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Intellect Wireless, Inc. v. Sharp Corp.

United States District Court, N.D. Illinois, Eastern Division

May 30, 2014

INTELLECT WIRELESS, INC., Plaintiff,
v.
SHARP CORPORATION, SHARP ELECTRONICS CORPORATION, HEWLETT-PACKARD COMPANY, PALM, INC., DELL INC., and GARMIN INTERNATIONAL, INC., Defendants

Page 840

For Intellect Wireless, Inc., Plaintiff, Counter Defendant: David Joseph Mahalek, Joseph Albert Culig, Paul K Vickrey, Raymond P. Niro, LEAD ATTORNEYS, Niro, Scavone, Haller & Niro, Ltd., Chicago, IL.

For Sharp Corporation, Sharp Electronics Corporation, Defendants, Counter Claimants: Richard de Bodo, LEAD ATTORNEY, Andrew Devkar, PRO HAC VICE, Bingham McCutchen LLP, Santa Monica, CA; Monica L. Thompson, Steven John Reynolds, DLA Piper U.S. LLP IL, Chicago, IL.

For Hewlett-Packard Company, Defendant: Graham M. Buccigross, Martin R. Bader, Matthew M. Mueller, Stephen Sandor Korniczky, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Paul J. Korniczky, Leydig, Voit & Mayer, Ltd., Chicago, IL.

For Palm, Inc., Defendant, Counter Claimant: Stephen Sandor Korniczky, LEAD ATTORNEY, Graham M. Buccigross, Martin R. Bader, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Matthew M. Mueller, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Paul J. Korniczky, Leydig, Voit & Mayer, Ltd., Chicago, IL.

For Garmin International, Inc., Defendant: Uma Chandrasekaran, Seyfarth Shaw LLP, Chicago, IL; Walter Jones, Jr., Pugh, Jones & Johnson, P.C., Chicago, IL.

For Dell, Inc., Defendant: Kimball Richard Anderson, LEAD ATTORNEY, Anthony DeMarco Pesce, Imron T Aly, Ivan Michael Poullaos, Kathleen B Barry, Winston & Strawn LLP, Chicago, IL.

For Dell, Inc., Counter Claimant: Kimball Richard Anderson, LEAD ATTORNEY, Imron T Aly, Ivan Michael Poullaos, Winston & Strawn LLP, Chicago, IL.

For Sharp Electronics Corporation, Counter Claimant: Richard de Bodo, LEAD ATTORNEY, Andrew Devkar, PRO HAC VICE, Bingham McCutchen LLP, Santa Monica, CA; Monica L. Thompson, Steven John Reynolds, DLA Piper U.S. LLP IL, Chicago, IL.

For Intellect Wireless, Inc., Counter Defendant: Joseph Albert Culig, Paul K Vickrey, Raymond P. Niro, LEAD ATTORNEYS, Niro, Scavone, Haller & Niro, Ltd., Chicago, IL.

For Hewlett-Packard Company, Counter Claimant: Graham M. Buccigross, Martin R. Bader, Stephen Sandor Korniczky, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Matthew M. Mueller, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Paul J. Korniczky, Leydig, Voit & Mayer, Ltd., Chicago, IL.

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MEMORANDUM OPINION & ORDER

Rebecca R. Pallmeyer, United States District Judge.

Plaintiff Intellect Wireless Inc. (" IW" ), holder of U.S. Patent Numbers 7,266,186 (" '186 Patent" ) and 7,310,416 (" '416 Patent" ) sued Defendants Sharp Corporation, Sharp Electronics Corporation, Hewlett-Packard Company, Palm, Inc., Dell Inc., and Garmin International, Inc.[1] for infringement in October 2010. This court granted partial summary judgment of non-infringement to Defendants in March 2012, and then stayed the case pending Judge William Hart's ruling on inequitable conduct in another case brought by IW on

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these same patents, Intellect Wireless, Inc. v. HTC Corp., No. 09-cv-2945. Following a bench trial, Judge Hart held that both patents were unenforceable due to inequitable conduct, Intellect Wireless, Inc. v. HTC Corp., 910 F.Supp.2d 1056 (N.D. Ill. 2012), and that ruling was affirmed on appeal. Intellect Wireless, Inc. v. HTC Corp., 732 F.3d 1339 (Fed. Cir. 2013). The court dismissed this case with prejudice.

