When Santa Barbara startup FindTheBest (FTB) was sued by a patent troll called Lumen View last year, it vowed to fight back rather than pay up the $50,000 licensing fee Lumen was asking for. Company CEO Kevin O'Connor made it personal, pledging $1 million of his own money to fight the legal battle.
Once FindTheBest pursued the case, the company dismantled the troll in short order. In November, the judge invalidated Lumen's patent, finding it was nothing more than a description of computer-oriented "matchmaking."
At that point, FindTheBest had spent about $200,000 on its legal fight—not to mention the productivity lost in hundreds of work hours spent by top executives on the lawsuit, and three all-company meetings.
Now the judge overseeing the case has ruled (PDF) that it's Lumen View, not FindTheBest, that should have to pay those expenses. In a first-of-its-kind implementation of new fee-shifting rules mandated by the Supreme Court, US District Judge Denise Cote found that the Lumen View lawsuit was a "prototypical exceptional case."
Not a close call
"Lumen’s motivation in this litigation was to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation," Cote stated in the order she issued on Friday. "Lumen’s threats of 'full-scale litigation,' 'protracted discovery,' and a settlement demand escalator should FTB file responsive papers, were aimed at convincing FTB that a pay-off was the lesser injustice."
In the recent Octane Fitness case (PDF), the Supreme Court changed the test for fee-shifting precisely to deter behavior such as Lumen's, Cote found. Lumen didn't do "any reasonable pre-suit investigation," and filed a number of near-identical "boilerplate" complaints in a short time frame. That all suggests "Lumen’s instigation of baseless litigation is not isolated to this instance, but is instead part of a predatory strategy aimed at reaping financial advantage from the inability or unwillingness of defendants to engage in litigation against even frivolous patent lawsuits."
Cote also recounted Lumen's attempt to get a "gag order" against FTB, to stop it from talking to the press about its case. The motion was denied.
She continued: "The question of whether this case is exceptional is not close, and fee shifting in this case will serve as an instrument of justice.”
The exact amount that Lumen will have to pay isn't yet clear, as FindTheBest will have to file a brief detailing its expenses.
The fees win for FindTheBest comes not long after it lost a more ambitious effort to push forward with a RICO anti-extortion lawsuit against Lumen View. In that case, also overseen by Cote, the judge wasn't convinced that RICO could be used to fight bogus lawsuits, even ones as baseless as Lumen's.
FindTheBest CEO Kevin O'Connor told Ars that he's very pleased with the fee order, and that they're not giving up on their RICO case yet either.
"Settling would have been easier, but I couldn’t let myself give into this injustice," said O'Connor in a statement. "We hope other companies see this as a sign that settling isn’t the only way out." He continued:
This is an exciting day for FindTheBest and the thousands of tech companies across the country who have received demand letters from patent trolls, but this isn’t the end for us. While we respect Judge Cote’s decision on our RICO case, we still feel we have grounds for a case and will be appealing the decision.
This appears to be the first case of a district court judge applying the new fee-shifting rules required by Octane Fitness. Others may be on the way soon. In a case in which Newegg beat back Site Update Solutions, a subsidiary of patent-holder Acacia Research, Newegg was initially denied fees. Last month, an appeals court ordered that case to be re-briefed under the new Octane rules, giving Newegg a second chance.
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