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LendingTree, LLC v. Zillow, Inc.

United States District Court, W.D. North Carolina, Charlotte Division

October 9, 2014

LENDINGTREE, LLC, Plaintiff,
v.
ZILLOW, INC. and NEXTAG, INC.; Defendants

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For LendingTree, LLC, Plaintiff: Bruce Colbath, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLC, New York, NY; Corby C. Anderson, LEAD ATTORNEY, Nexsen Pruet, PLLC, Charlotte, NC; Darren Matthew Franklin, David A. Randall, Laura Marie Burson, LEAD ATTORNEYS, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, Los Angeles, CA; Edward Victor Anderson, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, Palo Alto, CA; James Montgomery Chadwick, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton, Palo Alto, CA; James W. Geriak, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, Costa Mesa, CA; Jonathan Marina, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Hampton & Richter, LLC, San Diego, CA; Lai Lam Yip, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, San Francisco, CA; Martin Randall Bader, Matthew M. Mueller, Michael Murphy, William Blonigan, LEAD ATTORNEYS, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Nagendra W Setty, LEAD ATTORNEY, PRO HAC VICE, Orrick, Herrington & Sutcliffe LLP, San Francisco, CA; Paul W. Garrity, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton, LLP, New York, NY; Stephen Sandor Korniczky, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin et al., San Diegeo, CA; Matthew S. DeAntonio, Nexsen Pruet, Charlotte, NC.

For Zillow, Inc., Adchemy, Inc., Defendants: Carolyn Chang, Elizabeth J White, Saina S Shamilov, Yevgeniya A Titova, LEAD ATTORNEYS, PRO HAC VICE, Fenwick & West LLP, Mountain View, CA; Ravi Ragavendra Ranganath, Todd Richard Gregorian, LEAD ATTORNEYS, PRO HAC VICE, Fenwick & West LLP, San Francisco, CA; J. David Hadden, Lynn H. Pasahow, Ryan A. Tyz, PRO HAC VICE, Fenwick & West LLP, Mountain View, CA; Mark Peter Henriques, Womble, Carlyle, Sandridge & Rice, LLP, Charlotte, NC; Sarah Motley Stone, Womble Carlyle Sandridge & Rice, Charlotte, NC.

For Nextag, Inc., Defendant: Kevin Andrew Lake, Stephen C. Crenshaw, LEAD ATTORNEYS, PRO HAC VICE, Cooley, LLP, Reston, VA; Mark Peter Henriques, LEAD ATTORNEY, Womble, Carlyle, Sandridge & Rice, LLP, Charlotte, NC; Christopher Charles Campbell, PRO HAC VICE, Cooley, LLP, Reston, VA; Matthew James Brigham, PRO HAC VICE, Cooley, LLP, Palo Alto, CA; Sarah Motley Stone, Womble Carlyle Sandridge & Rice, Charlotte, NC; Thomas J. Friel, Jr., PRO HAC VICE, Cooley LLP, San Francisco, CA.

For Trip Jendron, Movant: Stephen S. Ashley, Jr., LEAD ATTORNEY, Ashley Law Firm P.C., Charlotte, NC.

For LendingTree, LLC, Counter Defendant: Corby C. Anderson, LEAD ATTORNEY, Nexsen Pruet, PLLC, Charlotte, NC; Edward Victor Anderson, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, Palo Alto, CA; Stephen Sandor Korniczky, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin et al., San Diegeo, CA; William Blonigan, LEAD ATTORNEY, PRO HAC VICE, Sheppard Mullin Richter & Hampton LLP, San Diego, CA; Matthew S. DeAntonio, Nexsen Pruet, Charlotte, NC.

For Zillow, Inc., Adchemy, Inc., V., Counter Claimants: J. David Hadden, Lynn H. Pasahow, Fenwick & West LLP, Mountain View, CA; Mark Peter Henriques, Womble, Carlyle, Sandridge & Rice, LLP, Charlotte, NC; Ryan A. Tyz, PRO HAC VICE, Fenwick & West LLP, Mountain View, CA; Sarah Motley Stone, Womble Carlyle Sandridge & Rice, Charlotte, NC.

For Nextag, Inc., Counter Claimant: Mark Peter Henriques, LEAD ATTORNEY, Womble, Carlyle, Sandridge & Rice, LLP, Charlotte, NC; Christopher Charles Campbell, PRO HAC VICE, Cooley, LLP, Reston, VA; Matthew James Brigham, PRO HAC VICE, Cooley, LLP, Palo Alto, CA; Sarah Motley Stone, Womble Carlyle Sandridge & Rice, Charlotte, NC; Thomas J. Friel, Jr., PRO HAC VICE, Cooley LLP, San Francisco, CA.

