IN THE UNITED STATES DISTRICT COURT
`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
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`1:17CV687
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`Defendant.
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`OPTOLUM, INC.
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`CREE, INC.,
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`Plaintiff,
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`v.
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`MEMORANDUM OPINION AND ORDER
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`OSTEEN, JR., District Judge
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`Before this court is a Motion for Attorneys’ Fees filed by
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`Defendant Cree, Inc. (Doc. 368.) For the reasons that follow,
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`this court will deny Defendant’s motion.
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`I.
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`BACKGROUND
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`After a jury returned a verdict in favor of Defendant, (see
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`Docs. 342, 367), Defendant moved for attorneys’ fees,
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`(Doc. 368), and filed a brief in support, (Def.’s Br. in Supp.
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`of its Mot. for Attorneys’ Fees (“Def.’s Br.”) (Doc. 369)).
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`Plaintiff OptoLum, Inc. responded in opposition, (Pl.’s Opp’n to
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`Def.’s Mot. for Attorneys’ Fees (“Pl.’s Br.”) (Doc. 373)), and
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`Defendant replied, (Doc. 374).
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`Defendant argues that this is an exceptional case
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`warranting attorneys’ fees because Plaintiff “pursued legal
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 1 of 13
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`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
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`1:17CV687
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`Defendant.
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`OPTOLUM, INC.
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`CREE, INC.,
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`Plaintiff,
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`v.
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`MEMORANDUM OPINION AND ORDER
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`OSTEEN, JR., District Judge
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`Before this court is a Motion for Attorneys’ Fees filed by
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`Defendant Cree, Inc. (Doc. 368.) For the reasons that follow,
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`this court will deny Defendant’s motion.
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`I.
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`BACKGROUND
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`After a jury returned a verdict in favor of Defendant, (see
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`Docs. 342, 367), Defendant moved for attorneys’ fees,
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`(Doc. 368), and filed a brief in support, (Def.’s Br. in Supp.
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`of its Mot. for Attorneys’ Fees (“Def.’s Br.”) (Doc. 369)).
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`Plaintiff OptoLum, Inc. responded in opposition, (Pl.’s Opp’n to
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`Def.’s Mot. for Attorneys’ Fees (“Pl.’s Br.”) (Doc. 373)), and
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`Defendant replied, (Doc. 374).
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`Defendant argues that this is an exceptional case
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`warranting attorneys’ fees because Plaintiff “pursued legal
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 1 of 13
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`theories regarding brand value and willfulness having no basis
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`in law or fact.” (Def.’s Br. (Doc. 369) at 3.)
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`II. STANDARD OF REVIEW
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`Under the Patent Act, “[t]he court in exceptional cases may
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`award reasonable attorney fees to the prevailing party.” 35
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`U.S.C. § 285. “[A]n ‘exceptional’ case is simply one that stands
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`out from others with respect to the substantive strength of a
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`party’s litigating positions (considering both the governing law
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`and the facts of the case) or the unre asonable manner in which
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`the case was litigated.” Octane Fitness, LLC v. ICON Health &
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`Fitness, Inc., 572 U.S. 545, 554 (2014). The Supreme Court in
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`Octane Fitness overruled the Federal Circuit’s previous test for
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`when to award attorneys’ fees, which required finding “that the
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`litigation was both ‘brought in subjective bad faith’ and
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`‘objectively baseless’” because that test was “overly rigid.”
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`Id. (quoting Brooks Furniture Mfg., Inc. v. Dutailier Int’l,
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`Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005)). The Octane Fitness
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`court explained that “a case presenting either subjective bad
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`faith or exceptionally meritless claims may sufficiently set
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`itself apart from mine-run cases to warrant a fee award.” Id. at
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`555 (emphasis added).
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`“[A] ‘nonexclusive list’ of ‘factor s’” a court could
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`consider in determining whether to award fees “includ[es]
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 2 of 13
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`‘frivolousness, motivation, objective unreasonableness (both in
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`the factual and legal components of the case) and the need in
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`particular circumstances to advance considerations of
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`compensation and deterrence.” Id. at 554 n.6 (quoting Fogerty v.
