2010-1199, 1344

United States Court of Appeals

for the Federal Circuit
MEDIA QUEUE, LLC,
Plaintiff-Appellant,
v.
NETFLIX, INC.,
Defendant-Cross Appellant,
and
BLOCKBUSTER, INC.,
Defendant-Appellee,
and
GREENCINE HOLDINGS, LLC,
Defendant.

Appeals from the United States District Court for the Northern District of
California, Case No.09-CV-1027, Judge Susan Illston

BRIEF OF AMICI CURIAE AMAZON.COM, INC., FACEBOOK, INC.,

MICROSOFT CORP., ORACLE CORP., SAMSUNG ELECTRONICS CO.,
LTD, TOYOTA MOTOR SALES, U.S.A., INC., AND YAHOO! INC. IN
SUPPORT OF DEFENDANT-CROSS APPELLANT NETFLIX AND
VACATING THE DISTRICT COURT’S ATTORNEY FEES DECISION
Robert T. Cruzen
Jeffrey S. Love
John D. Vandenberg
KLARQUIST SPARKMAN, LLP
One World Trade Center
121 S.W. Salmon Street, Suite 1600
Portland, Oregon 97204-2988
(503) 595-5300
Attorneys for Amici Curiae

JULY 7, 2010
COUNSEL PRESS, LLC (888) 277-3259
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

MEDIA QUEUE v. NETFLIX

No. 2010-1199, 1344

CERTIFICATE OF INTEREST

Counsel for Amici John D. Vandenberg certifies the following:

1. The full name of every party or amicus represented by me is:

Amazon.com, Inc., Facebook, Inc., Microsoft Corp., Oracle Corp., Samsung

Electronics Co., Ltd., Toyota Motor Sales, U.S.A., Inc., and Yahoo! Inc.

2. The name of the real party in interest (if the party named in the caption is not
the real party in interest) represented by me is:

Not applicable.

3. All parent corporations and any ptLblicly held companies that own 10 percent
or more of the stock of the party or amicus curiae represented by me are:

Amazon.com, Inc., Facebook, Inc., Microsoft Corp., Oracle Corp., Samsung

Electronics Co., Ltd., and Yahoo! Inc. each have no parent corporations and no
publicly held company owns 10% or more of their stock.

Toyota Motor Sales, U.S.A., Inc. is a wholly-owned subsidiary of Toyota Motor

North Anlerica, Inc. which is a wholly-owned subsidiary of Toyota Motor
Corporation. No publicly held corporation owns 10% or more of the stock of
Toyota Motor Corporation.

4. The names of all law firms and the partners or associates that appeared for the
party or amicus now represented by me in the trial court or agency or are expected
to appear in this court are:

None appeared in th.e lower tribllnal. Klarquist Sparkman, LLP: John D.

Vandenberg, Robert T. Cruzen, and Jeffrey S. Love appear in this court for Amici.
July 7,2010 ~. J//l. /
ignature of COll

John D. Vand g
Printed name of counsel
 TABLE OF CONTENTS

Page
I. STATEMENT OF INTERESTS OF AMICI 1

II. SUMMARY OF POSITION AND ARGUMENT 2

III. UNREASONABLE OVERREACHING

BY PATENTEES IS EPIDEMIC 6

IV. CURRENT SECTION 285 JURISPRUDENCE

HAS INVITED CONFUSION AND LED TO
SKEWED RESULTS IN THE DISTRICT COURTS 9

V. PROOFTHATAPATENTO~RSHOULD
HAVE KNOWN THAT IT WAS ASSERTING ITS
PATENT BEYOND ITS LEGITIMATE SCOPE SHOULD
SUFFICE TO SUPPORT AN EXCEPTIONAL CASE FINDING 14

