Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Realtime Adaptive Streaming LLC v. Netflix, Inc. et al., Nos. 2021-1484, -1485, -1518, -1519 (July 27, 2022), affirming a decision of the U.S. District Court for the Central District of California awarding attorney fees under the Court’s inherent equitable authority.
Realtime asserted six patents against Netflix in the District of Delaware, and Netflix filed IPR petitions in response. Netflix also moved to dismiss, arguing that four patents were directed to ineligible subject matter under 35 U.S.C. § 101. After IPRs were instituted for all six patents, and the magistrate judge issued a decision finding four patents ineligible under Section 101, Realtime voluntarily dismissed the Delaware case. The next day, Realtime asserted the same patents in two lawsuits against Netflix in the Central District of California, even though Realtime previously argued to the Delaware court that transfer to California would be inconvenient and an unfair burden. Netflix moved for attorney fees, and to transfer the cases back to Delaware, but Realtime voluntarily dismissed the California cases before a decision on either motion. The district court awarded Netflix attorney fees for the California cases pursuant to 35 U.S.C. § 285 and the court’s inherent authority, but it declined to award fees for the Delaware case and IPR proceedings. Realtime appealed the district court’s fee award, and Netflix cross-appealed the denial of fees for the related proceedings.
The Federal Circuit affirmed. It held the district court’s conclusion that Realtime “impermissibly” and “unjustifi[ably]” engaged in forum-shopping to avoid the Delaware court’s patent-ineligibility ruling was not an abuse of discretion. The Federal Circuit found that Realtime’s conduct was “within the bounds of activities sanctionable under a court’s inherent power” and affirmed the fee award. It did not reach the question of whether the fee award also satisfied the requirements of Section 285, or the related issue of whether Netflix was a prevailing party in the California cases. The Federal Circuit held that the district court did not abuse its discretion in denying Netflix’s fee request for the related proceedings and affirmed that holding.
In dissent, Judge Reyna noted that Realtime’s second voluntary dismissal operated as an adjudication on the merits as a matter of law under Rule 41(a)(1)(B). Netflix was a prevailing party, he argued, and it would have been appropriate to consider the fee award under Section 285.