Viavi Solutions Inc. v. Platinum Optics Technology Inc.

Background

Viavi sued PTOT for allegedly infringing four patents involving optical filters. The parties had previously litigated related patent disputes in China and Taiwan, which ended in settlement agreements releasing certain infringement liability for worldwide sales of PTOT products manufactured or sold before May 1, 2020.

Viavi’s United States complaint alleged that, after May 1, 2020, PTOT supplied infringing filters for use in electronic devices sold in the United States. The complaint and Viavi’s infringement contentions primarily identified PTOT’s “11246” filter and included claim charts comparing that filter with the asserted patents. PTOT submitted a declaration stating that it had not manufactured or sold the 11246 filter since May 2020. Viavi nevertheless continued to pursue theories involving that filter and other, substantially similar filters. The court later denied Viavi’s request to amend its infringement contentions to add Filter #25. Viavi then voluntarily sought dismissal.

On May 2, 2023, the court dismissed Viavi’s claims with prejudice, dismissed PTOT’s counterclaims without prejudice, and denied PTOT’s renewed summary-judgment motion as moot. PTOT then sought $826,654 in attorneys’ fees and $8,400 in costs under 35 U.S.C. § 285, sanctions under 28 U.S.C. § 1927, and sanctions under the court’s inherent power.

Attorneys’ Fees Under Section 285

Section 285 allows a court to award reasonable attorneys’ fees to the prevailing party in an “exceptional” patent case. The court found that PTOT was the prevailing party and evaluated the total circumstances, including the strength of Viavi’s litigation position and the way Viavi litigated the case.

The court found that Viavi’s pre-suit investigation was inadequate. Viavi had analyzed the 11246 filter, but the court found that Viavi lacked evidence before filing suit that the filter—or another PTOT filter—was incorporated into electronic devices sold in the United States. The court also found that Viavi lacked evidence that the relevant technical specifications practiced a claim of the asserted patents. The court concluded that reliance on information from unspecified sources in Asia was insufficient and that Viavi should have investigated further before filing suit.

The court also found it unreasonable for Viavi to rely on the 11246 filter because that filter was expressly covered by the parties’ earlier license for the relevant period, and Viavi had no evidence that PTOT sold the filter after May 1, 2020. The court further found that Viavi should have abandoned claims involving the 11246 filter after receiving PTOT’s declaration that PTOT had stopped manufacturing and selling it. Continuing to pursue those claims and related theories unnecessarily prolonged the litigation and caused PTOT to incur additional fees.

The court found the case exceptional in certain respects, but it did not find that Viavi’s initial belief was objectively baseless. The court therefore concluded that PTOT should receive some, but not all, of its fees. The court awarded fees incurred from January 20, 2021, the date of PTOT’s declaration, and deferred determining the reasonable amount.

Sanctions Under Section 1927 and Inherent Power

Section 1927 permits sanctions for conduct that unreasonably and vexatiously multiplies litigation, but the court explained that such an award requires subjective bad faith. The court also considered its inherent power to impose sanctions for bad-faith conduct.

The court declined to impose sanctions under either authority. Although it found Viavi’s positions weak and its continued conduct disappointing, it did not find that Viavi or its counsel knowingly or recklessly raised a frivolous argument, acted to harass PTOT, or otherwise acted with subjective bad faith.

Costs and Next Steps

PTOT sought $8,400 in expert-witness fees as non-taxable costs. The court explained that expert fees may be awarded as sanctions only when the case goes sufficiently beyond an exceptional case and the required fraud or bad faith is shown. Because PTOT had not established fraud or the required bad faith, the court did not impose those expert-witness fees through its inherent power.

The court granted PTOT’s motion for attorneys’ fees and costs in part. It ordered PTOT to submit billing records for fees requested for work after January 20, 2021, including fees for preparing the fee motion. Viavi may file a supplemental brief addressing the reasonableness of those fees, and PTOT may file a reply. The court will determine the reasonable amount separately.