VI. FOGERTY SUPPORTS AN EVEN­

HANDED APPLICATION OF SECTION 285 16

VII. PUBLIC POLICY ABHORS

OVERREACHING ASSERTIONS OF PATENTS 17

VIII. CONCLUSION 20

1
 TABLE OF AUTHORITIES

Page
Cases

Atmel Corp. v. Authentec, Inc.,

557 F. Supp. 2d 1051 (N.D. Cal. 2008) 13

Blonder-Tongue Labs., Inc. v. Univ. ofIll. Found.,

402 U.S. 313 (1971) 9, 18, 19

Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc.,

393 F.3d 1378 (Fed. Cir. 2005) passim

CBT Flint Partners, LLC v. Return Path, Inc.,

676 F. Supp. 2d 1376 (N.D. Ga. 2009) 13

eBay Inc. v. MercExchange, L.L. C.,

547 U.S. 388 (2006) 7

Eltech Sys. Corp. v. PPG Indus., Inc.,

903 F.2d 805 (Fed. Cir. 1990) passim

Fogerty v. Fantasy, Inc.,

510 U.S. 517 (1994) 3, 4,16,17

Holland v. Florida,
No. 09-5327,2010 WL 2346549 (U.S. June 14,2010) 11

ICU Med. v. Alaris Med.,

2007 WL 6137003 (C.D. Cal 2007), aff'd, 558 F.3d 1368 (Fed. Cir. 2009) 13

In re Seagate,
497 F.3d 1360 (Fed. Cir. 2007) (en banc) 5, 10, 11, 14

Mercoid Corp. v. Mid Cant'! Inv. Co.,

320 U.S. 661 (1944) 17, 18

Moreno v. US.,
88 Fed. CI. 266 (Fed. CI. 2009) 11

Morton Salt Co. v. G.S. Suppiger Co.,

314 U.S. 488 (1942) 17

11
Motion Picture Patents Co. v. Universal Film Mfg. Co.,
243 U.S. 502 (1917) 17

Motionless Keyboard Co. v. Microsoft Corp.,

2005 WL 1899377 (D. Or. August 5, 2005) 14

Profl Real Estate v. Columbia Pictures Indus.,

508 U.S. 49 (1993) 12

Wedgetail, Ltd. v. King,

576 F.3d 1302 (Fed. Cir. 2009) 4

Statutes

35 U.S.C. § 285 passim

Other Authorities

http://www.aipla.org/Content/ContentGroups/Speaker_Papers/Mid­
Winter 1/20083 IShowalter-slides.pdf 9

John R. Allison et al., Extreme Value Or Trolls On Top? The Characteristics Of

The Most-Litigated Patents, 158 UNIV. PENN. L. REv. 1 (Dec. 2009) 7

Joseph Scott Miller, Building a Better Bounty: Litigation-Stage Rewards for

Defeating Patents, 19 BERKELEY TECH. L.J. 667 (2004) 7

Ted Sichelman, Commercializing Patents, 62 STAN. L. REv. 341 (Jan. 2010) 7

111
I. STATEMENT OF INTERESTS OF AMICI

Amici Curiae Amazon.com, Facebook, Microsoft, Oracle, and Yahoo!

("Internet Amici") are leading software and internet service companies. Anyone

who has used the Internet or a computer likely has used their software or services.

The innovations of their scientists and engineers have helped billions of people

express themselves, stay connected with others, be more productive at work, and

be entertained online. Given the breadth of users and uses of computers and the

Internet, Internet Amici's software and services inevitably are packed with myriad

features-some core but most peripheral. The same is true of Toyota Motor Sales,

U.S.A., Inc. Its thousands of innovations are packaged together into a single

product, alltomobiles driven by tens of millions of people. Samsung is the leading

electronics company in the world that has developed and made innovations in

various fields, including memory, displays and teleconlmunications. Its

innovations are packetized into many electronics devices and products used by

millions of people every day.

Amici's successes have attracted a torrent of patent suits. Many of these

patentee plaintiffs have no case. Some overreach with exorbitant demands for

broad injunctions and damages, based on patents allegedly directed to trivial

features. Wielding such peripheral patents, they demand injunctions against and

royalties on Amici's entire software offering, service, or product-such as an

- 1­
operating system, e-commerce website, or automobile. These overreaching

patentee plaintiffs then seek settlements for some amount less than the cost of

defending the suit. They proceed confident that-even if they lose-the risk of an

attorney fees award is small, regardless of whether their demands have any merit.

To seek to enjoin or tax, via damages or settlement monies, unpatented

products or actions without an objectively reasonable basis abuses the patent

privilege and harms the public policies of the patent systenl. Our patent

jurisprudence-including its application of Section 285-needs to be better attuned

to this serious problem and its causes.

