vPersonalize Inc v. Magnetize Consultants Ltd

Opinion

6 UNITED STATES DISTRICT COURT FOR THE 7 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 ) 9 vPersonalize Inc., ) ) CASE NO. 2:18-cv-01836-BJR 10 Plaintiff, ) ) ORDER DENYING DEFENDANT’S 11 v. ) MOTION FOR ATTORNEYS’ FEES AND ) COSTS AND DENYING PLAINTIFF’S 12 ) MOTION FOR LEAVE TO FILE Magnetize Consultants Ltd., ) SURREPLY 13 (dba Kit Builder) ) ) 14 Defendant. ) ____________________________________) 15 16

17 I. INTRODUCTION 18 Before the Court are two motions: (1) Defendant Magnetize Consultants Ltd.’s Motion for 19 Attorneys’ Fees and Costs, Dkt. No. 156, and (2) Plaintiff vPersonalize Inc.’s Motion for Leave to 20 21 File Plaintiff’s Surreply in Opposition to Defendant’s Motion for Attorneys’ Fees and Costs, Dkt. 22 No. 197. Having reviewed both motions, oppositions thereto, the record of the case, and the 23 relevant legal authorities, the Court will deny both motions. The reasoning for the Court’s decision 24 follows. 25 1 II. BACKGROUND 1 The Court has set forth the facts of this matter previously in its Order Granting in Part and 2 3 Denying in Part Defendant’s Motion to Dismiss. See Dkt. 152 at 2–7. 4 In brief, the matter involves Plaintiff’s allegation that Defendant infringed Plaintiff’s 5 patents for automating the design and manufacture of custom-printed apparel and misappropriated its 6 trade secrets. Plaintiff’s First Amended Complaint contained five counts, including Counts I-III 7 for Infringement of the ‘280 Patent,1 ‘172 Patent, and ‘886 Patent, respectively, and Count IV-V 8 for Misappropriation of Trade Secrets in violation of the Defend Trade Secrets Act of 2016 and 9 the Washington Uniform Trade Secrets Act, respectively. Dkt. No. 22 at 9–13. 10 11 Based on parties’ representations that Plaintiff no longer asserted infringement of the ‘172 12 Patent, the Court granted dismissal of Count II in October of 2019. Dkt. No. 95. Then, in February 13 of 2020, the Court granted dismissal of Counts III and V, pursuant to a motion to dismiss submitted 14 by Defendant, but denied dismissal of Counts I and IV. Dkt. No. 152. Shortly thereafter, on 15 February 13, 2020, Plaintiff posted notice of the voluntary dismissal of Counts I and IV and the 16 Court administratively closed the case on the same day. Dkt. No. 155. 17 On February 28, 2020, fifteen days after the formal closing of this matter, Defendant 18 19 submitted the pending Motion for Attorneys’ Fees and Costs. Dkt. No. 156. After full briefing on 20 the motion, Plaintiff submitted the also pending Motion for Leave to File a Surreply, Dkt. No. 197, 21 along with a copy of the surreply it seeks leave to file, Dkt. No. 198. 22 23

