CAFC vacates attorneys’ fees awarded to Justin Timberlake, Britney Spears in patent infringement case

Singer-songwriter Justin Timberlake attends the ‘The Devil And The Deep Blue Sea’ premiere during the 2016 Tribeca Film Festival.

On October 20th, a panel at the United States Court of Appeals for the Federal Circuit issued a non-precedential decision in a patent infringement action involving American pop music stars Justin Timberlake and Britney Spears and their production companies. The Federal Circuit’s decision vacated an earlier award of attorneys’ fees to Timberlake, Spears and the other defendants based on a finding that the case was exceptional within the meaning of 35 U.S.C. 285. The per curiam decision from the panel made up of Judges Moore, Linn and O’Malley explained that certain of the factors relied upon by the district court to find this case to be exceptional were entitled to no weight under § 285. Thus, the attorneys’ fee order of the district court was vacated and the case remanded for further proceedings.

The original action in this patent infringement litigation was filed by Large Audience Display Systems (LADS), who alleged that Timberlake, Spears and their production companies infringed upon U.S. Patent No. 6,669,346, titled Large-Audience, Positionable Imaging and Display System for Exhibiting Panoramic Imagery, and Multimedia Content Featuring a Circularity of Action. This patent protects a panoramic imaging and display system in which an array of speakers is positioned around a perimeter of the system’s screen to provide audible sound which pans in such a way that can be synchronized with the movement of objects on the screen.

Fig. 1 of U.S. Patent No. 6,669,346.

LADS first sued Timberlake, Spears and their production companies in the U.S. District Court for the Eastern District of Texas (E.D. Tex.) in November 2009, alleging infringement of the ‘346 patent based on display technologies used by the pop singers during separate tours. LADS alleged that Timberlake and Tennman Productions’ infringement occurred during the 2007 FutureSex LoveShow tour and that Spears and Spears King Pole’s infringement occurred during the 2009 Circus Tour, both of which used large audience displays during performances. “Specifically, Appellees used a large-scale display system in their concert tours that either drops down from or is fixed to the ceiling,” according to the background of the case. “The display system is shaped like a cylinder, so that the audience can see the screen from any direction. The screen is sufficiently large to display a larger image of a performer for an audience who may be seated far away from the actual performer.” Initially, the Los Angeles Lakers and the Pussycat Dolls were also named as defendants by LADS, but they had been dismissed from the case at separate points. In 2010, the case was transferred to the U.S. District Court for the Central District of California (C.D. Cal.).

Before C.D. Cal. issued its decision in the case in 2015, the defendants attempted to challenge the validity of all asserted claims of the ‘346 patent by filing a petition for inter partes reexamination, a legal proceeding later obviated by inter partes review procedures at the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB). The reexamination request included a television broadcast of the opening ceremonies at the 1996 Olympics, arguing that this disclosed a large audience display as prior art. Although the examiner initially rejected the broadcast as “merely a visual presentation,” the first of three rejections of the Olympics broadcast, PTAB ultimately cancelled 14 claims of the ‘346 patent.

After PTAB issued its decision, the defendants filed a motion to dismiss the case from district court with prejudice in April 2015 and the case was dismissed in June 2015. In September 2015, the district court further granted an order awarding attorney’s fees and costs to the defendants in the case. The court granted the defendants an award in excess of $755,000, finding that the case was exceptional for several reasons. “Plaintiff, an apparent shell corporation, seems to have been formed with the sole intent to create jurisdiction in another district,” the court order reads. “It also seems that plaintiffs further prolonged the reexamination process, and consequently this litigation, by refusing to present the USPTO with additional prior art that, eventually, was dispositive of the claims at issue in this case.” The district court also found that LADS “violated clear, important canons of professionalism” by providing privileged information in its argument to mitigate its liability for attorney’s fees. This last charge was related to LADS’ provision of an e-mail between counsel for both sides sent in December 2009 in which the counsel for the defense stated that “the position of infringement is not frivolous.”

The Federal Circuit panel, however, saw the situation in a much different light. In a discussion on abuse of discretion in district courts, the Federal Circuit found “that the district court based its ruling, to some extent, on both a misunderstanding of what factors are relevant to an exceptionality determination and a clearly erroneous view of the record evidence.” LADS decision to form within the Eastern District of Texas “is irrelevant to where a court may exercise jurisdiction over an action brought by it.” Although LADS’ location could have been relevant to a change of venue, incorporation “in Texas would not affect whether the Eastern District of Texas could assert jurisdiction” over the defendants.

The Federal Circuit also recoiled from the argument that the USPTO’s cancellation of asserted claims through reexamination was proof of LADS making a frivolous claim. “The fact that PTO canceled the asserted claims after LADS filed its complaint, without more, does not support a finding of frivolousness,” the panel explained. The court noted that the PTAB’s broadest reasonable construction makes claims more susceptible to cancellation than they would be in a district court proceeding. Further, the PTAB does not attach a presumption of validity to claims in the same way that a district court must. The Federal Circuit acknowledged that it is possible in some cases that a reexamination rejection of asserted claims could lead to a finding that assertion of those claims was frivolous, but that there was nothing to justify such a conclusion in this case. 

The Federal Circuit panel also found that the record did not support the district court’s determination that the prior art involving the 1996 Olympics opening ceremonies was dispositive prior art in this case. The Olympics broadcast was not considered by the PTO at multiple points during the reexamination process. “Hence, the PTO concluded that Appellee’s comments did not rebut any findings by the PTO or responses from LADS, and the inclusion of the Olympics Prior Art was therefore considered improper,” the Federal Circuit’s decision reads. “Indeed, Appellees agree that the PTO rejected all of the reexamined claims without relying on the Olympics Prior Art.”

Not only did this Federal Circuit decision undo the district court’s finding of exceptionality, thereby preventing the award of attorney’s fees and costs, but he Federal Circuit also raised big questions as to how the court came to its conclusion on the amount of fees to be awarded. The panel found that district court did not perform a lodestar calculation and simply awarded the full amount proposed by counsel representing Timberlake, Spears and the production companies. District court made its determination that the award was reasonable, and even below average, based on a 2013 Report of the Economic Survey produced by the American Intellectual Property Law Association (AIPLA). That survey, however, provided two benchmarks for determining average fees: the end of discovery, and through trial. “In this case, little discovery had been conducted by the parties, and the case was dismissed with prejudice before trial,” the Federal Circuit noted. Further, although the defendants were represented by counsel from New York, the case was tried in California, meaning that California fee rates should be applied to determine a reasonable award.

The Federal Circuit also had issue with the bill itself, raising serious questions about whether redundant work was billed to Timberlake, Spears and the production company defendants. The panel openly wondered about seven partners billing 79 percent of the total hours, which was quadruple the number of hours billed by associates. Indeed, the Federal Circuit pointed out that partners were billing for basic tasks even though 12 associates were also assigned to and billing the case. Still further, the Federal Circuit said that it appeared as if “at least some of the billing entries were unreasonable, such as an entry for reviewing answers to interrogatories already served, and an entry for reviewing a court decision when the case was stayed for several years.”