Amici have a strong interest in the Court clarifying the standard for

awarding attorney fees to defendants in such cases. The court should make it clear,

again, that a case may be found exceptional under 35 U.S.C. § 285 whenever a

patentee initiates or continues litigation after it should have known there was an

objectively high likelihood that its assertions or demands were not justified by any

valid claim in the patent.

II. SUMMARY OF POSITION AND ARGUMENT

"The court in exceptional cases may award reasonable attorney fees to the

prevailing party." 35 U.S.C. § 285. This fee-shifting statute is party neutral. As

the Court held in Eltech Sys. Corp. v. PPG Indus., Inc., "there is and should be no

difference in the standards applicable to patentees and infringers who engage in

-2­
bad faith litigation" when determining attorney fees motions. 903 F.2d 805,811

(Fed. Cir. 1990). The U.S. Supreme Court later endorsed this party-nelltral reading

and expanded it to copyright cases in Fogerty v. Fantasy, Inc., noting that "the

federal fee-shifting statutes in the patent and trademark fields ... support a party­

neutral approach." 510 U.S. 517,525 n.12 (1994) (citing and quoting Eltech).

A party-neutral application of Section 285 looks to the objective

unreasonableness of a party's position-be it a defendant's denial of liability or a

patentee's assertion of infringement. Evidence that a party proceeded in reckless

disregard of the objective unreasonableness of its position suffices to establish bad

faith and an exceptional case under Section 285. See Eltech, 903 F.2d at 811

("Where, as here, the patentee is manifestly unreasonable in assessing

infringement, while continuing to assert infringement in court, an inference is

proper of bad faith, whether grounded in or denominated wrongful intent,

recklessness, or gross negligence.").

But recently, this Court's Section 285 jllrisprudence has wavered and strayed

from this party-neutral precedent. Panels of the Court have appeared to raise the

bar for successful defendants seeking to recover their fees, by requiring a showing

of subjective bad faith, without citing Eltech's clarification that objectively

reckless behavior is sufficient to establish such bad faith. See, e.g., Brooks

Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. eire 2005).

-3­
In Brooks, for example, the Court reversed the district court's award ·of fees under

Section 285 on the grounds that "[a]bsent misconduct in conduct of the litigation or

in securing the patent, sanctions may be imposed against the patentee only if both

(1) the litigation is brought in subjective bad faith, and (2) the litigation is

objectively baseless." Id.; see also Wedgetail, Ltd. v. King, 576 F.3d 1302 (Fed.

Cir. 2009) (affirming refusal to find the patentee's unsuccessful case exceptional,

quoting Brooks' two-part test, and not mentioning Eltech or the objective

recklessness standard). This wavering has spawned disparate treatment of patent

owners and alleged infringers in the trial courts. Such disparate treatment

undermines the innovation our patent system is designed to encourage and wastes

judicial resources. It should be stopped.

One critical problem with the "subjective bad faith" prong of the Brooks'

formulation is that, read literally as it often is, it gives a free pass to overreaching

patent holders who may allege infringement in good faith, but make manifestly

unreasonable demands for injunctions or damages based on patents directed to

trivial features. This, too, is contrary to the public policy of our patent system.

While no change of law is required to remedy these ills, Amici respectfully

urge this Court (1) to clarify that the party-neutral approach of Eltech and Fogerty

should be applied by district courts and (2) to expressly endorse the following

objective recklessness standard on fees motions by defendants:

-4­
 To establish that a case is "exceptional" under Section 285, it is
sufficient to show by clear and convincing evidence that the
patentee asserted or maintained some infringement claim or
demanded sonlerelief despite an objectively high likelihood
that such assertion or demand was not justified by any valid
patent claim, and this risk was either known or so obvious that
it should have been known to the patentee.

Amici's proposed clarification is consistent with Elteeh, 903 F.2d at 811

("Where, as here, the patentee is manifestly unreasonable in assessing

infringement, while continuing to assert infringement in court, an inference is

proper of bad faith, whether grounded in or denominated wrongful intent,

recklessness, or gross negligence." (emphases added)). And it closely tracks the

standard in In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007) (en bane), in which this

Court adopted the following recklessness standard:

[W]e ... hold that proof of willful infringement permitting

enhanced damages requires at least a showing of objective
recklessness....
. . . Accordingly, to establish willful infringement, a
patentee must show by clear and convincing evidence that the
infringer acted despite an objectively high likelihood that its
actions constituted infringement of a valid patent. . .. [T]he
patentee must also demonstrate that this objectively defined risk
... was either known or so obvious that it should have been
known to the accused infringer.

