MARSHALL, Texas (Legal Newsline) - A Texas federal judge last month ruled against a Texas-based company that was tagged the most prolific patent “troll” in 2014 and filed more than 100 lawsuits in 2015.
Judge Rodney Gilstrap for the U.S. District Court for the Eastern District of Texas, Marshall Division, in a Dec. 17 order agreed with defendants -- many of which are big-name retailers -- that plaintiff eDekka LLC’s lawsuits were “exceptional.”
The Plano, Texas, based non-practicing entity sued a large number of defendants in the typically plaintiff-friendly Texas federal court, alleging infringement of U.S. Patent No. 6,266,674 entitled “Random Access Information Retrieval Utilizing User-Defined Labels.”
The company claimed in its lawsuits that the retailers’ websites include a “shopping cart” function that infringes on the ‘674 patent.
According to documents filed along with the complaints, the patent was originally filed in March 1992 by Sunnyvale, Calif., inventor Donald J. Hejna Jr.
Issued to eDekka in 2001, the ‘674 patent covers a method for utilizing user-defined labels to retrieve information. It does not appear, at first glance, to have anything to do with the Internet.
In looking at drawings attached to the complaints, it looks more like a pager of some sort.
In 2014, eDekka filed lawsuits against about 130 defendants alleging infringement of the ‘674 patent. In April and May of 2015, the company filed lawsuits against 89 additional defendants alleging infringement of the patent.
Among those retailers that were sued: Starbucks, Pier 1 Imports, Perry Ellis, Hershey, Wet Seal, The Yankee Candle Company and LOreal USA.
The defendants’ motion arose from the 2015 actions, which the federal court previously consolidated, and asked the court to find the cases “exceptional” under federal law.
Under the law, a court in exceptional cases may award reasonable attorney fees to the prevailing party. An exceptional case is “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.”
The defendants argued that eDekka’s lawsuits should be found exceptional because they are objectively unreasonable and it litigated in an unreasonable manner.
Gilstrap sided with the retailers, pointing out that the patent’s claims were “clearly directed” toward unpatentable subject matter and “no reasonable litigant” could have “reasonably expected success” on the merits when defending against the numerous Section 101 motions filed.
“However, rather than acknowledging the inherent weaknesses of the ‘674 Patent, eDekka proffered completely untenable arguments to the Court throughout the § 101 briefing process and at the Sept. 10, 2015 hearing,” the judge wrote in his nine-page order. “For example, eDekka asserted that the patented claims ‘improve the functioning of technology’ by reducing ‘the time to retrieve information and the amount of information that must be retrieved.’ eDekka offered only vague support for this contention in its briefing and then broadly expanded on this idea at the hearing.”
Numerous defendants in the two consolidated actions had filed motions to dismiss under Section 101 of the federal Patent Act.
Section 101, only a sentence or two long, describes the four categories of inventions that it declares eligible to be considered to be patented. They include: machines, compositions of matter (i.e. pharmaceuticals), articles of manufacturing (i.e. tools) and processes or methods.
Gilstrap heard arguments on the Section 101 motions in September. He later granted their motions and held that the claims of the patent were patent-ineligible.
“The Court finds that eDekka repeatedly offered insupportable arguments on behalf of an obviously weak patent,” the judge wrote in last month’s order. “This causes the Court to question whether eDekka engaged in a reasonable and thorough pre-suit investigation regarding the § 101 standard and relevant authority before filing a significant number of lawsuits.
“In these particular and focused circumstances, the Court identifies a clear need to advance considerations of deterrence.”
Gilstrap added that eDekka’s litigation history in the Eastern District of Texas reflects an “aggressive strategy” that avoids testing its cases on the merit and instead aims for early settlements falling at or below the cost of defense.
“Based upon the record of the above-captioned cases, as well as the Court’s in camera review of eDekka’s ‘674 Patent settlements to date, the Court finds a pattern of defendants that agreed to settlements at relatively early points in the litigation for amounts significantly below the cost of taking a patent case to trial,” he wrote, noting that just two days before its Section 101 hearing -- on Sept. 8 -- eDekka reached out to various defendants, offering to settle their cases for $3,000 each.
“The Court finds that it is reasonable to conclude that eDekka acted with the goal of ‘exploiting the high cost to defend complex litigation’ to extract ‘nuisance value settlement[s]’ from defendants,” Gilstrap wrote.
“Such tactics contribute significantly to the Court’s finding that this case is ‘exceptional.’”
Gilstrap noted that a finding of exceptionality is something that the court arrives at “reluctantly” -- “lest we unintentionally narrow the public’s access to the courts by chilling future decisions to seek redress for a case in which success is not guaranteed.”
But the judge said eDekka clearly crossed the threshold with its “vexatious” litigation strategy.
Gilstrap granted the defendants’ motion for attorneys’ fees and directed them to submit evidence concerning the amount of fees incurred.
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.