Appeals Court Smacks Down Patent Troll Blackbird, Orders It To Pay $363k In Attorneys Fees To Company It Sued

from the take-that dept

Remember Blackbird Technologies? This was the patent trolling firm made up almost entirely of lawyers who insisted they weren't a law firm... they just bought up patents for basically nothing and then threatened and/or sued a bunch of companies claiming patent infringement. A few years back it was suing basically everyone over some dubious patents. But it made a pretty massive strategic error in suing Cloudlfare because Cloudflare decided to fight back, not just to win its case, but to invalidate as many Blackbird patents as possible, while simultaneously reporting the ethics violations involved in pretending not to be a law firm when you really are (and in what appeared to be trying to purchase the bare right to sue, rather than the actual full patent rights).

That process ended poorly for Blackbird, who lost in court and on appeal, in a fairly demeaning way (the courts gave Cloudflare a complete and total victory -- and the appeal was even ruled upon within days of the hearing, which is almost unheard of in such cases). It still cost Cloudflare hundreds of thousands of dollars, but Blackbird had lost many of its employees and had cut back significantly on filing new lawsuits.

And now it's in even more trouble. The Court of Appeals for the Federal Circuit (CAFC, the appeals court that handles all patent cases) has upheld a lower court's order telling Blackbird it needs to pay $363,243.80 in legal fees to one of the companies it tried to shake down, Health in Motion LLC (HIM). The court clearly sees what's going on here, and its recounting of how Blackbird tried to get out of the case is... really something to behold. First, Blackbird sued and, following the typical patent trolling playbook, asked for $80,000 to settle. That number is (purposely) significantly less than it would take to fight the case in court. That's how the whole patent trolling shakedown process works. Sue, and then offer to settle for less than it would cost the defendant, even if they won the case. But HIM also decided to fight back and told Blackbird that it should pay them for having to waste this time on lawyers. From the CAFC summary, this is a fun read (if you're confused "Appellees" is HIM, the defendant in the case):

In June 2017, Blackbird offered to settle its case against Appellees for $80,000.... Appellees declined Blackbird’s offer, explaining that Blackbird’s “infringement allegations lack[ed] merit” “[i]n view of the substantial differences between what is claimed in the [’]976 [p]atent and the accused device,” .... Appellees also explained that they “believe[d] there [was] a strong likelihood” that Blackbird would be ordered to pay Appellees’ attorney fees, and countered with a settlement offer that included, inter alia, Blackbird “mak[ing] a payment of $120,000” to Appellees.

In October 2017, Blackbird made another settlement offer, this time for $50,000... (“Blackbird’s counsel . . . made an oral offer to settle the case if [Appellees] paid Blackbird $50,000.”). Again, Appellees declined.... In April 2018, Blackbird offered to settle yet again, this time for $15,000.... Appellees once again declined, “maintain[ing] their request that Blackbird pay a portion of [Appellees’] expenses[.]”... Later that same month, and again the following month (May 2018), Blackbird offered “a ‘walk-away’ settlement whereby [Appellees] would receive a license to the [’976] patent for zero dollars, and the case would be dismissed.”.... Once again, Appellees declined.... (Blackbird’s Vice President and Head of Litigation stating that “[Appellees], through counsel, have rejected all settlement offers by Blackbird . . . , including the zero-dollar ‘walk-away’ offer. . . . I understand the reasoning for this to be that [Appellees] have a belief that they will ultimate[ly] be awarded their legal fees after judgment in this matter”).

This is amusing. It's basically "Pay us $80k to go away." "No, fuckers, how about you pay us $120k." "Okay, how about $50k to go away." "No. You pay us." "$15k?" "No, you pay us!" "Okay, how about we just walk away for nothing." "No, dammit, you pay us."

Given that Blackbird's trolling strategy flopped pretty spectacularly, they then tried strategy two: run away!

In May 2018, shortly before discovery was scheduled to end, Appellees filed a motion for summary judgment.... Blackbird opposed... but, after Appellees’ motion was fully briefed, and without notifying Appellees in advance, Blackbird filed a notice of voluntary dismissal with prejudice... executed a covenant not to sue,... and filed a motion to dismiss for lack of subject matter jurisdiction.... (Appellees’ lead counsel explaining that “Blackbird’s counsel never mentioned that he intended to file a covenant not to sue. . . . Blackbird surprisingly filed a Notice of Dismissal, Covenant Not to Sue[,] and Motion to Dismiss”);... (Appellees’ counsel stating that Appellees “didn’t even get a call from Blackbird, [Appellees] just saw . . . on the [CM/]ECF [system] that [Blackbird] had filed these documents dismissing the case”).

That, right there, is Blackbird realizing "oh fuck, we're screwed."