497 F.3d at 1371. As this Court is aware, a willfulness finding may support a fees

award to the prevailing plaintiff, even in the absel1ce of subjective bad faith in the

form of litigation misconduct.

-5­
 As with willfulness, this standard, even if satisfied, would not require

district courts to conclude that a given case is exceptional under Section 285 or that

a whole or partial award of fees is necessitated. Amici merely ask this Court to

clarify that-as with willfulness-when clear and convincing evidence establishes

that a patentee acted with such objective recklessness, a district court may, in its

discretion, conclude that the case is exceptional and award fees to a defendant

under Section 285.

III. UNREASONABLE OVERREACHING

BY PATENTEES IS EPIDEMIC

Our patent system suffers from an unchecked epidemic of overreaching

patent assertions. Far too many patentee plaintiffs seek overbroad injunctions,

make facially overbroad infringement allegations, and demand a share of the

target's profits masquerading as "damages." Such actions go far beyond any

reasonable scope of their patented inventions. They use these excessive

pleadings-and demands for unreasonably burdensome and expensive

discovery-to inflate the "cost-of-defense" and "small-risk-of-huge-loss"

settlement value.

Wielding federally granted patents in our powerful federal courts and

asserting infringement claims far beyond the scope of the patented invention has

become a profitable business model attracting more and more players:

-6­
 An industry has developed in which firms use patents not as a
basis for producing and selling goods but, instead, primarily for
obtaining licensing fees. See FTC, To Promote Innovation: The
Proper Balance of Competition and Patent Law and Policy, ch.
3, pp. 38-39 (Oct. 2003), available at http://www. ftc.
gov/os/2003/10/innovationrpt.pdf(as visited May 11,2006, and
available in Clerk of Court's case file). For these firms, an
injunction, and the potentially serious sanctions arising from its
violation, can be employed as a bargaining tool to charge
exorbitant fees to companies that seek to buy licenses to
practice the patent.

eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388,396 (2006) (Kennedy, J.,

concurring). See generally Ted Sichelman, Commercializing Patents, 62 STAN. L.

REv. 341,368 (Jan. 2010) ("many of the so-called 'patent pools' are not

nlechanisms to provide new technology to commercializers, but are merely 'patent

thickets' that already-commercializing entities need to navigate, often with large

payments, to continue making and selling their products."); John R. Allison et al.,

Extreme Value Or Trolls On Top? The Characteristics Of The Most-Litigated

Patents, 158 UNIV. PENN. L. REv. 1 (Dec. 2009) (non-practicing entities "represent

over 80% ofth~ suits filed involving the most-litigated patents and own more than

50% of the most-litigated patents themselves."); Joseph Scott Miller, Building a

Better Bounty: Litigation-Stage Rewards for Defeating Patents, 19 BERKELEY

TECH. L.J. 667, 671-75 (2004) (defendants with meritorious defenses in patent

cases have strong incentives to settle prematurely).

-7­
 This present state of affairs does great harm to our nation's patent system.

As discussed in Section VII below, the limited monopoly of a patent is a

conditional public privilege. Recklessly seeking injunctive relief or damages

beyond the scope of the patented invention is a violation of the public trust that, if

unchecked by the courts, threatens to tum innovation's engine into its brake. A

recklessly overreaching patentee abuses a public trust, and so does greater harm

than a plaintiff who overreaches in a merely private tort claim Gust as a reckless

driver of a public bus risks greater harm than a reckless driver of a private car).

The immediate victims of such suits are often the very patent-owning

innovators and job creators our patent system was designed to encollrage-such as

Amici. The current vogue is to pay a single filing fee of $350 to drag one to three

dozen technology companies or their corporate customers into a plaintiff-friendly

forum with the goal of extracting a "cost-of-defense" settlement. These cost-of­

defense settlements are often substantial, in part because patent litigation is very

costly and time consuming:

[It is an] acknowledged fact that patent litigation is a very

costly process.

