CAFC on NPE in Sarif case: "Importantly, Sarif did not delay in its litigation tactics"

The outcome was affirmance of Judge Stark of D. Delaware:
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Appellee Sarif Biomedical LLC (“Sarif”) sued Appellants
Brainlab, Inc., Brainlab AG, and Brainlab
Medizinische Computersysteme GmbH (collectively,
“Brainlab”) in the U.S. District Court for the District of
Delaware (“District Court”), alleging infringement of,
inter alia, claims 1–9 of U.S. Patent No. 5,755,725 (“the
’725 patent”). Following an order on claim construction
adverse to Sarif, see Sarif Biomed. LLC v. Brainlab, Inc.
(Sarif I), No. 13-846-LPS, 2015 WL 5072085, at *10 (D.
Del. Aug. 26, 2015), the parties jointly stipulated to final
judgment of invalidity and noninfringement, and Brainlab
filed a motion for attorney fees pursuant to 35 U.S.C.
§ 285 (2012). The District Court denied Brainlab’s Motion
for Attorney Fees. Sarif Biomed. LLC v. Brainlab, Inc.
(Sarif II), No. 13-846-LPS, 2016 WL 5422479, at *1 (D.
Del. Sept. 27, 2016) (Order on Attorney Fees).
Brainlab appeals the denial of attorney fees. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(1) (2012). We
affirm.

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Substantive strength
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The District Court properly evaluated the substantive
strength of Sarif’s case. The District Court found that
Sarif acted in “good faith” in part because, “[a]t each stage
of the litigation, [Sarif] provided detailed arguments,
grounded in the intrinsic evidence, in support of its proposed
constructions” and “obtained expert opinion which
supported its constructions.” Sarif II, 2016 WL 5422479,
at *2 (footnote omitted).2 Supporting its constructions
with citations to the specification and expert testimony,
Sarif identified two supporting structures for limitation
(e)—“a computer . . . using algorithms,”
(...)
Brainlab’s counterarguments are ultimately unpersuasive
under our standard of review. First, Brainlab
avers that the PTAB’s decision not to institute an inter
partes review for claims 1–9, after stating these claims
“cannot be construed” based on a likelihood that they are
indefinite, Brainlab, 2014 WL 5788571, at *5, demonstrates
the weakness of Sarif’s position, as it is an important
“objective indicator[] of the invalidity of the ’725
patent,” Appellants’ Br. 42. Brainlab places too much
significance on the PTAB’s determination. The PTAB
does not have authority to institute an inter partes review
under § 112. See 35 U.S.C. § 311(b). Therefore, as Brainlab
admitted, any conclusion regarding indefiniteness is
dicta.
(...)
Second, Brainlab argues Sarif’s proposed construction
is weak because portions of Sarif’s expert testimony
appear to undermine its ultimate construction.
(...)
Third, throughout its brief, Brainlab argues the District
Court “fail[e]d to make findings of fact in support of
its conclusion that Sarif’s case was not unusually weak”
and “ignored . . . overwhelming evidence.” Appellants’
Br. 37; see id. at 37–42. However, we have recognized
that “[t]he trial judge [i]s in the best position to understand
and weigh the[] issues,” and the District Court
“ha[d] no obligation to write an opinion that reveals [his]
assessment of every consideration.” Univ. of Utah v. MaxPlanck-Gesellschaft
zur Foerderung der Wissenschaften
e.V., 851 F.3d 1317, 1323 (Fed. Cir. 2017). Upon our
review of the record, we find the District Court adequately
considered the facts, and we are not left with a “definite
and firm conviction that a mistake has been made.”
Unreasonable manner
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Unreasonable Manner and Other Considerations
The District Court also did not clearly err in considering
the reasonableness of the manner in which Sarif
litigated this case or any other circumstances of this case.
Although Sarif modified its claim construction position
from the PTAB to the District Court, the District Court
correctly explained that
[i]t can . . . be reasonable for a party to propose
different constructions in PTAB and District
Court proceedings, as the PTAB must give claims
terms their “broadest reasonable construction,”
whereas District Courts give them the meaning
they would have to a “person of ordinary skill in
the art at the time of the invention.”
Sarif II, 2016 WL 5422479, at *2 (citing Cuozzo Speed
Techs., LLC v. Lee, 136 S. Ct. 2131, 2142 (2016)). Brainlab
claims the District Court committed legal error because
it did not consider whether this stated standard
applies to a means-plus-function clause such as limitation
(e). See Appellants’ Br. 45–46 (citing In re Donaldson Co.,
16 F.3d 1189, 1194–95 (Fed. Cir. 1994)
(...)
Brainlab also has failed to demonstrate that Sarif’s
motivations and actions as a whole were improper. See
Appellants’ Br. 53–56. Although we have stated “that a
pattern of litigation abuses characterized by the repeated
filing of patent infringement actions for the sole purpose
of forcing settlements, with no intention of testing the
merits of one’s claims, is relevant to a district court’s
exceptional[-]case determination under § 285,” SFA Sys.,
793 F.3d at 1350, the District Court considered Brainlab’s
evidence and concluded Brainlab “ha[d] not demonstrated
that this is a ‘nuisance suit’” because “[Sarif]’s status as a
non-practicing entity, the language of the press releases
directed toward its investors, its decision to allege infringement
against several other entities, and its decision
to settle other cases, do not combine to establish that this
case was always ‘meritless’ or ‘predatory,’” Sarif II, 2016
WL 5422479, at *2 (emphasis added). Importantly, Sarif
did not delay in its litigation tactics. For instance, the
District Court acknowledged that Sarif disclaimed claims
10–11, soon after the PTAB instituted an inter partes
review of those claims, and Sarif decided not to pursue
those claims in the District Court litigation. See id. at *1.
Moreover, Sarif stipulated to judgment of invalidity and
noninfringement a mere six days after the District Court
found claims 1–9 indefinite. See J.A. 983. In sum, the
District Court did not abuse its discretion. See SFA Sys.,
793 F.3d at 1352 (finding no abuse of discretion where
“[appellant] failed to proffer sufficient evidence of a pattern
of litigation misconduct by [appellee]”).