24 1 Where not otherwise stated, the Court adopts the defined terms designated in its Order Granting in Part and 25 Denying in Part Defendant’s Motion to Dismiss. Dkt. No. 152. 2 III. DISCUSSION 1 A. Surreply 2 Under the local rules of this Court, a party seeking to “strike material contained in or 3 4 attached to a reply brief . . . may file a surreply requesting that the court strike the material.” Local 5 Rules W.D. Wash. LCR 7(g). This Court’s standing order elaborates on this requirement, stating 6 that “[l]eave of Court must be obtained to file a sur-reply.” Dkt. No. 26 at 2. Surreplies must 7 address the materials the movant claims should be stricken as inappropriate as “[e]xtraneous 8 argument or a surreply filed for any other reason will not be considered.” LCR 7(g)(2); see also 9 Farnes v. Metro. Grp. Prop. & Cas. Ins. Co., No. 18-cv-1882, 2019 WL 4044102, at *1 (W.D. 10 Wash. July 31, 2019). One appropriate ground for a request to strike is the well-established rule 11 12 that “courts will not consider new arguments raised for the first time in a reply brief.” Wild Fish 13 Conservancy v. U.S. Envtl. Prot. Agency, 331 F. Supp. 3d 1210, 1220 n.3 (W.D. Wash. 2018) 14 (quoting Bach v. Forever Living Prod. U.S., Inc., 473 F. Supp. 2d 1110, 1122 n.6 (W.D. Wash. 15 2007)) 16 Plaintiff argues that leave to file should be granted because Defendant, in its reply in 17 support of the motion for attorneys’ fees, raised two new arguments necessitating a response: (1) 18 19 a request that the Court issue a final judgment and (2) an article justifying the rates charged by 20 Defendant’s counsel. Dkt. No. 197 at 2–3. 21 The Court finds that Plaintiff’s motion and surreply do not substantively address new 22 arguments requiring a surreply. Both grounds Plaintiff identifies as new arguments were, in fact, 23 responses to arguments advanced by Plaintiff in its response to the motion for attorneys’ fees that 24 (1) no judgment had been issued in this case, Dkt. No. 184 at 4–8, and (2) that Defendant’s 25 3 counsel’s fees were “unconscionable,” id. at 16. As such, the Court will deny Plaintiff’s Motion 1 and will consider the underlying motion without reference to Plaintiff’s surreply. 2 3 B. Attorneys’ Fees and Costs 4 Defendant claims it is entitled to attorneys’ fees and costs under four statutes: (1) 35 U.S.C. 5 § 285; (2) 28 U.S.C. § 1927; (3) RCW § 19.108.040; and (4) RCW § 4.84.185. Dkt. No. 156 at 2. 6 1. 35 U.S.C. § 285 7 35 U.S.C. § 285 provides that the Court in a patent infringement suit may award reasonable 8 attorney fees to a prevailing party “in exceptional cases.” 35 U.S.C. § 285; see also Octane Fitness, 9 LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 553 (2014) (“[t]he power [to award attorney 10 fees in patent cases] is reserved for ‘exceptional’ cases”). In deciding whether a case is 11 12 exceptional, the Court looks to the totality of the circumstances. SunEarth, Inc. v. Sun Earth Solar 13 Power Co., 839 F.3d 1179, 1180 (9th Cir. 2016) (per curiam) (citing Octane Fitness, 572 U.S. at 14 553); see also Eko Brands, LLC v. Adrian Rivera Maynez Enterprises, Inc., 325 F. Supp. 3d 1116, 15 1123 (W.D. Wash. 2018), aff’d, 946 F.3d 1367 (Fed. Cir. 2020). As the Supreme Court explained 16 in Octane Fitness, “an ‘exceptional’ case is simply one that stands out from others with respect to 17 the substantive strength of a party’s litigating position (considering both the governing law and the 18 19 facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, 20 572 U.S. at 554. This included consideration of a nonexclusive list of factors, including 21 “frivolousness, motivation, objective unreasonableness (both in the factual and legal components 22 of the case) and the need in particular circumstances to advance considerations of compensation 23 and deterrence.” Id. at 554 n.6; see also SunEarth, 839 F.3d at 1181. 24