If a patentee's expense is high though he enjoys the

benefits of the presumption of validity, the defendant in an
infringement suit will have even higher costs as he both
introduces proof to overcome the presumption and attempts to
rebut whatever proof the patentee offers to bolster the claims...

-8­
 ... [P]atent cases that go to trial seem to take an
inordinate amount of trial time. . . . And time-particularly
trial time-is unquestionably expensive.

. . . [P]rospective defendants will often decide that paying

royalties under a license or other settlement is preferable to the
costly burden of challenging the patent.

Blonder-Tongue v. Univ. ofIII. Found., 402 U.S. 313,334-338 (1971); see also

http://www.aipla.org/Content/ContentGroups/Speaker_Papers/Mid­

Winter1/20083/Showalter-slides.pdf, at pp.7-8 (statistical study showing high

defense costs for patent litigation).

IV. CURRENT SECTION 285 JURISPRUDENCE

HAS INVITED CONFUSION AND LED TO
SKEWED RESULTS IN THE DISTRICT COURTS

This Court's Section 285 jurisprudence wavered in 2005 with this

ambiguous statement in Brooks Furniture Mfg., Inc. v. Dutailier Int 'I, Inc., 393

F.3d 1378, 1381 (Fed. Cir. 2005), which suggests that a standard higher than

objective recklessness may apply to fees motions by defendants: "Absent

misconduct in conduct of the litigation or in securing the patent, sanctions may be

imposed against the patentee only if both (1) the litigation is brought in subjective

bad faith, and (2) the litigation is objectively baseless." Id. (citing Prof'l Real

Estate Investors v. Columbia Pictures Indus., 508 U.S. 49, 60-61 (1993) and

Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1329-31 (Fed. Cir. 2003)).

- 9­
The terminology used in Brooks is markedly different from that' of Seagateand

Eltech:

Brooks Seagate and Eltech

"the litigation is "objective recklessness"; "the infringer acted despite an
objectively baseless" objectively high likelihood that its actions constituted
(Brooks, 393 F.3d at infringement of a valid patent" (Seagate, 497 F.3d at
1381). 1371 ).
"recklessness, or gross negligence"; "the patentee is
manifestly unreasonable in assessing infringement"
(Eltech, 903 F.2d at 811).
"the litigation is "this objectively defined risk ... was either known or so
brought in subjective obvious that it should have been known" (Seagate, 497
bad faith" (Brooks, 393 F.3dat 1371).
F.3d at 1381). "A party confronted with the difficulty of proving what is
in an adversary's mind must be at liberty to prove facts
establishing that that adversary should have known"
(Eltech, 903 F.2d at 810).

In this case, the trial COlIrt quoted only the Brooks terminology, without

citing Eltech or Seagate and without stating whether it had construed Brooks

consistently with their "objective recklessness" standard. (See Order Denying

Defendant's Motion For Attorneys' Fees at p. 2). Thus, it is likely that the trial

COlIrt did not apply the Eltech standard in denying the successful defendants an

award of attorney fees. For this reason, the Court should vacate the order and

insist that the trial court apply the correct standard.

Amici themselves hold tens of thousands of patents and recognize the value

of being able to enforce legitimate patent claims in the courts. Nevertheless, the

- 10 ­
Brooks formulation may be construed to favor overzealous patentees over the

wrongly accused victims of their overreaching patent assertions. That is because it

appears to impose a more restrictive standard than the "objective recklessness"

standard of Eltechand Seagate. Specifically, a trial court may consider subjective

"bad faith" a stricter standard than recklessness or gross negligence.

The U.S. Supreme Court weeks ago didjust this when it rejected a "bad

faith" standard for equitable tolling of deadlines missed by a petitioner's attorney

due to gross negligence. Holland v. Florida, No. 09-5327,2010 WL 2346549, at

* 12 (U.S. June 14, 2010) ("The Court of Appeals held that ... even attorney
conduct that is 'grossly negligent' can never warrant tolling absent 'bad faith ... or

so forth on the lawyer's part.' But in our view, the Court of Appeals' standard is

too rigid.") (citation onlitted). Other courts also have rejected a "bad faith"

standard as being stricter than the correct "reckless disregard" standard. See, e.g.,

Moreno v. US., 88 Fed. CI. 266,278, n.19 (Fed. CI. 2009) ("Willfulness under the

FLSA does not require bad faith nor intent to harm on the part of the employer, but

rather only knowing or reckless disregard for whether the conduct was prohibited

by the statute."). Given this different perception of "bad faith" and recklessness in

other contexts, the Brooks formulation, quoted above, has sown doubt in trial

courts on the governing standard for "exceptional case" determinations under

Section 285.

