BroadSoft, Inc. v. CallWave Commc'ns, LLC

BROADSOFT, INC., Plaintiff, v. CALLWAVE COMMUNICATIONS, LLC, Defendant.

Civil Action No. 13-711-RGA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

August 8, 2019

MEMORANDUM OPINION

I. INTRODUCTION

Presently before the court post-judgment in this declaratory judgment action for non-infringement and invalidity is a motion to declare this case exceptional under 35 U.S.C. § 285, filed by plaintiff BroadSoft, Inc. ("BroadSoft"). (D.I. 425)¹ Defendant CallWave Communications, LLC ("CallWave") opposes the motion. (D.I. 431) For the following reasons, BroadSoft's motion is denied.

II. BACKGROUND

BroadSoft initiated the present litigation against CallWave on April 23, 2013, asserting causes of action for a declaratory judgment of non-infringement and invalidity of four CallWave patents, including U.S. Patent Nos. 8,351,591 ("the '591 patent"), and 7,822,188 ("the '188 patent"). (D.I. 1) On September 27, 2013, CallWave filed its answer and counterclaims accusing BroadSoft's BroadWorks product of infringing the '188 and '591 patents. (D.I. 21 at 13-16)

The CallWave patents relate to methods of placing calls from a call processing system in response to a request and methods for allowing a user to screen a call. (D.I. 1 at ¶ 8) Prior to thefiling of the present action, CallWave filed suit in this District in January and February 2013, alleging infringement of the CallWave patents by Telovations, Inc. ("Telovations"), a former BroadSoft customer and software licensee, and Bright House Networks, LLC ("Bright House"). (Id. at ¶¶ 9-21) Telovations and Bright House then sought indemnification from BroadSoft because BroadSoft licensed the accused BroadWorks software product to them. (D.I. 10 at 2-4)

The court issued a Memorandum Opinion and Order in the present litigation on October 1, 2017, granting BroadSoft's motion for judgment on the pleadings based on patent ineligibility under 35 U.S.C. § 101, and granting BroadSoft's motion for summary judgment of invalidity. (D.I. 421; D.I. 422) The court entered judgment in favor of BroadSoft and against CallWave on October 2, 2017. (D.I. 423)

On October 16, 2017, BroadSoft filed the instant motion for attorneys' fees and costs pursuant to 35 U.S.C. § 285. (D.I. 425) On October 27, 2017, CallWave filed an appeal to the Federal Circuit regarding the court's Memorandum Opinion and Order granting judgment in favor of BroadSoft. (D.I. 430) The court stayed consideration of the motion for attorneys' fees and costs pending the outcome of the appeal before the Federal Circuit. (D.I. 442) The Federal Circuit issued its mandate on November 26, 2018, affirming the decision of the District Judge, and the stay was lifted on the motion for attorneys' fees and costs. (D.I. 450)

III. LEGAL STANDARD

Section 285 provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The Supreme Court has defined "an 'exceptional' case [as] simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness LLC v. IconHealth & Fitness, Inc., 572 U.S. 545, 554 (2014). When considering whether a case is exceptional, district courts are to exercise their discretion on a case-by-case basis, considering the totality of the circumstances. Id. Relevant factors for consideration include "frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Id. at 554 n.6 (internal quotation marks omitted). Cases which may merit an award of attorney fees include "the rare case in which a party's unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so 'exceptional' as to justify an award of fees" or "a case presenting either subjective bad faith or exceptionally meritless claims." Id. at 546. A movant must establish its entitlement to attorneys' fees under § 285 by a preponderance of the evidence. Id. at 557.

IV. ANALYSIS

It is undisputed that BroadSoft is the prevailing party. Following the Federal Circuit's mandate affirming the judgment of the District Court, BroadSoft has indisputably received relief on the merits which alters the legal relationship of the parties. See Parallel Iron LLC v. NetApp Inc., 70 F. Supp. 3d 585, 589 (D. Del. 2014) (holding that, "for a party to be a prevailing party, that party must win a dispute within the case in favor of it that materially alters the legal relationship between the parties at the time of the judgment."). Thus, the only issue is whether the case is exceptional. The court must evaluate the totality of the circumstances to determine whether this case warrants exceptional status under § 285.

