Exceptional Case Finding Upheld Where Patent Assertion Entity Prolonged Litigation In Bad Faith Despite Adverse Claim Construction And Lack Of Any Credible Alternative Argument

In Taurus IP, LLC v. DaimlerChrysler Corp., Nos. 08-1462, -1463, -1464, -1465 (Fed. Cir. Aug. 9, 2013), the Federal Circuit affirmed the district court's claim construction, judgment of invalidity, judgment of noninfringement, finding of an exceptional case, denial of a motion to dismiss for lack of personal jurisdiction over impleaded defendants, finding of liability for breach of contract, award of damages consisting of certain attorneys' fees, and imposition of evidentiary sanctions based on witness tampering, and reversed an award of damages for want of evidence at trial.

As a backdrop to the present case, licensing company Orion IP, LLC ("Orion"), managed by Erich Spangenberg, asserted a set of patents against a number of car manufacturers in the Eastern District of Texas. Some of the manufacturers, including DaimlerChrysler Corporation ("Chrysler"), entered into a settlement agreement with Orion. Meanwhile, just prior to the settlement, Orion assigned U.S. Patent No. 6,141,658 ("the '658 patent") to Taurus IP, LLC ("Taurus"), another company managed by Spangenberg. Taurus then asserted the '658 patent against Chrysler and other companies in the Western District of Wisconsin, alleging that the companies' websites, which allow configuration of a hypothetical vehicle, infringed the patent.

The district court decided on SJ that the '658 patent was anticipated by a prior art patent and further that the accused websites did not infringe the '658 patent. Additionally, the district court decided that the suit against Chrysler and others was exceptional under 35 U.S.C. § 285, and awarded attorneys' fees, as well as evidentiary sanctions against Spangenberg for tampering with a witness. Finally, after trial, the jury found that third-party defendants Orion and Spangenberg had breached the settlement agreement between Orion and Chrysler by asserting the '658 patent, and awarded the cost of defending against the Wisconsin lawsuit as damages for the breach.

On appeal, the Federal Circuit affirmed eight categories of findings and decisions at the district court, and partly reversed one award of damages.

"While an adverse claim construction generally cannot, alone, form the basis for an exceptional case finding, this court's decisions in DePuy Spine and Medtronic Navigation do not undermine the rule that a party cannot assert baseless infringement claims and must continually assess the soundness of pending infringement claims, especially after an adverse claim construction." Slip op. at...