- 11 ­
 This doubt is compounded by the source of the Brooks terminology. It did

not come from controlling case law construing the Patent Act's statutory

"exceptional cases" fees standard. Rather, Brooks relied on a Supreme Court

antitrust case construing the non-statutory "sham exception" to the Noerr-

Pennington antitrust immunity doctrine. See Prof'l Real Estate, 508 U.S. 49, 60­

61, n. 4 ("We hold that litigation cannot be deprived of immunity as a sham llnless

the litigation is objectively baseless" in addition to being motivated by

"anticompetitive intent"). In that case, the Supreme Court acknowledged lower

court confusion as to the meaning of "sham" in this context, clarified that it

included both objective and subjective components, and described the objective

component in terms that should not be required in fees decisions under Section 285

(e.g., "repetitive lawsuit carrying the hallmark of insubstantial claims"):

The Courts of Appeals have defined 'sham' in inconsistent and

contradictory ways. We once observed that 'sham' might
become 'no more than a label courts could apply to activity
they deem unworthy of antitrust immunity.' [Citations
omitted.] The array of definitions adopted by lower courts
demonstrates that this observation was prescient.

508 U.S. at 55-58.

The goals, factors, and precedent culminating in the Supreme COllrt'S

clarification of that aspect of antitrust law have nothing to do with the proper

construction of the Patent Act's statutory standard for attorney fees. Section 285

does not limit fees to "sham" cases. It allows them in "exceptional" cases.

- 12 ­
Brooks' reliance on "sham" jurisprudence to construe Section 285 has only sown

confusion.

To be sure, some trial courts navigate these confusing waters by (a)

construing Brooks consistently with Eltech, and (b) noting that, to the extent they

differ, Eltech controls as the prior decision:

ICU advocates that, under Brooks, a finding of exceptionality

based on a party's bad faith engagement in objectively baseless
litigation requires direct proof of that party's subjective intent
to engage in that litigation. ICU is only partially correct, as
such potent proof would be sufficient, but not necessary in
showing bad faith. Prior Federal Circuit authority, particularly
under Eltech, stated that subjective bad faith could be: 1)
'grounded in or denominated wrongful intent, recklessness, or
gross negligence;' or 2) derived from a party's decision to
engage in a litigation tactic that 'the patentee knows, or on
reasonable investigation should know, is baseless.'

ICU Med. v. Alaris Med., 2007 WL 6137003, n. 3 (C.D. Cal 2007) (April 16 Order

granting in part defendant's fee motion), aff'd, 558 F.3d 1368 (Fed. Cir. 2009).

But not all trial courts adopt this correct approach. See CBT Flint Partners,

LLC v. Return Path, Inc., 676 F. Supp. 2d 1376, 1380 (N.D. Ga. 2009) (citing

Brooks and declining to award fees because, while "[i]t is true that CBT's cOllnsel

displayed a certain stubborn recklessness in dismissing the Defendants' arguments

as to 'fatal flaws' in CBT's infringement contentions," the court was "not firmly

convinced that counsel for CBT acted in subjective bad faith."); Atmel Corp. v.

Authentec, Inc., 557 F. Supp. 2d 1051,1057-58 (N.D. Cal. 2008) (where the

- 13 ­
defendant noted that "even accepting Plaintiffs' proposed claim construction, the

accused products do not infringe the patents," the court declined to award fees

under Brooks because "Defendant bears the burden of establishing that Plaintiffs

acted in subjective bad faith."); Motionless Keyboard Co. v. Microsoft Corp., 2005

