Realtime Adaptive Streaming L.L.C. v. Sling TV, L.L.C., et al., No. 2023-1035 (Fed. Cir. (D. Colo.) Aug. 23, 2024). Opinion by Albright (sitting by designation), joined by Moore and Lourie.
Realtime sued DISH and related Sling entities for infringement of three patents related to digital data compression. Eventually the case narrowed to just one asserted patent, the ’610 patent. The district court found the asserted claims ineligible as abstract under 35 U.S.C. § 101, and the Federal Circuit affirmed in a prior decision.
While that finding of ineligibility was on appeal, the district court granted DISH’s motion for attorneys’ fees. In awarding fees, the district court identified six “red flags” or danger signals that it held should have served as warning signs to Realtime: (1) decisions by other district courts in the “Google” and “Netflix” cases finding similar claims of a related patent ineligible; (2) a nonprecedential decision by the Federal Circuit in Adaptive Streaming v. Netflix; (3) two Patent Trial and Appeal Board decisions invalidating claims of a related patent for anticipation and obviousness; (4) a reexamination of the ’610 patent rejecting the claims as unpatentable for obviousness; (5) a notice letter sent by DISH to Realtime conveying its belief the ’610 patent was invalid and expressing an intention to seek attorneys’ fees; and (6) opinions by DISH’s expert witness on invalidity and ineligibility.
Considering each of these six red flags, the district court found that “Realtime’s dogged pursuit of the case notwithstanding those danger signals renders this an exceptional case” warranting attorneys’ fees. Realtime appealed.
The Federal Circuit vacated and remanded because the district court abused its discretion in finding the case exceptional. The Federal Circuit explained that “the district court relied on the six red flags without explaining the weight for each flag,” and “some of these red flags should not have been accorded any weight.”
Addressing each of the six red flags, the Federal Circuit first agreed with the district court as to the Google and Netflix decisions (the first red flag). The decisions involved a patent with a “virtually identical” specification and claims that were “essentially the same in substance” as the ’610 patent claims, so they “were a significant red flag to Realtime to reconsider its patent eligibility position of the asserted claims of the ’610 patent.”
The Federal Circuit disagreed, however, with the district court’s analysis of the remaining red flags. The Adaptive Streaming decision (the second red flag) “was about a different technology entirely” and thus “should not have been treated as a red flag.” As for the two Board decisions on anticipation and obviousness of a related patent (the third red flag), the Federal Circuit stated that the district court “failed to explain why the decisions were relevant in awarding attorneys’ fees.” The decisions “concerned different sections of the Patent Act and did not analyze whether anything in the prior art was well-understood, routine, or conventional” to put Realtime on notice that its arguments for the eligibility of the ’610 patent claims were meritless.
Next, as to certain office actions issued in a reexamination of the ’610 patent (the fourth red flag), the Federal Circuit said “it is unclear whether these office actions were used by the district court as red flags,” but if it did then the court “failed to adequately explain how these Board decisions sufficed to support a finding of exceptionality.”
The Federal Circuit likewise explained that “it is not clear what it is about the notice letter” (the fifth red flag) that made the district court treat it as a red flag. “The district court did not say.” The Federal Circuit explained that “simply being on notice of adverse case law and the possibility that opposing counsel would pursue [attorneys’] fees does not amount to clear notice that the ’610 claims were invalid,” so the letter is “not sufficient to support an exceptionality finding in this case.”
Lastly, the Federal Circuit addressed the opinions of DISH’s expert witness (the sixth red flag). DISH argued that its expert’s opinions “warranted serious consideration,” but the Federal Circuit ruled that, “without at least an explanation for why Realtime and [its expert] did not show ‘serious consideration’ of [DISH’s expert’s] opinions, the district court’s analysis was insufficient to support a finding of exceptionality.”
In the end, the Federal Circuit vacated and remanded for further consideration, while offering “no opinion on the correct disposition of DISH’s attorneys’ fees motion on remand.”