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`Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). “There is no
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`precise rule or formula for making these determinations, but
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`instead equitable discretion should be exercised in light of the
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`considerations . . . identified.” Fogerty, 510 U.S. at 534
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`(internal quotation marks omitted) (quoting Hensley v.
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`Eckerhart, 461 U.S. 424, 436–37 (1983)). The prevailing party
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`must establish entitlement to attorney s’ fees by a preponderance
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`of the evidence. Octane Fitness, 572 U.S. at 557–58.
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`III. ANALYSIS
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`Neither party disputes that Defendant is the prevailing
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`party in this case. (Compare Def.’s Br. (Doc. 369) at 15, with
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`Pl.’s Br. (Doc. 373) at 1.) What the parties do dispute is
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`whether this is an “exceptional case[]” such that this court
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`should award Defendant “reasonable attorney fees.” § 285.
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`“[A] central aim of § 285 . . . is to prevent an alleged
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`infringer from suffering a ‘gross injustice.’” Kilopass Tech.,
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`Inc. v. Sidense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013). The
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`aim is not to punish a plaintiff for bringing claims, but “to
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 3 of 13
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`compensate a defendant for attorneys’ fees it should not have
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`been forced to incur.” Id.
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`Defendant argues Plaintiff asserted objectively
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`unreasonable theories related to brand value and willfulness.
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`(Def.’s Br. (Doc. 369) at 16.) Regarding brand value, Defendant
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`argues Plaintiff’s brand value allegations “were based on . . .
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`assertions that Cree misled consumers and thus misappropriated
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`reputation or brand value that otherwise belonged to OptoLum,”
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`and “[t]hose claims were dismissed as a matter of law.” (Id.)
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`Essentially, Defendant argues Plaintiff’s brand value
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`allegations were tied to Plaintiff’s Lanham Act and unjust
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`enrichment claims which were dismissed at the motion to dismiss
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`stage, so Plaintiff should not have continued to pursue damages
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`for brand value after those claims were dismissed. (Id. at 5.)
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`Defendant points to this court striking portions of Plaintiff’s
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`expert report concerning an additional five percent royalty for
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`brand value as further evidence of the unreasonableness of
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`Plaintiff’s claim. (Id. at 6–9.) Regarding willfulness,
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`Defendant argues Plaintiff unreasonably maintained its willful
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`infringement claim “[d]espite lacking any basis to support
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`willful infringement.” (Id. at 18.) According to Defendant,
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`because the only evidence offered that could potentially suggest
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`willful infringement was testimony that the inventor of
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 4 of 13
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`Plaintiff’s asserted patents may have mentioned he had a patent
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`to one of Cree’s founders, it was unreasonable for Plaintiff to
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`pursue a willful infringement claim. ( Id. at 12.)
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`Plaintiff, on the other hand, contends its introduction of
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`brand value evidence and willfulness evidence was not
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`unreasonable. (Pl.’s Br. (Doc. 373) at 10–14.) Regarding brand
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`value, Plaintiff argues that the Lanham Act and unjust
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`enrichment claims were related to allegations of “false
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`statements in Cree’s advertising campaigns,” whereas the
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`“evidence concerning Cree’s desire to use the accused products
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`to build its brand and the effect of that strategy on Cree’s
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`state of mind” were related to the hypothetical negotiation
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`analysis conducted to determine a reasonable royalty. ( Id. at
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`10–11.) Regarding willfulness, Plaintiff argues the fact that
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`Defendant did not move to dismiss or for summary judgment on
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`Plaintiff’s willful infringement claim supports Plaintiff’s
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`argument that its claim was not unreasonable. (Id. at 13.)
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`A.