WL 1899377 (D. Or. August 5, 2005) (declining to award fees lInder Brooks where

the "plaintiff conceded no literal infringement on many claims and provided no

evidence-aside from the accused devices themselves-to show that the devices

were functionally equivalent to such claims," because, "[t]hough tempting, the

court will not speculate as to plaintiffs motives in bringing suit against (very)

deep-pocket defendants to vindicate patented inventions that have yet to result in a

marketable or sold product."). Amici suggest that in practice this confusion and

resulting favoritism is often acute and does great harm to our nation's patent

system, and that there is a pressing need for this COlIrt to clarify that the "objective

recklessness" standard of Eltech and Seagate controls. Any contrary reading of

Brooks should not be the governing law.

v. PROOF THAT A PATENT OWNER SHOULD

HAVE KNOWN THAT IT WAS ASSERTING ITS
PATENT BEYOND ITS LEGITIMATE SCOPE SHOULD
SUFFICE TO SUPPORT AN EXCEPTIONAL CASE FINDING

Applying the clarified "objective recklessness" standard suggested above,

which is based squarely on Seagate and Eltech, should end the often disparate

treatment of overreaching patent owners and infringers. And, as discussed below,

- 14 ­
this standard will promote the strong public policy against overreaching assertions

of many patentees.

This "objective recklessness" standard allows a district court, in its sOllnd

discretion, to make a fees award even if some of the relief sought by the patent

owner was reasonable but other infringement assertions or relief demands were

not. The harm from reckless attempts to improperly extend a patent is not

necessarily lessened by other reasonable assertions Gust as a defendant's willful

infringement of one patent claim is not necessarily excused by its successful

defense against other claims). This would untie the district courts' hands and

allow them to make fees decisions based on a fair, party-neutral standard.

To be sure, not every willfulness finding results in a fees award to a

prevailing patentee. Amici believe that this is appropriate and do no not suggest

that a finding of objective recklessness should in every instance mandate a fees

award to a prevailing defendant. But district courts should at least understand that

they possess sufficient discretion to make an award in an appropriate case based

upon such a finding. The trial court's opinion in this case indicates that some

courts do not understand that this Court's precedent gives them that discretion.

The Court should use its decision in this case to remedy that confusion by

clarifying its past precedents.

- 15 ­
VI. FOGERTY SUPPORTS AN EVEN­
HANDED APPLICATION OF SECTION 285

The U.S. Supreme COllrt's decision in Fogerty supports Amici's position in

two ways. First, the Court expressly noted that Section 285 requires an even­

handed approach to prevailing plaintiffs and prevailing defendants: "the federal

fee-shifting statutes in the patent and trademark fields ... support a party-neutral

approach." Fogerty, 510 U.S. at 525.

Second, the Court explained that attorney fees provisions should be

construed to advance the public policies underlying the broader statutory scheme

of which they are a part. Id. at 526. Specifically, the Court noted that the

copyright monopoly was a limited one:

More importantly, the policies served by the Copyright Act are

more complex, more measured, than simply maximizing the
number of meritorious suits for copyright infringement. The
Constitution grants to Congress the power 'To promote the
Progress of Science and useful Arts, by securing for limited
Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries.' U.S. Const., Art. I, § 8,
cl. 8. We have often recognized the monopoly privileges that
Congress has authorized, while 'intended to motivate the
creative activity of authors and inventors by the provision of a
special reward,' are limited in nature and must ultimately
serve the public good.

Id. (Quoting Sony Corp. ofAmerica v. Universal City Studios, Inc., 464 U. S. 417,

429 (1984)) (emphases added).

- 16 ­
 Therefore, defeating spurious infringement claims advances the aims of the

Copyright Act:

Because copyright law ultimately serves the purpose of

enriching the general public through access to creative works, it
is peculiarly important that the boundaries of copyright law be
demarcated as clearly as possible. To that end, defendants who
seek to advance a variety of meritorious copyright defenses
should be encouraged to litigate them to the same extent that
plaintiffs are encouraged to litigate meritorious claims of
infringement.... Thus a successful defense of a copyright
infringement action may further the policies of the Copyright
Act every bit as much as a successful prosecution of an
infringement claim by the holder of a copyright.

Id. at 527.

As explained below, these same considerations apply to the Patent Act.

VII. PUBLIC POLICY ABHORS

OVERREACHING ASSERTIONS OF PATENTS

A patent is a privilege with conditions attached. It "is a privilege ...

conditioned by a public purpose. It results from invention and is limited to the

invention which it defines." Mercoid Corp. v. Mid Cont'l Inv. Co., 320 U.S. 661,

665-66 (1944) (emphasis added). This public policy "excludes from [the patent

grant] all that is not embraced in the invention. It equally forbids the use of the

patent to secure an exclusive right or limited monopoly not granted by the Patent

Office and which it is contrary to public policy to grant." Morton Salt Co. v. G.S.