The court notes that in "exceptional" cases,the courts may award legal fees. And this was an exceptional case.

Considering the “totality of the circumstances,” the District Court found that Blackbird’s case against Appellees is “exceptional within the meaning of [§] 285 and Octane Fitness.”.... Specifically, the District Court determined that Blackbird’s case against Appellees is “exceptional” because it “stand[s] out from . . . others with respect to” both “the substantive strength of [Blackbird’s] litigation position” and “the unreasonable manner in which the case [was] litigated” by Blackbird.... The District Court also found that “granting a fee award [was] warranted” in this case “to deter future abusive litigation.”... Finally, the District Court concluded that Appellees’ requested award of $363,243.80 was reasonable considering each attorney’s “comparable skill, experience, and reputation.”

And, as the CAFC notes, all of that was exactly right. I won't go through the full smackdown, but let's just say that CAFC found Blackbird's arguments "unpersuasive." Blackbird tried to argue that it couldn't have possibly known that its "litigation position was purportedly weak," but the court highlights that this is belied by the company's own actions.

...the exercise of even a modicum of due diligence by Blackbird, as part of a presuit investigation, would have revealed the weaknesses in its litigation position.

It also mocks Blackbird's silly claim that it only would have known that its legal position was weak if it was on notice from the court. As CAFC basically says, Blackbird's own actions disprove this claim:

It is also unclear what effect, if any, notice would have had on Blackbird’s conduct, as Blackbird waited until the “eve of trial” to dismiss its suit... despite being aware of Appellees’ non-infringement contentions months before....

At a minimum, Blackbird was aware of Appellees’ intention to seek attorney fees and expenses as early as December 2016, when, in answering Blackbird’s Original Complaint, Appellees requested attorney fees and expenses..... While this request may not have provided the “focused” and “supported” notice that we have looked for in other cases... it undermines Blackbird’s attempt to blame others, including the District Court, for it being purportedly unaware of the weaknesses in its litigation position. Accordingly, the District Court did not abuse its discretion in determining that this case “stands out” with respect to the lack of substantive strength in Blackbird’s litigation position.

Also, CAFC notes, it wasn't just Blackbird's laughably weak legal position that made this "exceptional." Blackbird's actions very much contributed to that decision, including its pursuit of "nuisance value settlements" (i.e., trolling).

The District Court did not limit its findings to the substantive strength of Blackbird’s litigation position, and further determined that Blackbird’s case against Appellees was “exceptional” because Blackbird “litigated . . . in an unreasonable manner.” ... The District Court made multiple findings to support this determination... each of which is supported by the record. First, the District Court found that Blackbird “made multiple settlement demands that were far less than the anticipated cost of defense,” i.e., nuisance value settlement offers.... By its own admission, Blackbird made a series of decreasing settlement offers... each of which was significantly less than the cost of litigation ... (Appellees’ litigation costs totaled at least $363,243.80).

Second, the District Court found that Blackbird unreasonably “delayed in producing documents, withheld many documents until after [Appellees] took [Blackbird’s] deposition[,] and completely failed to produce other responsive documents.”... Again, the record supports the District Court’s findings; indeed, the record shows numerous, unexcused delays by Blackbird in producing documents... as well as Blackbird’s attempts to withhold responsive documents entirely, without notice or excuse, until Appellees learned of the documents during depositions... (Blackbird admitting that it “had the documents in-house” yet failed to produce them),... (Blackbird admitting “[t]hat [it] is true” that “documents identified in th[e] deposition” have never been produced). While Blackbird subsequently implied that some of these documents might be privileged... Blackbird has failed to identify in the record any such assertion of privilege prior to the depositions.

Finally, the District Court determined that Blackbird had unreasonably “filed a notice of dismissal, covenant not to sue, and motion to dismiss without first notifying [Appellees’] counsel, on the same day pretrial submissions were due and shortly before [Appellees’] motion for summary judgment was to be decided.” ... The record supports these findings.... Accordingly, the District Court did not abuse its discretion in determining that this case stands out with respect to the manner in which Blackbird litigated.

Also, the court points out, Blackbird is a damn patent troll who does this type of stuff all the time:

In addition to its findings as to the substantive strength of Blackbird’s litigation position and conduct during litigation, the District Court found that “granting a fee award [was] warranted” in this case “to deter future abusive litigation.”... (explaining that Blackbird “has filed over one hundred patent infringement lawsuits, and none have been decided, on the merits, in favor of [Blackbird]”)

From there, the court looks at the requested attorneys fees and finds them perfectly reasonable... and concludes that Blackbird needs to pay up to the tune of $363,243.80.

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Filed Under: cafc, legal fees, patent troll, patents, shakedown, vexatious
Companies: blackbird, health in motion