Court should award attorney fees against these two people and the entity jointly with Investpic.
The Court denies SAP’s request to join Mr. Miller, Mr. Varma, and Regulus in this matter to hold each individually liable for attorney fees in this matter. While the Court agrees with SAP that 35 U.S.C. § 285 does not limit the award of attorney fees against parties and that the Court may join these additional people and the entity for the purposes of determining fee liability, the Court declines to do so. The Court believes that, considering Mr. Miller’s and Mr. Varma’s interest in Investpic, an award of attorney’s fees against Investpic alone is sufficient.
The Court concluded by allowing SAP to file a motion for recovery of its attorney’s fees within 14 days.
SAP noted in its motion that it had incurred about $540,000 in litigating the case—a case resolved within about seven months after the case was filed via a motion for judgment on the pleadings filed about five months after SAP answered. This is one reason (i.e., the significant attorney’s fees in patent-infringement litigation) why they say patent litigation is the sport of kings. It will be interesting to see how much Judge Kinkeade ultimately awards.