A. Sequential Ring Claim²

In support of its motion to declare the case exceptional, BroadSoft alleges that CallWave's assertion of the sequential ring claim is objectively meritless because CallWave asserted the claim following the Supreme Court's 2010 decision in Bilski v. Kappos, 561 U.S. 593 (2010), which held that adding a generic computer implementation to human activity was insufficient to satisfy the patent eligibility standard under § 101. (D.I. 426 at 16-17) BroadSoft contends that CallWave maintained its infringement position even after the Supreme Court's decision in Alice Corp. Pty. Ltd. v. CLS Bank International, 134 S. Ct. 2347 (2014), established that CallWave's infringement position was objectively meritless. (Id.)

In response, CallWave contends that BroadSoft did not immediately recognize the significance of the Alice decision to the claims at issue in the present litigation. Instead, CallWave observes that BroadSoft waited until the summary judgment stage to inform CallWave of its § 101 defense by way of a motion for judgment on the pleadings filed on September 9, 2016, more than two years after the Supreme Court issued its decision in Alice. (D.I. 431 at 15-16)

The court is not persuaded that CallWave's position on the merits of BroadSoft's § 101 defense was objectively unreasonable. The record reflects that BroadSoft first challenged the validity of the '188 and '591 patents pursuant to § 101 in its motion for judgment on the pleadings, which was filed on September 9, 2016, more than two years after the Supreme Court's decision in Alice. (D.I. 290) When CallWave subsequently moved to strike BroadSoft's motionfor judgment on the pleadings, based in part on the alleged untimeliness of the § 101 challenge, BroadSoft represented to the court that

[a]lthough the case is now rightfully viewed, with the benefit of hindsight, as a sea change in patent ineligibility jurisprudence, that conclusion was not so obvious in the weeks and months following issuance of the Alice decision. During this time frame, it simply did not occur to BroadSoft to include the Section 101 defense in its initial invalidity contentions. . . . If BroadSoft had foreseen how the case law surrounding Alice would develop, it would likely have done so. But in the end, BroadSoft filed the same motion that it would have filed earlier in the case and derived no benefit from the current timing of its Section 101 motion.

(D.I. 383 at 9-10) Courts in this district have been reluctant to find exceptional case status based on a patent's invalidity under § 101 for the same reasons, recognizing that "the § 101 analysis is an evolving state of the law and a difficult exercise, which does not lend itself to, e.g., shifting fees pursuant to § 285." YYZ, LLC v. Pegasystems, Inc., C.A. No. 13-581-SLR, 2016 WL 1761955, at *1 (D. Del. May 2, 2016); see also Jedi Techs., Inc. v. Spark Networks, Inc., C.A. No. 16-1055-GMS, 2017 WL 3315279, at *11 (D. Del. Aug. 3, 2017) ("[T]he mere fact that one side's arguments prevailed over its opponent's does not make a § 285 award appropriate. Furthermore, the Alice analysis is not straightforward. . . ."). Consequently, the court concludes that CallWave's position regarding BroadSoft's § 101 defense was not so unreasonable as to warrant an award of exceptional case status pursuant to § 285.

B. Single Number Outcall ("SNO") Claims³

In support of its motion for attorneys' fees and costs, BroadSoft contends that CallWave failed to conduct adequate pre-suit diligence because publicly available documents showed that the accused BroadWorks product included SNO functionality more than a year before CallWave's 2005 priority date for the SNO claims.⁴ (D.I. 426 at 15) According to BroadSoft, CallWave cited prior art BroadWorks functionalities as evidence of SNO infringement. (5/16/19 Tr. at 3:15-25; 4:20-5:5) In response, CallWave alleges that the publicly available BroadSoft technical documents do not show a system that practices every element of the asserted claims as required for a claim of anticipation, and the BroadWorks Anywhere feature provided new technology first introduced in March 2008. (D.I. 431 at 17)

The record before the court establishes that, from the earliest stages of the litigation, BroadSoft understood CallWave's allegations of infringement to encompass the BroadWorks Anywhere feature. This is apparent from BroadSoft's May 31, 2013 opposition to CallWave's motion to dismiss, when BroadSoft submitted the declaration of Scott Hoffpauir, BroadSoft's Chief Technology Officer identifying the BroadWorks Anywhere feature among other exemplary BroadWorks features. (D.I. 11 at ¶ 5; see also D.I. 10 at 4) Moreover, CallWavespecifically identified the BroadWorks Anywhere feature in its May 8, 2014 infringement contentions. (D.I. 427, Ex. 3) The record further establishes that the BroadWorks Anywhere feature was introduced in March 2008, approximately three years after the priority date for CallWave's asserted SNO claims. (5/16/19 Tr. at 34:2-7; D.I. 362 at ¶ 40)

Judge A...