Spencer v. Taco Bell - Mot For Reconsideration

Case 8:12-cv-00387-SDM-TBM Document 111 Filed 05/13/14 Page 1 of 11 PageID 1682
UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
WAYNE SPENCER and MACH 5 LEASING,
INC.,
Plaintiffs
v.
TACO BELL CORP., TACO BELL
FOUNDATION, INC., and
IMAGEWORKS DISPLAY & MARKETING
GROUP, INC.,
Defendants
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) Case No.: 8:12-cv-00387-SDM-TBM
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DEFENDANTS' MOTION FOR RECONSIDERATION OF ORDER DENYING
DEFENDANTS' MOTION FOR EXCEPTIONAL CASE FINDING AND AWARD OF
ATTORNEYS' FEES AND INCORPORATED MEMORANDUM OF LAW
Pursuant to Federal Rules of Civil Procedure Rule 60(b )(6), defendants Taco Bell Corp.
and Taco Bell Foundation, Inc. (collectively "Defendants") respectfully move for reconsideration
of this Court's order denying Defendants' Motion for Exceptional Case Finding and A ward of
Attorneys' Fees (Dkt. 11 0).
TABLE OF CONTENTS
I. A MOTION FOR RECONSIDERATION IS APPROPRIATE HERE .............................. 1
II. THE U.S. SUPREME COURT'S LOWERED CRITERIA AND STANDARD OF
PROOF FOR DETERMINING AN EXCEPTIONAL CASE REQUIRES THE
COURT TO RECONSIDER AND GRANT DEFENDANTS' FEE MOTION ................. 1
III. DEFENDANTS HAD PROVEN THIS CASE AS EXCEPTIONAL BY A
PREPONDERANCE OF THE EVIDENCE ....................................................................... 3
a. Legal Standard ........................................................................................................ 3
b. This Case Stands Out From Others Because Spencer Procured The
Asserted Patent Through Misconduct.. ................................................................... 4
c. Plaintiffs Unreasonably Litigated This Case ........................................................... 6
IV. CONCLUSION ................................................................................................................... 7
TABLE OF AUTHORITIES
Page(s)
Federal Cases
Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc.,
393 F.3d 1378 (2005) ............................................................................................................. 2, 3
Egyptian Goddess, Inc. v. Swisa, Inc.,
543 F.3d 665 (Fed.Cir. 2008) ..................................................................................................... 6
Intellect Wireless, Inc. v. HTC Corp.,
732 F.3d 1339 (Fed. Cir. 2013) .................................................................................................. 5
Octane Fitness, LLC v. Icon Health & Fitness, Inc.,
_ S.Ct. _, 2014 WL 1672251(2014) ................................................................... 1, 2, 3, 4, 6
Federal Statutes
35 U.S.C. 285 ........................................................................................................................ 1, 3, 4
11
I. A MOTION FOR RECONSIDERATION IS APPROPRIATE HERE
A Motion for reconsideration must demonstrate why the court should reconsider its prior
decision and set forth facts or law of a strongly convincing nature to induce the court to reverse
its prior decision. An intervening change in controlling law is a recognized ground justifying a
motion for reconsideration. This motion for reconsideration meets the requirement.
As discussed in detail below, the United States Supreme Court ("Supreme Court")
recently changed the controlling legal standard for 35 U.S.C. 285 that governs the award of
attorney's fees in this case.
1
This change in controlling law justifies this motion for
reconsideration. Defendants promptly bring this motion after the Supreme Court's Octane
Fitness decision. Further, Defendants have set forth facts and law in this Motion and
Defendants' motion for an exceptional case finding and attorneys' fees award under 35 U.S.C.
285 ("Fee Motion," Dkt. 97) demonstrating why the Court should reconsider its Order denying
the Fee Motion in light of Octane Fitness. Therefore, Defendants' motion for reconsideration is
appropriate here.
