Blackbird tagged with $350K in attorney fees; trial judge wanted to deter the licensing entity from making similar weak arguments in the future

January 24, 2020

Blackbird Tech LLC, DBA Blackbird Technologies,

Plaintiff-Appellant
v.
Health In Motion LLC, DBA Inspire Fitness, Leisure Fitness Equipment LLC,

Defendants-Appellees

2018-2393

December 16, 2019

 

Case Summary by Frederick Hadidi

 

35 USC §285 says that a court “may award reasonable attorney fees to the prevailing party” in exceptional cases. The Supreme Court’s 2014 Octane Fitness decision explains that such a case is one that “stands out from others respect to the substantive strength of a party’s litigating position … or the unreasonable manner in which the case was litigated.” The Court went on to say that there is no precise rule or formula for making these determinations; rather District Courts may “determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.”

 

In the decision in this case (Blackbird Tech v. Health in Motion), the Federal Circuit describes a raft of litigation (mis)behaviors that—when combined as they were here—can lead to a sizable attorney fee award.

 

Blackbird Tech LLC is a patent licensing entity that is owned by attorneys. As of 2018 it had filed more than 110 patent litigations, none of which had been decided on the merits in its favor. In the case it had filed against Health in Motion, Blackbird asserted US patent no. 6,705,976, which is directed to a resistive training exercise device.

 

After making a series of progressively smaller settlement demands (including a zero-dollar “walkaway” offer), after opposing the defendant’s summary judgment motion, and shortly before trial, Blackbird executed a covenant not to sue and filed a motion to dismiss. Health in Motion then moved for more than $350,000 in attorney fees. 

 

In its order granting the defendant’s motion, the District Court found that Blackbird’s claim construction and infringement positions were “meritless” and “frivolous.” Blackbird appealed, arguing that the trial judge had abused his discretion in granting the fee award.

 

In its decision affirming the award, the Federal Circuit agreed with the lower court that Blackbird’s claim construction and infringement positions were meritless, noting that even if the plaintiff’s arguments were assumed to be correct, there would still be no infringement of the asserted claims.

 

Blackbird also made the case that the attorney fee award was improper, because neither the District Court nor the defendant adequately informed Blackbird that its positions were weak. The Court of Appeals rejected this argument, pointing out that “the exercise of even a modicum of due diligence by Blackbird, as part of a pre-suit investigation, would have revealed the weaknesses in its litigation position.” The panel also said that Blackbird was made aware of the defendant’s intention to seek attorney fees at least as early as 2016, when Health in Motion requested attorney fees in its answer to Blackbird’s complaint.

 

Next, the Federal Circuit said that the lower court did not abuse its discretion in determining that the case “stands out” with regard to the manner in which Blackbird litigated, explaining that the record shows “numerous, unexcused delays” by Blackbird in producing documents, as well as the plaintiff’s attempts to withhold responsive documents entirely. Moreover, Blackbird had made “multiple settlement demands that were far less than the anticipated cost of defense,” showing that Blackbird had acted in bad faith by “exploiting the high cost to defend complex litigations to extract a nuisance value settlement.”

 

The District Court’s decision also explained that its attorney fee award was intended to deter Blackbird from making similar weak arguments in the future, and noted that the plaintiff had filed 100+ patent litigations, without a single case decided on the merits in its favor. Citing its 2017 Inventor Holdings decision, the Federal Circuit agreed that it was within the lower court’s discretion to consider deterrence when deciding whether to award attorney fees.

 

Blackbird’s final argument was that given the amount at stake —the first settlement offer was only for $80,000)—the District Court should have determined whether it is reasonable to spend more than $350,000 to defend such a small claim. Although there are Federal Circuit decisions that caution against spending “countless hours” defending against small claims, the Court of Appeals said that the number of hours billed in this case (about 650) is not even close to the “countless hours” mentioned in those decisions, and that the record supports the conclusion that the plaintiff’s conduct “so severely affected every stage of the litigation that a full award of attorney fees was proper here.”   Click here for the PDF.

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