Blackbird Tech LLC, et al. v. Health in Motion LLC, et al.

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

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

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.”

2019

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