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`Brand Value
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`Plaintiff’s First Amended Complaint brought a claim for a
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`violation of Section 43(a) of the Lanham Act for false
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`advertising and an unjust enrichment claim. (Compl. (Doc. 32)
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`¶¶ 171–97.) Those claims were dismissed at the motion to dismiss
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`stage. (Doc. 49 at 9, 13.) Plaintiff maintained, including
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 5 of 13
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`during trial, that under a reasonable royalty analysis, it was
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`entitled to damages for the alleged increase in value to
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`Defendant’s brand value due to its use of Plaintiff’s patents.
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`(See, e.g., Doc. 377 at 207–13.)
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`Upon a showing of infringement, a patentee is entitled to
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`“damages adequate to compensate for the infringement, but in no
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`event less than a reasonable royalty for the use made of the
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`invention by the infringer.” 35 U.S.C. § 284. “A ‘reasonable
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`royalty’ derives from a hypothetical negotiation between the
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`patentee and the infringer when the infringement began. A
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`comprehensive . . . list of relevant factors for a reasonabl e
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`royalty calculation appears in Georgia-Pacific Corp. v. United
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`States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).”
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`ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 868–69 (Fed.
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`Cir. 2010).
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`In considering Georgia-Pacific factor eleven, the extent to
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`which the infringer has made use of the invention and any
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`evidence probative of the value of that use, Plaintiff’s damages
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`expert, William Scally, opined that the technology enabled Cree
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`to build its brand, which would have put increased pressure on
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`the hypothetically negotiated royalty rate. (See Doc. 299 at 61–
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`62.) He concluded that a five percent rate represented the
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 6 of 13
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`increased value of the Asserted Patents on building Cree’s
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`brand. (Id. at 62.)
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`This court granted Cree’s motion to exclude as to that
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`portion of Scally’s opinion. (See Doc. 315 at 2.) This court
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`found that Scally had not sufficiently tied his methodology to
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`the facts of this case to be able to testify about incremental
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`value to a reasonable royalty. (See id.) Although this court did
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`exclude that portion of Scally’s opinion, brand value remained
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`relevant to other Georgia-Pacific factors, and according to
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`Scally, brand value reflected Defendant’s frame of mind
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`regarding what royalty rate they would have paid to use the
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`Asserted Patents. (E.g., Doc. 378 at 60.)
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`That this court excluded a portion of Plaintiff’s damages
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`expert’s opinion does not mean Defendant is entitled to
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`attorneys’ fees. “[A] finding of exceptionality requires more
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`than the mere fact that a party’s arguments were unsuccessful;
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`that this Court ruled against the plaintiffs on [portions of
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`their expert’s opinion] . . . is not sufficient by itself to
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`merit an award of attorney’s fees.” Duke Univ. v. Sandoz, Inc.,
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`1:14-CV-1034, 2016 WL 11540567, at *1 (M.D.N.C. Feb. 10, 2016)
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`(citing Gaymar Indus., Inc. v. Cincinnati Sub -Zero Prods., Inc.,
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`790 F.3d 1369, 1373 (Fed. Cir. 2015) (“[F] ees are not awarded
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`solely because one party’s position did not prevail.”)); Raylon,
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 7 of 13
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`LLC v. Complus Data Innovations, Inc. , 700 F.3d 1361, 1368 (Fed.
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`Cir. 2012) (“Reasonable minds can differ as to claim
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`construction positions and losing constructions can n evertheless
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`be nonfrivolous.”).