25 4 2. 28 U.S.C. § 1927 1 28 U.S.C. § 1927 provides that the Court may order “[a]ny attorney or other person 2 3 admitted to conduct cases . . . who so multiplies the proceedings in any case unreasonably and 4 vexatiously . . . to satisfy personally the excess costs, expenses, and attorneys' fees reasonably 5 incurred because of such conduct.” 28 U.S.C. § 1927. Where ordered, these sanctions must be 6 accompanied by a finding that the sanctioned attorney “acted recklessly or in bad faith” or 7 committed intentional misconduct. Barnd v. City of Tacoma, 664 F.2d 1339, 1343 (9th Cir. 1982); 8 see also In re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996) (“[b]ad faith is 9 present when an attorney knowingly or recklessly raises a frivolous argument, or argues a 10 11 meritorious claim for the purpose of harassing an opponent”) (quoting Estate of Blas v. Winkler, 12 792 F.2d 858, 860 (9th Cir. 1986)). 13 3. RCW § 19.108.040 14 RCW § 19.108.040 mirrors 35 U.S.C. § 285 and provides that, “[i]f a claim of 15 misappropriation is made in bad faith . . . or wilful [sic] and malicious misappropriation exists, 16 the court may award reasonable attorney’s fees to the prevailing party.” RCW § 19.108.040. 17 Under the statute, “‘malicious’ connotes a level of ill will or improper motive not captured by 18 19 ‘without just cause or excuse’” and, instead, is akin to “as a result of ill will or improper motive.” 20 ADA Motors, Inc. v. Butler, 432 P.3d 445, 453 (Wash. Ct. App. 2018); see also Boeing Co. v. 21 Sierracin Corp., 738 P.2d 665, 680–81, 682–83 (Wash. 1987). 22 4. RCW § 4.84.185 23 Finally, RCW § 4.84.185 provides that, “upon written findings by the judge that the action 24 . . . was frivolous and advanced without reasonable cause,” the Court may order the nonprevailing 25 5 party to pay the prevailing party “reasonable expenses,” including attorneys’ fees. RCW § 1 4.84.185. For a court to award such expenses, it must determine that the entire lawsuit meets this 2 3 standard, rather than one or more claims therein. Kilduff v. San Juan Cty., 453 P.3d 719, 728 4 (Wash. 2019) (citing Biggs v. Vail, 830 P.2d 350, 352 (Wash. 1992)). “A frivolous action is one 5 that cannot be supported by any rational argument on the law or facts.” Hanna v. Margitan, 373 6 P.3d 300, 308 (Wash. Ct. App. 2016) (quoting Rhinehart v. Seattle Times, Inc., 798 P.2d 1155, 7 1160 (Wash. Ct. App. 1990)). 8 5. Denial of Fees 9 The Court finds that it can address all four statutes at the same time as there is much overlap 10 11 between exceptional cases involving frivolous or meritless initiation of suit and vexatious or bad 12 faith prosecution once begun. 13 At no point in this case has the Court made a written finding that the case was frivolous or 14 that Plaintiff or its attorneys acted bad faith. See Dkts. No. 95, 97, 153 at 3. Further, while some 15 of Plaintiff’s claims were dismissed for failure to state a claim or abandoned by Plaintiff once 16 litigation commenced, this does not make those claims, or the lawsuit as a whole, meritless. In 17 fact, at least two of Plaintiff’s claims survived Defendant’s motion to dismiss, lending credence to 18 19 the contention that at least some of Plaintiff’s case contained merit. 20 Furthermore, as regards Plaintiff’s delay and obstruction of discovery, while the Court does 21 not condone the manner in which Plaintiff’s counsel conducted discovery, the Court already 22 instituted a reasonable consequence in finding that Plaintiff waived attorney-client privilege 23 objections both by its untimely response to the requests and by its failure to offer any valid 24 explanation therefor. Dkt. No. 95; Dkt. No. 97. As a result, Plaintiff was ordered to turn over all 25 6 responsive documents. Such a penalty was proportional and sufficient at that time. 1 Based on the foregoing, the Court will not award attorneys’ fees and expenses to 2 3 Defendant. 4 IV. CONCLUSION 5 Having found that Defendant is not entitled to recover attorneys’ fees and costs, the Court 6 need not address the issue of timing raised by Plaintiff. Dkt. No. 184 at 7–8. The Court will, 7 however, enter a formal judgment in this case, as requested by Defendant. Dkt. No. 191 at 11. 8 The Court hereby DENIES Defendant’s Motion for Attorneys’ Fees and Costs, Dkt. No. 9 156, and DENIES Plaintiff’s Motion for Leave to File Plaintiff’s Surreply in Opposition to 10 11 Defendant’s Motion for Attorneys’ Fees and Costs, Dkt. No. 197. 12 13 DATED this 15th day of May, 2020. 14

15 _______________________________ BARBARA J. ROTHSTEIN 16 UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 7