REALTIME ADAPTIVE STREAMING LLC v. NETFLIX INC.

Before: Newman, Reyna, and Chen. Appeal from the Central District of California.

Summary: Courts may use their inherent equitable powers to award attorneys’ fees for bad faith conduct.

Realtime Adaptive Streaming (Realtime) filed suit against Netflix in the District of Delaware alleging infringement of six patents. While the action was pending, Netflix moved to dismiss the Delaware action, arguing that several of the patents were ineligible under Section 101. Netflix also filed IPRs challenging the patentability of the patents. After the Patent Office instituted the IPR proceedings and a Delaware magistrate judge recommended that several patents be found ineligible, but before the district court ruled on the recommendation, Realtime voluntarily dismissed the suit.

Realtime re-asserted the same patents in the Central District of California, despite having previously argued in Delaware that litigating in California would be an unfair burden. Netflix moved for attorneys’ fees and to transfer the actions back to Delaware. Prior to any decision, Realtime voluntarily dismissed the case. The district court awarded fees for the California actions under Section 285 and, in the alternative, under its inherent equitable powers, finding that Realtime had engaged in impermissible forum shopping.

Applying Ninth Circuit precedent, the Federal Circuit held that the California district court did not abuse its discretion in awarding fees under its inherent equitable powers. The Federal Circuit noted that while Rule 41 allows a plaintiff to voluntarily dismiss an action and refile in another forum, Realtime’s conduct was blatant gamesmanship to avoid a potentially adverse ruling in Delaware. The Federal Circuit also upheld the district court’s denial of fees for the IPR proceedings and the Delaware action, finding no abuse of discretion in the court’s determination that the Delaware action was not clearly untenable when Realtime filed that action and that the IPR institutions alone were not enough to apprise Realtime of the futility of its litigation efforts.