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`Here, Plaintiff did not litigate its incremental brand
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`value theory in an unreasonable or vexatious manner. See SFA
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`Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1349 (Fed. Cir. 2015)
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`(“[U]nder Octane Fitness, the district court must consider
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`whether the case was litigated in an unreasonable manner as part
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`of its exceptional case determination, and . . . district courts
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`can turn to our pre-Octane Fitness case law for guidance.”). Nor
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`did Plaintiff engage in misconduct or misrepresentations to any
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`degree sufficient to find this case exceptional. Cf. MarcTec,
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`LLC v. Johnson & Johnson, 664 F.3d 907, 919-20 (Fed. Cir. 2012)
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`(“MarcTec engaged in litigation misconduct when it:
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`(1) misrepresented both the law of claim construction and th e
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`constructions ultimately adopted by the court; and
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`(2) introduced and relied on expert testimony that failed to
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`meet even minimal standards of reliability, thereby prolonging
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`the litigation and the expenses attendant thereto.”). Finally,
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`while Plaintiff’s incremental brand value theory was weak, it
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`was not frivolous. See Octane Fitness, 572 U.S. at 554 n.6; see
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`also GoDaddy.com LLC v. RPost Commc’ns Ltd. , No. CV-14-00126-
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 8 of 13
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`PHX-JAT, 2016 WL 4569122, at *8 (D. Az. Sept. 1, 2016) (finding
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`the exclusion of a damages expert’s “report falls within the
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`realm of ‘most cases’ that do not ‘trigger a finding of
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`litigation misconduct’” (quoting MarcTec, 664 F.3d at 920)). Had
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`Scally tied a five percent “increase in brand value” to the
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`relevant facts and data, his opinio n on Georgia-Pacific factor
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`eleven very well may not have been excluded.
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`Additionally, this court notes that it is not exceptional
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`for portions of an expert’s report to be excluded. In fact,
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`portions of Defendant’s infringement expert’s opinion were also
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`excluded. (See Doc. 315 at 4–10.) Thus, the fact that portions
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`of Plaintiff’s expert’s opinion were excluded does not “stand []
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`out from other[]” cases because Defendant faced the same issue.
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`See Octane Fitness, 572 U.S. at 554.
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`Finally, contrary to Defendant’s contention that brand
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`value was related to Plaintiff’s Lanham Act and unjust
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`enrichment claims, this court finds, for the reasons discussed
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`above, that even if brand value was relevant to those claims, it
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`was also relevant to Plaintiff’s damages theo ry of a reasonable
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`royalty.
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`The totality of circumstances does not reflect Defendant
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`suffered “a ‘gross injustice.’” Kilopass Tech., 738 F.3d at
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`1313. This court is not satisfied by a preponderance of the
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 9 of 13
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`evidence that Plaintiff’s conduct regarding incremental brand
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`value was exceptional. Defendant’s motion for attorneys’ fees
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`will be denied as to brand value.
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`B.
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`Willful Infringement
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`Plaintiff’s willful infringement claim was dismissed at the
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`close of Plaintiff’s case-in-chief. (See Oral Order 11/03/2021;
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`Doc. 323.) Defendant argues that “[d]espite wielding its
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`assertion of willful infringement as a basis for extensive
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`discovery and trial testimony, OptoLum never articulated any
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`facts that would even remotely rise to willful infringement
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`under the law.” (Def.’s Br. (Doc. 369) at 17–18.)
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`“Willful infringement is a question of fact.” Bayer
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`Healthcare LLC v. Baxalta Inc., 989 F.3d 964, 987 (Fed. Cir.
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`2021). “To establish willfulness, the patentee must show the
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`accused infringer had a specific intent to infri nge at the time
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`of the challenged conduct.” Id. (citing Halo Elecs., Inc. v.
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`Pulse Elecs., Inc., 579 U.S. 93 (2016)). “As the Supreme Court
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`stated in Halo, ‘[t]he sort of conduct warranting enhanced
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`damages has been variously described in our cases as willful,
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`wanton, malicious, bad-faith, deliberate, consciously wrongful,
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`flagrant, or—indeed—characteristic of a pirate.’” Id. (quoting
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`Halo Elecs., 579 U.S. at 103–04). However, “the concept of
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`‘willfulness’ requires a jury to find no more than deliberate or
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 10 of 13
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`intentional infringement.” Eko Brands, LLC v. Adrian Rivera
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`Maynez Enters., Inc., 946 F.3d 1367, 1378 (Fed. Cir. 2020). In
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`short, willful infringement requires that the defendant (1) know
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`of the asserted patents; and (2) know that the defendant’s
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`actions constitute infringement. See Bench Walk Lighting LLC v.
