The district court briefly summarized this patent infringement action that it found frivolous as follows: "In the 1990's, Segan invented a system for people to browse the Internet. Today, Zynga makes video games that people can play while on Facebook. People don't browse the Internet while playing Zynga games on Facebook. But Segan sued Zynga for patent infringement. Segan lost at summary judgment, because no reasonable juror could conclude that Zynga's games infringe Segan's patent."
The district court then asked two questions: (1) was "this an "exceptional case" within the meaning of 35 U.S.C. § 285, such that Segan should pay Zynga for its attorneys' fees?" and (2) should the law firm representing Segan "be sanctioned under Rule 11 for filing and pursuing a frivolous lawsuit?"
After analyzing the patent claims, the specification and the accused games, the district court answered the first question in the affirmative. "Overall, it was obvious that the '928 patent's system for browsing the Internet with character icons and getting enhancements from various websites did not cover the act of playing games like FarmVille while on Facebook. From the beginning of the case, Segan's claim construction positions and infringement theory were so unreasonable as to make this case 'exceptional' within the meaning of section 285, even without reference to Segan's litigation conduct."
The district court then determined that the request fee amount was reasonable. "In light of the foregoing, the motion for attorneys' fees is granted. And the requested fee amount of $1,188,773.93 is reasonable. Indeed, it is on the low side for a case like this, particularly considering the high quality of the representation Zynga received. Segan argues that Zynga has not adequately justified its fee request, but given the length of the litigation and the difficulty Segan put Zynga through, the requested amount falls so squarely within the range of reasonableness . . ."
The district court next turned to addressing the section question--whether the law firm should be sanctioned as well. The district court found that even though the attorneys "devised and put forth objectively baseless claim construction and infringement positions, the record suggests they did not pursue the lawsuit in bad faith or with an improper purpose." The district court found that several of the pre-filing communications "are more suggestive of lawyers who come to believe in a ridiculous argument than they are of lawyers who are preparing to file a lawsuit in bad faith. The apparent absence of bad faith is a factor courts can and should consider when deciding how much to sanction attorneys."
The district court also found that in determining the amount of sanctions the law firm should be found jointly and severally liable, the fact that "devised and put forth objectively baseless claim construction and infringement positions, the record suggests they did not pursue the lawsuit in bad faith or with an improper purpose. For example, several of the pre-filing communications among Blank Rome attorneys are more suggestive of lawyers who come to believe in a ridiculous argument than they are of lawyers who are preparing to file a lawsuit in bad faith. The apparent absence of bad faith is a factor courts can and should consider when deciding how much to sanction attorneys." The district court singled out that the lawsuit was brought on "Segan's behalf in July 2011, three years before the Supreme Court decided Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. ----, 134 S.Ct. 1749, 1756 (2014); see also Raylon, 700 F.3d (involving Rule 11 sanctions and decided in 2012). Of course, this doesn't change the fact that the lawsuit was just as baseless in 2011 as it is now, and that's why Zynga is entitled to a full fee award against Segan under section 285. But the landscape is changing, such that the attorneys had less notice in 2011 than they do today of their own potential liability."
As a result, the district court found that the law firm sanction for which it would be jointly and severally liable with the client would be $100,000, which the district court also found would serve the deterrent purpose of Rule 11.
Segan LLC v. Zynga Inc, Case No. 14-cv-01315-VC (N.D. Cal. Sept. 10, 2015)