Sherwood Sensing Solutions LLC v. Henny Penny Corp.

604 F.Supp.3d 699

SHERWOOD SENSING SOLUTIONS LLC, Plaintiff,

v.HENNY PENNY CORPORATION, Defendant.

Case No. 3:19-cv-366

United States District Court, S.D. Ohio, Western Division, at Dayton.

Signed May 20, 2022

James H. Greer, Charles Franklin Shane, Bieser, Greer & Landis, Dayton, OH, Jeffrey D. Parks, Pro Hac Vice, Jonathan T. Suder, Pro Hac Vice, Richard A. Wojcio, Jr., Pro Hac Vice, Friedman Suder & Cooke, Fort Worth, TX, for Plaintiff.

Kevin W. Kirsch, Baker & Hostetler LLP, Columbus, OH, Brian Donald Wright, Donald E. Burton, Faruki Ireland Cox Rhinehart & Dusing PLL, Dayton, OH, Kevin P. Flynn, Baker & Hostetler LLP, Cincinnati, OH, for Defendant.

ORDER DENYING DEFENDANT'S MOTION FOR ATTORNEY'S FEES

Michael J. Newman, United States District Judge This patent infringement case is before the Court on Defendant Henny Penny Corporation's ("Henny Penny's") motion for attorney's fees pursuant to 35 U.S.C. § 285. Doc. No. 43. Plaintiff Sherwood Sensing Solutions LLC ("Sherwood") filed an opposition memorandum (Doc. No. 44), and Henny Penny offered a reply (Doc. No. 45). The motion is ripe for review.

I.

Sherwood was the holder of U.S. Patent No. 10,285,539 ("the ’539 Patent") claiming a novel food frying system. Doc. No. 17 at PageID 81–82. It believed Henny Penny's "automatic top-off" food fryers infringed on the ’539 Patent. Id. at PageID 88. Sherwood sued Henny Penny for patent infringement in this Court on November 19, 2019. Doc. Nos. 1, 17.

Counsel for the parties met in December 2019. Doc. No. 43-1 at PageID 638. Henny Penny's counsel presented Sherwood with several prior-art references—including one informally named "Van Den Berg"—that they believed invalidated the ’539 Patent. Id. Henny Penny insisted Sherwood reconsider the litigation, but Sherwood was undeterred. Id. PageID 637–38. Sherwood did, however, drop its willful infringement claim in its amended complaint. Doc. Nos. 1, 17.

Henny Penny petitioned the Patent Trial and Appeal Board (the "Board") for inter partes review ("IPR") of the ’539 Patent. Doc. No. 24 at PageID 328. IPR "allows a third party to ask the U.S. Patent and Trademark Office [("USPTO")] to reexamine the claims in an already-issued patent and to cancel any claim that the agency finds to be unpatentable in light of prior art." Cuozzo Speed Techs., LLC v. Lee , 579 U.S. 261, 265, 136 S.Ct. 2131, 195 L.Ed.2d 423 (2016) (citing 35 U.S.C. § 100, et seq. ). Henny Penny's petition—relying on Van Den Berg—sought to invalidate each ’539 Patent claim. Doc. No. 43-1 at PageID 666.

IPR review permits the patent holder, in response to the challenged claims, to "[c]ancel any challenged patent claim" and "propose a reasonable number of substitute claims." 35 U.S.C. §§ 316(d)(1)(A) and (B). Substitute claims "may not enlarge the scope of the claims of the patent or introduce new matter." 35 U.S.C. § 316(d)(3). The Board determines if the "newly-presented, narrower claims are ‘supported by the patent's written description’ and ‘unpatentable in the face of the prior art cited in the IPR.’ " Nike, Inc. v. Adidas AG , 955 F.3d 45, 51–52 (Fed. Cir. 2020) (quoting Aqua Prods., Inc. v. Matal , 872 F.3d 1290, 1314 (Fed. Cir. 2017) ). Narrowing the patent's scope gives the patent holder a chance to salvage the patent against possibly invalidating prior art. See Aqua Prods. , 872 F.3d at 1298–99 (explaining that the amendment process "is an important tool that may be used to adjust the scope of patents" "at the lowest cost point in the system" to avoid "winner-take-all" district court litigations (first citing 35 U.S.C. § 316(d)(3) ; and then quoting Office Patent Trial Practice Guide, 77 Fed. Reg. 48756, 48764 (Aug. 14, 2012) )).

Henny Penny moved to stay the district court litigation pending resolution of its IPR petition. Doc. No. 24 at PageID 328. Sherwood objected because, at the time, the Board had not yet agreed to review the ’539 Patent. Doc. No. 20. United States District Court Judge Thomas M. Rose—to whom this case was previously assigned—stayed this matter. Doc. No. 24 at PageID 331–32. The Board granted review of the ’539 Patent several months later. Doc. No. 43-1 at PageID 711.

Before the Board, Sherwood moved to amend its ’539 Patent claims. Doc. No. 43-1 at PageID 827. But, in a preliminary ruling, the Board found that Sherwood's substituted claims expanded, not narrowed, the patent's scope, introduced new matter, and were likely unpatentable. Id. at PageID 830–41. Sherwood responded with a second motion to amend its claims. Id. at PageID 770.

