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Realtime Adaptive Streaming LLC v. Netflix, Inc., et al., Nos. 2021-1484, -1485, -1518, -1519 (Fed. Cir. (C.D. Cal.) July 27, 2022). Opinion by Chen, joined by Newman. Opinion concurring in part and dissenting in part by Reyna.

Realtime asserted six patents against Netflix in the District of Delaware. Netflix moved to dismiss the complaint for failure to state a claim, arguing that the infringement pleadings were insufficient and that four of the patents were ineligible under 35 U.S.C. § 101. Netflix also filed seven IPR petitions against the patents.

Following institution of all seven IPR proceedings and a report from the Delaware magistrate judge recommending ineligibility for claims of four of the patents, Realtime voluntarily dismissed the Delaware action. The next day, Realtime re-asserted the same six patents against Netflix, this time in multiple California actions (despite having previously argued to the Delaware court that a transfer to California would be inconvenient and unfair). Netflix then moved for attorneys’ fees and to transfer the case back to Delaware. Before those motions could be decided, Realtime dismissed the California cases.

In response, Netflix renewed its motion for attorneys’ fees for the California actions as well as the related Delaware action and the IPR proceedings. The district court awarded fees for the California actions (only) pursuant to § 285 and, in the alternative, the court’s inherent equitable powers. Realtime appealed the fee award, and Netflix cross-appealed the court’s denial of fees for the Delaware and ITC proceedings.

The Federal Circuit affirmed, ruling that the district court did not abuse its discretion in awarding fees pursuant to its inherent equitable powers or in denying fees for the related proceedings. The court did not reach the question whether the award also satisfied the requirements of § 285.

The Federal Circuit ruled that the district court “reasonably found Realtime’s conduct in the California actions ‘improper,’ ‘exceptional,’ and ‘totally unjustified.’” The district court also “reasonably concluded that Realtime’s conduct in forum shopping its dispute supports invocation of its equitable powers.” While the Federal Circuit agreed with Realtime that it is generally permissible for a plaintiff to voluntarily dismiss an action and refile in another forum, the court stated that “that is a woefully incomplete description of the circumstances of this case.” The court held that Realtime’s “blatant gamesmanship … constitutes a willful action for an improper purpose, tantamount to bad faith,” and thus it was “within the bounds of activities sanctionable under a court’s inherent power.”

The Federal Circuit also ruled that the district court did not abuse its discretion in declining to award Netflix fees for the related Delaware case and IPR proceedings. The district court had identified no evidence that the initial filing in Delaware was “untenable,” and the court reasonably denied fees relating to the IPRs.

Judge Reyna concurred with the majority’s holding that the district court did not abuse its discretion in awarding fees under its inherent powers to sanction. But he dissented in part, stating that he “also believe[s] that the district court did not err in determining that [Realtime’s] two voluntary dismissals without prejudice is sufficient to confer prevailing party status under 35 U.S.C. § 285.” The majority, by comparison, elected not to resolve the question of whether Realtime’s voluntary dismissals rendered Netflix a prevailing party.

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