Suppiger Co., 314 U.S. 488, 49_2 (1942).

- 17 ­
 In Motion Picture Patents Co. v. Universal Film Mfg. Co., the holder of a

patent on an improved film projector conditioned the sale of its projector on the

use of only specified unpatented film. 243 U.S. 502, 511 (1917). The Supreme

Court held that conduct inconsistent with the purposes of the patent grant:

It is undeniably true, that the limited and temporary monopoly

granted to inventors was never designed for their exclusive
profit or advantage; the benefit to the public or community at
large was another and doubtless the primary object in granting
and securing that monopoly....
These rules of law make it very clear that the scope of the grant
which may be made to an inventor in a patent, pursuant to the
statute, must be limited to the invention described in the claims
of his patent.

Id.

Twenty-seven years later, the Court reaffirmed that patent policy forbids

using a patent to gain rights in inventions beyond those described in the patent: "It

is the protection of the public ... which ... denies to the patentee after issuance

the power to use it in such a way as to acquire a monopoly which is not plainly

within the terms of the grant." Mercoid Corp., 320 U.S. at 665-66 (extensive

citations omitted).

Another twenty-seven years later, in Blonder-Tongue Labs. Inc. v. Univ. of

J

Ill. Found., the Court noted the "patent system's desirable stimulus to invention"

and that "the public has paramount interest in seeing that ... such monopolies are

kept within their legitimate scope." 402 U.S. 313,343-44 (1971).

- 18 ­
 One obvious manifestation of this principle has been the series
of decisions in which the Court has condemned attempts to
broaden the physical or temporal scope of the patent monopoly.
As stated in Mercoid v. Mid-Continent Investment Co., 320
U.S. 661,320 U. S. 666 (1944): "The necessities or
convenience of the patentee do not justify any use of the
monopoly of the patent to create another monopoly. The fact
that the patentee has the power to refuse a license does not
enable him to enlarge the monopoly of the patent by the
expedient of attaching conditions to its use. 316 U.S. 277
[(1942)]. The method by which the monopoly is sought to be
extended is immaterial. 316 U.S. 251-252 [(1942)]. The patent
is a privilege. But it is a privilege which is conditioned by a
public purpose. It results from invention and is limited to the
invention which it defines."

Id. (footnote omitted, citing to nine earlier Supreme Court precedents).

Under this consistent and clear Supreme Court precedent, a patent holder

harms public policy when it uses its patent recklessly in an attempt to assert or

secure patent-like rights beyond the legal scope of the patent grant.

Because recklessly overreaching demands for relief-be it seeking an

injunction against an entire software offering based on a patent claim allegedly

directed to a minor feature, or seeking a slice of the alleged infringer's profits on

software and services obviously beyond the scope of the patented invention-

violate the public policy of the patent system, they should suffice to support a trial

court finding that a case is exceptional.

- 19 ­
VIII. CONCLUSION

Amici urge this Court to clarify that Eltech's party-neutral application of

Section 285 is the governing law, and make clear that the district courts are

empowered, in appropriate cases, to deter the innovation-injuring epidemic of

recklessly overreaching patent assertions, by adopting the following standard:

To establish that a case is 'exceptional' under Section 285, it is

sufficient to show by clear and convincing evidence that the
patentee asserted or maintained some infringement claim or
demanded some relief despite an objectively high likelihood
that such assertion or demand was not justified by any valid
patent claim, and this risk was either known or so obvious that
it should have been known to the patentee.

Respectfully su , itted,

July 7,2010
bY~~~ Cruzen
Jeffrey S. Love i

John D. Vanden erg

Klarquist Sparkman, LLP
121 SW Salmon St., Ste. 1600
Portland, OR 97204
T: (503) 595-5300

Attorneys for Amici Curiae

- 20­
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Blockbuster Netflix

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Durie Tangri LLP
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Netflix
Alston & Bird, LLP
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Dallas, Texas 75201
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mike.newton@alston.com
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Media Queue, LLC

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