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Of interest

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Brainlab claims the District Court erred “[b]y limiting
itself to comparing Sarif’s conduct only to the cases ‘with
which [the District Court] has been involved.’” Appellants’
Br. 49 (emphasis added) (quoting Sarif II, 2016 WL
5422479, at *3). As we have explained above, the District
Court properly determined that this case is not exceptional,
grounding its reasoning in the correct legal standards
and a proper assessment of the facts. Therefore, we
decline Brainlab’s invitation to find legal error “based
upon [this] isolated statement stripped from its context.”
Waymo LLC v. Uber Techs., Inc., 870 F.3d 1350, 1361
(Fed. Cir. 2017) (internal quotation marks and citation
omitted).


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As background, some text from the district court opinion [ 2016 U.S. Dist. LEXIS 132127 ] -->


6. The Court is also unpersuaded that Plaintiffs conduct following the PTAB proceeding constituted an unreasonable approach to litigation or demonstrates that Plaintiffs case was extraordinarily weak. It is not unusual for a party to refine and revise its claim construction positions over the course of litigation. It can also be reasonable for a party to propose different constructions in PTAB and District Court proceedings, as the PTAB must give claim terms their "broadest reasonable construction," whereas District Courts give them the meaning they would have to a "person of ordinary skill in the art at the time of the invention." Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 195 L. Ed. 2d 423, 2016 WL 3369425, at *10 (U.S. 2016). It can also be reasonable for a patentee which believes in the validity of its claims to revise, clarify, or refine its claim construction strategy in light of a PTAB opinion that the claims are indefinite.



7. The subject matter at issue in the patent claims involved here is complex, and the proceedings before this Court involved construction of several terms in the asserted claims. Because Defendants have not shown that, as a whole, Plaintiffs claim construction arguments before this Court are inconsistent with those Plaintiff took before the PTAB, Plaintiffs modifications to its positions, while substantial, do not strike the Court as evidence that Plaintiffs case was extraordinarily weak. The Court does not conclude that it was unreasonable for Plaintiff to continue litigating this case in light of the need to revise its positions.

8. Defendants' additional '"evidence" does not persuade the Court of the substantive weakness of Plaintiffs case. First, the fact that a prior owner of the '725 patent declined to assert the patent in litigation does not indicate that either the prior owner or Plaintiff believed the patent to be invalid. Second, Defendants have not demonstrated that this is a "nuisance suit." Plaintiffs status as a non-practicing entity, the language of press releases directed toward its investors, its decision to allege infringement against several other entities, and its decision to settle other cases, do not combine to establish that [*8] this case was always "meritless" or "predatory."

9. As long as the test for awarding attorney fees turns on whether the case is "exceptional," the Court is obligated to consider the instant case in comparison to the full panoply of patent cases with which it has been involved, and needs to assess if the instant case is in some meaningful sense "uncommon," "rare; or "not ordinary." Octane Fitness, 134 S. Ct. at 1756. Having undertaken this analysis, the Court concludes that nothing about the instant case stands out as "exceptional'. in any respect, including the substantive strength of Plaintiffs unsuccessful positions or the manner in which Plaintiff litigated the case. Accordingly, the Court exercises its discretion to deny Defendants' request for attorney fees.