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`LG Innotek Co., 530 F. Supp. 3d 468, 491 (D. Del. 2021).
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`This court finds Plaintiff was motivated by a genuine
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`belief that Defendant had knowledge of the Asserted Patents.
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`This is evidenced by testimony from OptoLum’s founder, Joel Dry,
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`who testified that he had spoken at a conference that Cree
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`executives attended, but when pressed on cross-examination, was
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`not certain he would have mentioned the Asserted Patents by name
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`such that Cree would have had notice. (See Doc. 375 at 55–58,
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`116.) Although this court found, in granting Defendant’s motion
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`for judgment as a matter of law on willful infringement, that
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`OptoLum presented no evidence that anyone at Cree was aware of
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`the asserted patents at the time of the creation of the accused
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`products, (see Doc. 345 at 7), that does not negate Plaintiff’s
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`good faith belief it did have some evidence.
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`Moreover, the cases cited by Defendant do not persuade this
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`court that Plaintiff acted objectively unreasonabl y in pursuing
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`willful infringement at trial. In Finjan, Inc. v. Juniper
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`Network, Inc., the plaintiff continued pursuing claims that were
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 11 of 13
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`unwinnable after claim construction and summary judgment. See
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`No. C 17-05659 WHA, 2021 WL 75735, at *2 (N.D. Cal. Jan. 9,
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`2021) (reasoning that “Finjan should have dropped the ‘780
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`patent after that first round patent showdown, which granted
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`Juniper summary judgment of noninfringement on claim 1 on the
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`construction of the phrase ‘performing a hashing function[,]’
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`[but] [u]ndeterred, Finjan kept the ‘substantially
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`overlap[ping]’ claim 9, which included the same ‘performing a
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`hashing function’ limitation”). Unlike in Finjan, where the
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`plaintiff had an adverse ruling on a substantially identical
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`issue already litigated to guide its litigation strategy, no
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`such adverse ruling existed regarding willful infringement. As
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`pointed out by Plaintiff, Defendant never moved to dismiss or
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`for summary judgment on Plaintiff’s willful infringement claim.
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`The other case cited by Defendant is equally unpersuasive.
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`In that case, the court found the plaintiff had engaged in
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`litigation misconduct during the trial. See Medtronic
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`Navigation, Inc. v. BrainLAB Medizinische Computersystems Gmbh,
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`Civil Action No. 98–cv–01072–RPM, 2008 WL 410413, at *6 (D. Col.
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`Feb. 12, 2008). This court has made no such finding regarding
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`Plaintiff’s conduct at trial. Even assuming, as Defendant
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`argues, that Plaintiff had an obligation to continually
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`reevaluate the merits of its claim during the course of this
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 12 of 13
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`litigation, this court cannot find that Plaintiff had any notice
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`from this court’s prior rulings that Plaintiff had no basis in
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`law or in fact to pursue its willful infringement claim.
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`Therefore, this court will deny Defendant’s motion for
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`attorneys’ fees as to willful infringement.
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`In conclusion, Defendant has failed to show by a
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`preponderance of the evidence that Plaintiff’s theories on brand
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`value and willful infringement were frivolous or objectively
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`unreasonable. Therefore, this court will deny Defendant’s motion
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`for attorneys’ fees.
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`IV. CONCLUSION
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`For the foregoing reasons, this court will deny Defendant’s
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`Motion for Attorneys’ Fees, (Doc. 368).
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`IT IS THEREFORE ORDERED that Defendant’s Motion for
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`Attorneys’ Fees, (Doc. 368), is DENIED.
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`This the 19th day of August, 2022.
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` __________________________________
` United States District Judge
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`Case 1:17-cv-00687-WO-JLW Document 384 Filed 08/19/22 Page 13 of 13
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