District Court Thwarts $100 Million Damages Award, Finding Litigation Conduct Exceptional

The U.S. District Court for the Southern District of California recently ended a long, drawn-out patent infringement battle dealing with menu patents, which saw action in front of a jury, at the district court, at the Patent Trial and Appeal Board (PTAB), at the Federal Circuit, and even an unsuccessful petition to the Supreme Court. The resolution: The district court awarded Domino’s $2.7 million in attorneys’ fees and costs after finding the case exceptional within the meaning of 35 U.S.C. 285.

A Decade of Litigation

Beginning in August 2011, Ameranth, Inc. brought a series of patent infringement lawsuits against Domino’s and over 30 other defendants relating to the alleged infringement of four patents for menu generation and synchronization of data for mobile devices. United States Patents Nos. 6,384,850 (“the ‘850 Patent”), 6,871,325 (“the ‘325 Patent), 6,982,733 (“the ‘733 Patent”) and 8,146,077 (“the ‘077 Patent”). Specifically, Ameranth asserted that Domino’s online and mobile ordering system infringed the patents.

After a series of Covered Business Method (CBM) challenges brought at the PTAB, the only claims remaining in the lawsuits were those in the ‘077 Patent. On appeal, the Federal Circuit found all instituted claims of the ‘850, ‘325 and ‘733 patents unpatentable under 35 U.S.C. § 101. Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229, 1245 (Fed. Cir. 2016). In light of the Federal Circuit’s decision, the only remaining patent in the district court litigation was the ‘077 Patent.

After the Defendants exhausted all available remedies at the PTAB, and Ameranth exhausted all appeals, the district court litigation over the ’077 Patent continued in the United States Federal District Court for the Southern District of California. The parties engaged in motion practice, discovery and Markman proceedings. After a somewhat convoluted procedural history, as one might expect with so many defendants and joinder motions, the district court found the ‘077 Patent unpatentable under Section 101 and granted a motion to dismiss. Ameranth appealed that ruling and the Federal Circuit affirmed in an unpublished opinion. See Ameranth, Inc. v. Domino’s Pizza, LLC, 792 Fed. Appx. 780 (Fed. Cir. 2019).

On remand to the district court, the Domino’s Defendants requested a declaration that the case be considered exceptional, raising several arguments. First, the Domino’s Defendants argued Ameranth’s case was baseless because they knew or should have known that the ‘850, ‘325 and ‘733 patents were invalid based on a previous jury verdict finding the claims invalid. The Domino’s Defendants also asserted that Ameranth should have known, based on publicly available information, that they did not infringe the ‘077 Patent, and furthermore that Ameranth should have known the ‘077 Patent was invalid under Section 101 after the Supreme Court’s decision in Alice. Second, the Domino’s Defendants argued that Ameranth’s positions shifted during the litigation, and that Ameranth misled the Court on a number of other issues.

‘Revealing’ Conduct

The district court found Ameranth’s arguments relating to the ‘077 Patent particularly weak, and found their overall litigation conduct to also be “revealing.” Despite one jury, the PTAB, the district court and the Federal Circuit all reaching the same conclusion, “those losses have not had a deterrent effect on Ameranth’s behavior.”

Judge Dana M. Sabraw, Chief Judge of the Southern District of California, wrote: 

On the contrary, Ameranth had the jury verdicts erased, and settled with the Pizza Hut Defendants on the eve of trial before the Court could hear their § 101 motion. When that motion was eventually heard and decided adverse to Ameranth, Ameranth responded the same way it responded to its other losses, with an appeal to the Federal Circuit, where its loss was affirmed. Considering this pattern of continued bullishness in the face of numerous defeats, and the totality of the circumstances discussed above, the Court finds this is an exceptional case under §285.

According to Brooks Kushman, the case had significant ramifications for all of the defendants because the patent owner was seeking royalties for every food order and reservation made through each defendant’s online / mobile system. In fact, Ameranth sought over $100 million in damages from Domino’s alone, as well as future royalty payments on all electronic food orders placed on Domino’s system.

Brooks Kushman shareholder and President Frank Angileri, who recently participated in the IPWatchdog® Patent Litigation Masters™ program on a panel discussing how district courts are applying Section 101, led the winning team.

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