WASHINGTON (Legal Newsline) - A firm that unsuccessfully sued Apple, Amazon, Dell and numerous other tech companies for patent infringement will have to pay for its failures after a federal appeals court ordered it to pay more than $5 million in attorney fees for making unreasonable arguments and persisting with litigation when it should have quit.
The decision by the U.S. Court of Appeals for the Federal Circuit drew a strong dissent from one judge, who noted that the plaintiff’s arguments had been supported by the U.S. Solicitor General in an unsuccessful prior attempt to seek U.S. Supreme Court review.
PersonalWeb, which calls itself “A Proud member of the East Texas Community” – where the nation’s busiest patent courts are – is a non-practicing entity, commonly known as a patent troll, which holds 15 patents that it tries to collect license revenue on. It sued Amazon in its home court in 2011 for violating patents on “True Name” technology, a system for identifying data.
After the district court determined the claim terms in Amazon’s favor, PersonalWeb agreed to dismiss its case. But then in 2018 the company sued 85 Amazon customers for violating the same patents.
The cases were consolidated in a single multidistrict litigation court and PersonalWeb agreed that if it lost against Twitch, one of Amazon’s customers, it would admit defeat in the other customer cases. Amazon and PersonalWeb each sought a declaratory judgment and Amazon won, with the U.S. Court of Appeals for the Federal Circuit affirming.
Undeterred, PersonalWeb sued Amazon for infringement by its CloudFront unit. The district court again ruled against PersonalWeb, this time ordering it to pay $5.4 million in attorney fees and costs, saying PersonalWeb crossed the line from zealous advocacy. It described the case as “exceptional” because PersonalWeb “changed its infringement positions to overcome the hurdle of the day,” unnecessarily prolonged the litigation and “submitted declarations it should have known were not accurate.”
PersonalWeb appealed again, arguing its case wasn’t “exceptional” and even if it was, the fee award was excessive. In a Nov. 3 decision, the Federal Circuit disagreed.
Attorney fees are not a penalty for losing a case, the appeals court said. “It is a form of sanction where, for example, a party advances an argument that is wholly unsupported by the law,” the court said.
In this case, the district court cited a 1907 decision by the U.S. Supreme Court, Kessler v. Eldred, to support the idea PersonalWeb was barred from suing Amazon’s customers after losing to Amazon itself. PersonalWeb made things worse for itself by agreeing to dismiss all claims if it lost against Amazon customer Twitch.
“The dissent contends that PersonalWeb is being punished for taking the wrong side of an open argument,” the majority opinion states. “This is incorrect. PersonalWeb wove the very net in which it now stands.”
The company’s “flip-flopping” litigation tactics didn’t help, the court went on.
“PersonalWeb’s constantly changing infringement theories obfuscated the merits of its case and undermined its trustworthiness and reliability before the district court,” the court said.
Judge Timothy Dyk dissented, saying PersonalWeb’s lawyers were merely trying to exploit ambiguity in how courts have applied the old Kessler decision. After losing in district court, PersonalWeb sought Supreme Court review and the U.S. Solicitor General supported the company’s argument that Kessler didn’t apply, although the high court ultimately didn’t accept the case.
“The Solicitor General is not in the habit of making objectively baseless arguments to the Supreme Court,” the judge wrote. “I am at a loss to understand how making an argument that the Solicitor General agreed was correct and that was a matter of first impression in our court can lead to an award of fees.”
Amazon was represented by J. David Hadden of Fenwick & West, while PersonalWeb was represented by Michael Amory Sherman of Stubbs Alderton & Markiles. PersonalWeb lost similar litigation against Google, Facebook, Amazon and Dell before the Federal Circuit in 2021.