On August 9, 2013 the Federal Circuit decided Taurus IP, LLC v. DaimlerChrysler Corp., 2013 U.S. App. LEXIS 16507 (Court of Appeals, August 9, 2013). Taurus IP (a non-practicing entity) accused the auto manufacturers (DaimlerChrysler Company, Mercedes-Benz and Chrysler Group) for infringing claim 16 of U.S. Patent No. 6,141,658 (‘658 patent). The Federal Circuit affirmed the district court’s ruling that this case is exceptional under 35 U.S.C. § 285 and thus affirmed the award of $1.6 million in attorneys’ fees to the auto manufacturers. The ‘658 patent relates to a computer system for managing product knowledge related to products offered for sale by a selling entity. Among other features, claim 16 includes a user, user-defined relationship information, and a user system.

Claim Construction Term “User”

The Federal Circuit ruled that a term must be construed in light of the written description in which it resides. See Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005) (en banc). The Federal Circuit stated, that “we cannot look at the ordinary meaning of the term . . . in a vacuum.” Rather, the court must look at the ordinary meaning in the context of the written description and the prosecution history.  (quoting Medrad, Inc. v. MRI Devices Corp., 401 F.3d 1313, 1319 (Fed. Cir. 2005)). The Federal Circuit ruled that the district court properly construed the term “user” as “a person who is capable of creating and editing user-defined relationship information.”

The Federal Circuit reasoned that “the language of claim 16 makes it clear that the “user” must define the relationship information. Further, the written description of the ‘658 patent firmly supports this construction by only disclosing the term “users” with sufficient internal access to the data model to allow the creation and editing of relationship information. For example, the ‘658 patent discloses that “[e]ach type of user is responsible for certain goals of the system” such as “system management” or “data management.” (See ‘658 patent col. 12 ll. 2-11). Similarly, the patent discloses that “the system can ensure that each type of user can perform the tasks assigned to him or her, while maintaining database security.” Id., col. 13 ll. 45-48. Accordingly, Taurus IP acted in subjective bad faith and objective baselessness when Taurus IP continued to pursue the case after the above claim construction of the term “user.”

Exceptional and Attorney’s Fees Granted

Absent misconduct in litigation or in securing the patent, a case may be found exceptional under 35 U.S.C. § 285 only if (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). To be objectively baseless, the patentee’s assertions–whether manifested in its infringement allegations or its claim construction positions– “must be such that no reasonable litigant could reasonably expect success on the merits.” Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008), quoted in iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1378 (Fed. Cir. 2011).

Objectively Baseless

The Federal Circuit ruled that, “Taurus improperly asserted and maintained its positions in the litigation. See Post-Trial Decision, 559 F. Supp. 2d at 967-68.” The Federal Circuit further reasoned that “no reasonable litigant in Taurus’s position [after the claim construction] could have expected a finding that a web surfer accessing the accused external websites satisfied the requirement for a “user,” as recited in claim 16.” When patentees have sought unreasonable claim constructions divorced from the written description, the Federal Circuit has found infringement claims objectively baseless. See, e.g., MarcTec, 664 F.3d at 919. Because the specification and prosecution history clearly refute [the patentee's] proposed claim construction, the district court did not err in finding that [the patentee's] infringement claims were objectively baseless.

Subjective Bad Faith

The Federal Circuit states the District Court’s fact findings supports an implicit conclusion that Taurus subjectively knew that the DaimlerChrysler Patent Suit lacked a reasonable basis and was, therefore, pursued and maintained in bad faith. See MarcTec, 664 F.3d at 918. After careful consideration and review of the record, the Federal Circuit agreed with the District Court that [the patentee's] proposed claim construction, which ignored the entirety of the specification and the prosecution history, was thus unsupported by the intrinsic record, was frivolous, and supported a finding of bad faith.

Therefore, the Federal Circuit affirmed that this case was exceptional under 35 U.S.C. § 285 and maintained the award of Attorneys fee of $1.6 million for the defendants.