II. THE U.S. SUPREME COURT'S LOWERED CRITERIA AND STANDARD OF
PROOF FOR DETERMINING AN EXCEPTIONAL CASE REQUIRES THE
COURT TO RECONSIDER AND GRANT DEFENDANTS' FEE MOTION
The Supreme Court recently lowered both the criteria and standard of proof for
determining an exceptional case; thus, requiring that the Court reconsider Defendants' Fee
Motion. On March 20, 2014, applying the more "rigid and mechanical"
2
criteria for determining
an exceptional case ("Brooks Criteria") that the United States Court of Appeals for the Federal
1
Octane Fitness, LLC v. Icon Health & Fitness, Inc.,_ S.Ct. _, 2014 WL 1672251(2014).
2
Octane Fitness, 2014 WL 1672251 at *3.
1
Circuit ("Federal Circuit Court") had improperly set in Brooks Furniture
3
, the Court issued an
order ("Order," Dkt. 110) denying Defendants' Fee Motion.
The Brooks Criteria required that a case was "exceptional" under 285 only "when there
has been some material inappropriate conduct related to the matter in litigation, such as ...
inequitable conduct in procuring the patent .... "
4
In addition, the Federal Circuit incorrectly
held in Brooks Furniture that "the underlying improper conduct and the characterization of the
case as exceptional must be established by clear and convincing evidence. "
5
Based on the
Brooks Criteria and high standard of proof, the Court held in its Order that the record
"establishes incontestably that Spencer misrepresented material facts to the USPTO, but the
record fails to establish by clear and convincing evidence (but might establish by a
preponderance of the evidence) that Spencer's misrepresentations were undertaken with the
subjective intent to deceive the USPTO." See Dkt. 110 at 7. The Court found that its denial of
the Fee Motion was "a close call." !d.
On April 29, 2014, approximately one month after the Court issued its Order, the
Supreme Court rejected the Federal Circuit's rigid Brooks Criteria that the Court had relied on in
its Order and found that the Brooks Criteria was "overly rigid."
6
The Supreme Court lowered
the exceptional case criteria and held that an exceptional case is "simply one that stands out from
others with respect to the substantive strength of a party's litigation position (considering both
the governing law and the facts of the case) or the unreasonable manner in which the case was
3
Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378 (2005).
4
!d. at 1381.
5
Id. at 1382.
6
Octane Fitness, 2014 WL 1672251 at *6 ("The Federal Circuit's formulation is overly rigid").
2
litigated."
7
In addition, the Supreme Court held that a prevailing party only needs to establish an
exceptional case by a preponderance of the evidence, not clear and convincing evidence.
8
Here,
the Court held that Defendants had proven this case as exceptional under the more rigid Brooks
Criteria due to Plaintiffs' misconduct before the USPTO. See Dkt. 110 at 7. However, the Court
denied the Fee Motion "in a close call" because Defendants had not met the then-governing
higher clear and convincing standard. ld. Thus, in light of the relaxed criteria and lower
standard of proof that the Supreme Court announced in Octane Fitness, the Court should grant
Defendants' Fee Motion.
III. DEFENDANTS HAD PROVEN THIS CASE AS EXCEPTIONAL BY A
PREPONDERANCE OF THE EVIDENCE
a. Legal Standard
Prior to the Supreme Court's decision in Octane Fitness, the Federal Circuit had applied
the Brooks Criteria that limited exceptional cases under 35 U.S.C. 285 to cases involving
litigation-related misconduct (including inequitable conduct in procuring patents) or litigation
that was brought in subjective bad faith and was objectively baseless.
9
Recognizing that
exceptional cases should not be limited to those two limited categories of cases, the Supreme
Court held that an exceptional case should be "simply one that stands out from others with
respect to the substantive strength of a party's litigation position (considering both the governing
law and the facts of the case) or the unreasonable manner in which the case was litigated."
10
"District courts may determine whether a case is 'exceptional' in the case-by-case exercise of
7
ld. at *5.
8
ld. at *7.