Defendants now move for a declaration that the case before this court is exceptional and for an award of attorneys' fees under 35 U.S.C. § 285 [154]. An award of fees is appropriate, Defendants argue, because Plaintiff acquired the patent by engaging in inequitable conduct before the U.S. Patent and Trademark Office (" PTO" ), there was additional misconduct during the course of this litigation, and the infringement suit was meritless. Plaintiff acknowledges that the patents were declared invalid due to inequitable conduct, but argues nonetheless that the case is not exceptional. For the reasons discussed below, the court grants Defendants' motion [154] and refers the parties to Local Rule 54.3 to determine the appropriate fee award.

BACKGROUND

The '186 and '416 Patents, owned by inventor and IW CEO, Daniel A. Henderson, describe a wireless portable communications device to receive caller identification information and a picture over a telephonic communications network. (Mem. Op. & Order [132], hereinafter " Summ. J. Op.," at 2; Defs.' Mot. to Declare Case Exceptional & Award Att'ys' Fees & Costs [154], hereinafter " Defs.' Mot.," at 1.) Both patents were issued in 2007 (Summ. J. Op. at 2), and since February 2008, IW has filed six suits, including this one,[2] against twenty-four companies [3] in the wireless industry in the Northern District of Illinois, alleging infringement of the '186 and/or '416 Patents. Attorneys from the law firm of Niro, Haller & Niro, Ltd.[4] have represented Plaintiff in all six cases. Most of these suits have been settled pursuant to confidential agreements.[5] The first of these agreements is relevant to this motion: On September 5, 2008, Plaintiff entered into a licensing agreement and addendum with Motorola. (License & Settlement Agreement, Ex. 3 to Defs.' Mot., hereinafter " Motorola Agreement" ;

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Royalty Adjustment Agreement, Ex. 4 to Defs.' Mot., hereinafter " Motorola Addendum" ); see also HTC Corp., 910 F.Supp.2d at 1073. The Motorola Agreement provided that, in exchange for dismissal of the claims alleged against Motorola in a case pending before then-Chief Judge Holderman, No. 08-cv-1350, Motorola would pay Plaintiff $5,000,000. (Motorola Agreement at 4-5.) The Motorola Addendum, dated that same day, established a mechanism for Motorola to recover the full license fee: it provided that Motorola was entitled to a refund up to the full amount of the license agreement ($5,000,000) if Plaintiff successfully licensed its patents to other companies. (Motorola Addendum at 2); see also HTC Corp., 910 F.Supp.2d at 1073 (" The addendum promised refund of the license payment if IW collected license fees from other defendants, including LG, Samsung, Research in Motion and Apple." ). Because Plaintiff did successfully license its patents to other named defendants, Motorola ultimately recovered the full amount of its license fee, HTC Corp., 910 F.Supp.2d at 1073, and enjoyed a cost-free license in the disputed technology.

Defendants contend that Plaintiff was able to use the Motorola Agreement to leverage other settlements. (Defs.' Mot. at 6.) Specifically, Defendants assert, in negotiations with other alleged infringers, Plaintiff relied on the $5,000,000 that Motorola agreed to pay in its settlement agreement with IW as a monetary baseline, without disclosing the Motorola Addendum, which promised Motorola a refund. ( Id. ) After a bench trial on the Defendants' claim of inequitable conduct, in HTC Corp., Judge Hart concluded that " IW has been evasive about its licensing activities." HTC Corp., 910 F.Supp.2d at 1073. Specifically, Judge Hart found that Plaintiff produced the Motorola Agreement to Defendant HTC on October 18, 2010, but did not produce the Addendum until March 18, 2011, despite the fact that the parties had participated in a settlement conference on December 9, 2010 and had referred to the Motorola Agreement during these negotiations. Id. ...


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