The Board again rejected Sherwood's substituted claims, this time in a final order. Id. at PageID 821–22. The Board found that Van Den Berg, alone or in combination with other prior art, anticipated Sherwood's amended claims and rendered them unpatentable. Id. at PageID 783–822. This prompted the Board to cancel the ’539 Patent and deny Sherwood's motion to amend its claims. Id. at PageID 822. Sherwood did not appeal the decision to the U.S. Court of Appeals for the Federal Circuit. Id. at PageID 637–39; see 35 U.S.C. § 319 (providing for IPR appellate review).

Sherwood had no choice but to withdraw its patent infringement case in this Court. Doc. No. 37. It did so, and, in the same motion, preemptively asked the Court to declare Henny Penny unentitled to attorney's fees under 35 U.S.C. § 285. Id. at PageID 449. Henny Penny opposed such a premature ruling because it had not yet moved for attorney's fees. Doc. No. 38 at PageID 451. The Court agreed with Henny Penny because attorney's fees cannot be obtained before entry of judgment, absent countervailing court order or statute. Fed. R. Civ. P. 54(d)(2)(B)(i) ; S.D. Ohio Civ. R. 54.2(a). Therefore, the Court dismissed Sherwood's complaint with prejudice but tabled the attorney's fees issue unless and until Henny Penny so moved. Doc. No. 40.

Henny Penny has now moved for attorney's fees. Doc. No. 43. The Court sets forth the Patent Act's standard for attorney's fees below.

II.

35 U.S.C. § 285 provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." The Patent Act does not define what makes a case "exceptional," but the Supreme Court has construed the term to mean "uncommon," "rare," or "not ordinary." Octane Fitness, LLC v. ICON Health & Fitness, Inc. , 572 U.S. 545, 553, 134 S.Ct. 1749, 188 L.Ed.2d 816 (2014) (citing Webster's New International Dictionary 889 (2d ed. 1934)). An "exceptional case" is 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." Id. at 554, 134 S.Ct. 1749.

Fee awards under the Patent Act are an exception to the American Rule. Id. at 557, 134 S.Ct. 1749. Fee awards are not meant to be "a penalty for failure to win a patent infringement suit." Id. at 548, 134 S.Ct. 1749 (quoting Park-In-Theatres, Inc. v. Perkins , 190 F.2d 137, 142 (9th Cir. 1951) ). They should be selectively imposed "to prevent a party from suffering a ‘gross injustice,’ " Munchkin, Inc. v. Luv n’ Care, Ltd. , 960 F.3d 1373, 1378 (Fed. Cir. 2020) (quoting Checkpoint Sys., Inc. v. All-Tag Sec. S.A. , 858 F.3d 1371, 1376 (Fed. Cir. 2017) ), and should be calibrated to "deter" unreasonable litigation, Octane Fitness , 572 U.S. at 554 n.6, 134 S.Ct. 1749 (quoting Fogerty v. Fantasy, Inc. , 510 U.S. 517, 534 n.19, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994) ) (cleaned up).

Patent Act fee awards follow a two-step process. Step 1 (the purpose of this motion) is to determine whether the prevailing party won an exceptional case. Id. at 554, 134 S.Ct. 1749. That does not end the inquiry. The Court must then assess the "propriety" of a fee award considering "the closeness of the case, the tactics of counsel, the conduct of the parties, and any other factors that may contribute to a fair allocation of the burdens of litigation as between winner and loser." Am. Vehicular Scis. , LLC v. Autoliv, Inc. , 405 F. Supp. 3d 728, 736 (E.D. Mich. 2019) (quoting H-W Tech., Inc. v. Overstock.com, Inc. , No. 3:12-cv-0636, 2014 WL 4378750, at *7 (N.D. Tex. Sept. 3, 2014) ).

III.

The parties dispute both the construction of 35 U.S.C. § 285 and the exceptionality of this case. Sherwood argues that Henny Penny is prohibited from obtaining attorney's fees accrued during IPR. Doc. No. 44 at PageID 960. It relies on Federal Circuit dicta saying as much, as well as 35 U.S.C. § 285 ’s silence on the matter. Id. (citing Dragon Intell. Prop., LLC v. Dish Network LLC , 956 F.3d 1358, 1362 (Fed. Cir. 2020) ("[W]e see no basis in the Patent Act for awarding fees under § 285 for work incurred in inter partes review proceedings that the Appellants voluntarily undertook")). Henny Penny disagrees because IPR was meant to be an efficient substitute to costly district court patent infringement litigation. Doc. No. 43 at PageID 626.

Henny Penny insists that Sherwood's conduct in-and-out of IPR makes this case exceptional. Id. at PageID 628–33. Its topline argument is that Sherwood took inconsistent positions before this Court and the Board to perpetuate frivolous litigation. Id. at PageID 628–30. Henny Penny contends that Sherwood pressed a broad construction of a claim term in the district court but a narrower one in IPR. Id. Beyond that, Henny Penny believes the following shows Sherwood's "exceptional" behavior: (1) not withdrawing its patent infringement suit after being confronted with Van Den Berg; (2) pleading a willful infringement claim without supporting facts; (3) opposing a stay of the district court litigation pending IPR; (4) misleadingly not moving in IPR to cancel the original ’539 Patent claims yet trying to substitute new claims; (5) violating a host of PTAB rules, including attempting to add new matter via an amended claim and filing overlength briefs; and (6) conditioning dismissal of its district court complaint on entry of an...