9
Compare Octane Fitness, 2014 WL 1672251 at *6 to Brooks Furniture, 393 F.3d at 1381.
10
3
their discretion, considering the totality of the circumstances."
11
In addition, a prevailing party
seeking an attorneys' fees award under Section 285 is now governed by a lower preponderance of
the evidence standard as opposed to the higher clear and convincing standard that the Federal
Circuit Court had incorrectly imposed. "[N]othing in 285 justifies such a high [clear and
convincing] standard of proof. ... Indeed, patent-infringement litigation has always been
governed by a preponderance of the evidence standard."
12
b. This Case Stands Out From Others Because Spencer Procured The
Asserted Patent Through Misconduct
Under the new standard announced in Octane Fitness, this case is exceptional under
Section 285 because it stands out from others in that Spencer procured the Asserted Patent
through misconduct before the USPTO. Plaintiffs could not have brought this action but for
Spencer fraudulently procuring the Asserted Patent.
As fully set out in the Fee Motion, the pertinent facts are uncontested. Even though
Spencer was fully aware that prior sales and public use of the Mach 5 Canister
13
would have
prevented the Asserted Patent from issuing, Spencer withheld these highly material facts from the
USPTO and procured the Asserted Patent; and, worse yet, submitted two false affidavits to the
USPTO expressly denying these facts. See, e.g., Dkt. 97 at 5-7. Notably, the second false
affidavit came after Defendants had taken Plaintiffs' counsel's deposition and Plaintiffs had
received Defendants' Motion for Summary Judgment that raised the issue of Spencer's failure to
disclose to the USPTO the invalidating prior sales. Facing overwhelming evidence, Plaintiffs
11
ld.
12
ld. at *7.
13
It is undisputed that Plaintiffs have been selling/leasing and using a canister named "Mach 5"
("Mach 5 Canister") that practices the Asserted Patent since at least 2006.
4
could only provide conclusory attorney argument without proffering any evidence to the contrary
in their opposition ("Opposition") to the Fee Motion. See, e.g., Dkt. 101 at 1-6. The Court
found in its Order that Spencer misrepresented material facts to the USPTO; but the Court
struggled to find that Spencer's subjective intent to deceive the USPTO was proven by clear and
convincing evidence, while noting that the record might establish the intent to deceive by a
preponderance of the evidence. Dkt. 110 at 7 ("the record fails to establish by clear and
convincing evidence (but might establish by a preponderance of the evidence) that Spencer's
misrepresentations were undertaken with the subjective intent to deceive the USPTO .... Taco
Bell's motion is (in a close call) DENIED."). Defendants believe that even under the clear and
convincing standard required to show inequitable conduct, such repeated affirmative submissions
of a false affidavit warrants a finding of inequitable conduct, thus making the case exceptional.
14
According to the new criteria and standard of proof announced in Octane Fitness,
Defendants are no longer required to prove that Spencer engaged in inequitable conduct or prove
Spencer's intent to deceive by clear and convincing evidence to support an exceptional finding
under Section 285. Defendants are now only required to show that this case stands out from
others because Spencer engaged in misconduct by withholding and misrepresenting highly
material information from the USPTO, and thus improperly procured the Asserted Patent.
Therefore, this case is exceptional under Section 285 because this case stands out from others as,
by a preponderance of the evidence, Spencer could not have brought this case but for Spencer
14
See, e.g., Intellect Wireless, Inc. v. HTC Corp., 732 F.3d 1339, 1345 (Fed. Cir. 2013)
(affirming the district court's finding of intent to deceit based on one false declaration
submitted to the USPTO followed by another false declaration that, instead of admitting the
earlier falsity, danced around the truth).
5
deceiving the USPTO into issuing the Asserted Patent.
c. Plaintiffs Unreasonably Litigated This Case
Another reason for this case being exceptional is that Plaintiffs litigated this case in an
"unreasonable manner."
