EscapeX IP, LLC v. Google LLC

Background

EscapeX IP, LLC brought one patent-infringement claim against Google LLC, alleging that YouTube’s Super Chat feature infringed Claim 23 of U.S. Patent No. 10,474,687. The claim required, among other things, “uncapped,” or unlimited, engagements with content. Google argued that Super Chat could not satisfy that requirement because users faced monetary limits on their purchases.

EscapeX also alleged that Google had known about the patented technology since a March 2016 meeting involving Lyor Cohen and an EscapeX white paper. The court found that allegation false. EscapeX did not file its patent application until December 2016, the patent issued later, and the white paper attached to the complaint referred to later-issued patents, 2019 social-media comments, and a roadmap beginning in 2019. At oral argument, EscapeX’s counsel acknowledged that the attached white paper could not have been provided at the 2016 meeting.

Google notified EscapeX’s counsel of these problems on February 12, 2024. Counsel did not amend or dismiss the complaint before Google filed a motion to dismiss on March 11, 2024. EscapeX voluntarily dismissed the case two hours later, without prejudice. Google then sought fees and costs under 28 U.S.C. § 1927, which allows sanctions against a lawyer who unreasonably and improperly multiplies court proceedings, and under the court’s inherent power.

Court’s Analysis

The court concluded that sanctions under Section 1927 were warranted against EscapeX’s counsel. The complaint did not plausibly allege that Super Chat met every element of Claim 23 because it did not provide factual support for the required unlimited engagements. The court also found that publicly available information on YouTube’s website showed that Super Chat imposed monetary caps, information that counsel should have discovered through a reasonable pre-filing investigation.

The court separately found that the allegations about the 2016 white-paper meeting were false and that counsel had an independent duty to investigate the factual basis for those allegations. The court reasoned that the baseless infringement claim, the false allegations, counsel’s failure to correct or dismiss the case after receiving Google’s warning, and the resulting need for Google to file a motion to dismiss established both the lack of a reasonable basis for the claim and bad faith required for Section 1927 sanctions. The court also considered counsel’s conduct in other cases as supporting the need for deterrence.

Because sanctions under Section 1927 were available, the court denied Google’s request for inherent-power sanctions against EscapeX’s counsel. The court denied without prejudice Google’s request for inherent-power sanctions against EscapeX itself. It directed that, if Google wished to continue pursuing sanctions against EscapeX, Google could file a supplemental letter motion by April 18, 2025.

Disposition

The court granted Google’s motion for sanctions under 28 U.S.C. § 1927. It denied Google’s motion for sanctions under the court’s inherent power as against EscapeX’s counsel. It denied without prejudice Google’s motion for sanctions under the court’s inherent power as against EscapeX. The court did not set a fee or cost amount in this opinion because Google had not submitted the required time records and cost documentation; Google was directed to submit that documentation by April 7, 2025. Judge Valerie Figueredo directed the Clerk of Court to terminate the sanctions motion.