15
The facts and argument relating to Plaintiffs' unreasonable litigation
tactics are fully set out in the Fee Motion (Dkt. 97 at 14-18). For example, Plaintiffs
unreasonably litigated this case by betraying Spencer's own argument before the USPTO (e.g.,
Plaintiffs contradicted Spencer's own argument before the USPTO that dome-shaped bottom was
significantly different from a flat bottom) and making flip-flopping arguments (e.g., argued the
claimed design was not dictated by function in Plaintiffs' opposition to Defendants' motion for
summary judgment, and later filed for patent reissuance claiming that several design elements are
functional). Other examples of "the unreasonable manner in which the case was litigated" are set
out in the Fee Motion. Dkt. 97 at 14-18.
In addition, Plaintiffs' reference to a "survey" in its Opposition (see Dkt. 101 at 13-14) is
simply a thinly-veiled attempt to hide the baselessness of this case. First, there is no evidence as
to how the alleged survey was designed or conducted. See Dkt. 101 at 13-14. Second, because
an ordinary observer is one that is familiar with the prior art design,
16
a person taking the survey
should be at least familiar with U.S. Patent No. 6,367,801 ("'801 Patent"), which is undisputedly
the most pertinent prior art in this case, in order to render the survey result meaningful. There is
no evidence, however, that the persons taking the survey were familiar with or provided with a
copy of the '80 1 Patent in order to answer the alleged survey questions. Third, as Plaintiffs now
claim in the reissue application that many design elements should be removed as functional, the
15
16
Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 681 (Fed.Cir. 2008).
6
persons taking the survey should have been informed of the functional design elements before
they could meaningfully answer the alleged survey questions. Again, there is no evidence that
any of the persons taking the survey were aware of any alleged functional design element in the
Asserted Patent. Thus, the alleged survey conducted by Plaintiffs is meaningless and is irrelevant
to whether or not Plaintiffs litigated this case in good faith.
Plaintiffs were able to hide behind the more rigid Brooks Criteria and higher standard of
proof prior to Octane Fitness, despite deceiving the USPTO into issuing the Asserted Patent. As
a result, Plaintiffs have unreasonably caused Defendants to expend unnecessary resources in
defending against this costly litigation. Because Defendants have proven, by a preponderance
of the evidence, that this case is exceptional under Section 285 and Octane Fitness, Defendants
respectfully request that the Court award attorneys' fees to Defendants in the amount set forth in
the Fee Motion. See Dkt. 97, Sec. IV.
IV. CONCLUSION
For the reasons set forth above, Defendants respectfully urge the Court to reconsider its
Order denying the Fee Motion in light of Octane Fitness and award Defendants the attorney's
fees sought.
Date: May 13, 2014
Respectfully submitted,
Is/ Je({rey F. Yee
Greenberg Traurig, LLP.
ADAM LANDA
(FL Bar No. 0036016)
JEFFREY K. JOYNER (pro hac vice)
JEFFREY F. YEE (pro hac vice)
Attorneys for Taco Bell Corp. and Taco Bell
Foundation, Inc.
7
CERTIFICATE OF SERVICE
I hereby certify that on this 13th day of May, 2014, I electronically filed the foregoing
with the Clerk of the Court using the CM/ECF system, which will send a notice of electronic
filing to CM/ECF participants in this case.
Is/ Jeffrey F. Yee
Jeffrey F. Yee
CERTIFICATE OF COMPLIANCE WITH LOCAL RULE 3.01(g)
I hereby certify that I conferred with Plaintiffs' counsel, Edward P. Dutkiewicz, via e-
mail on May 9, 2014 informing him that Defendants would be filing this motion. Plaintiffs'
counsel indicated that Plaintiffs would oppose to the relief sought in the motion.
Is/ Jeffrey F. Yee
Jeffrey F. Yee
8

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Case 8:12-cv-00387-SDM-TBM Document 111 Filed 05/13/14 Page 1 of 11 PageID 1682

UNITED STATES DISTRICT COURT

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