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ORDER

Frank D. Whitney, Chief United States District Judge.

THIS MATTER is before the Court on numerous motions filed by the parties following a jury trial in this case. In sum, Plaintiff has moved for Judgment as a Matter of Law (Docs. Nos. 596, 597); Defendant Zillow[1] has moved for Sanctions pursuant to Rule 11 (Doc. No. 582); all remaining Defendants[2] have moved for attorneys' fees (Docs. Nos. 577, 584, 587, 603, 604, 619); and Plaintiff has requested leave to file a surreply to Zillow's motion for attorneys' fees (Doc. No. 644). These motions are ripe for disposition. For the reasons that follow, Defendant NexTag's motion for attorneys' fees is DENIED IN PART and GRANTED IN PART, and all other motions are DENIED.

I. Background

Four years ago, LendingTree filed this patent infringement case alleging that Adchemy, Inc.; NexTag, Inc.; Quinstreet Media, Inc.; Quinstreet, Inc.; Zillow, Inc., and Leadpoint, Inc., d/b/a SECURERIGHTS infringed on U.S. Patent No. 6,611,816 (the '816 Patent" ), held by LendingTree. LendingTree further accused Zillow of infringing U.S. Patent No. 6,385,594 (" the '594 Patent" ), also held by

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LendingTree. Defendants denied the infringement allegations and asserted various defenses. Relevant to this Order, Zillow and Adchemy asserted anti-trust claims against LendingTree, and NexTag asserted laches and estoppel as defenses to LendingTree's infringement claims.

Several Defendants settled with LendingTree prior to trial, but three Defendants--Zillow, Adchemy, and NexTag--proceeded to a jury trial. The Court also conducted a bench trial on NexTag's laches and estoppel defenses. The Court need not detail all of the evidence presented during trial, but in pertinent part, provides the following summation of facts for purposes of this Order.

A. The Disputed Technology

LendingTree's patents are both titled " Method and Computer Network for Co-Ordinating a Loan over the Internet." The claims of the patents are directed toward that end. LendingTree filed this patent case alleging the Defendants infringed upon the patents by operating various websites that connect Internet borrowers and mortgage lenders. During claim construction, the Court heard the arguments of counsel and essentially agreed with Defendants' proposed constructions, subject to a few modifications. In the Court's view, Defendants' constructions more appropriately defined the claimed process, whereas LendingTree's proposed constructions sought to expand the breadth of the patented claims. As explained in the Court's oral rulings during the claim construction hearing, the Court interpreted the claims in accordance with applicable law governing claim construction.

Following claim construction, the parties engaged in discovery, some of which was intensely contested and required Court intervention. All parties moved for summary judgment, and the Court denied those motions.

B. Trial and Verdict

This case proceeded to trial, resulting in jury verdicts in favor of Defendants on LendingTree's infringement claims and in favor of LendingTree on Defendants' anti-trust claims. The jury also found that clear and convincing evidence showed both patents to be invalid because they failed to identify the correct inventors. Immediately following return of the jury verdict, LendingTree sought -- for the first time -- a special interrogatory to the jury as to the identification of the proper inventors. The Court denied this motion. LendingTree also renewed its motions for judgment as a matter of law, which the Court also denied. These rulings, as well as the right to recover attorneys' fees, are the bulk of the motions now before the Court.

II. Analysis

There are numerous motions pending before the Court, and the Court will address them in turn, albeit not necessarily in the order in which they were filed.

A. LendingTree's Motions for Judgment as a Matter of Law

LendingTree renews its motion for judgment as a matter of law (" JMOL" ) under Federal Rule of Civil Procedure 50, and in the alternative, moves for a new trial under Federal Rule of Civil Procedure 59, because the patents-in-suit are not invalid for failing to identify the correct inventors. LendingTree also moves pursuant to Rule 59(a) for a new trial on infringement, willful infringement, and damages because LendingTree contends it was prevented from developing the full evidentiary record it was entitled to develop under the Court's claim construction and that, consequently, allowing the verdict to stand results in a miscarriage of justice.

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It is well-settled that in patent cases, the law of the regional circuit governs a motion for JMOL under Rule 50(b). See SynQor, Inc. v. Artesyn Techs., 709 F.3d 1365, 1373 (Fed.Cir.2013) (" This court reviews the grant or denial of a motion for JMOL under the law of the regional circuit . . . ." ). In the Fourth Circuit, the district court may grant judgment as a matter of law when it finds that " a reasonable jury would not have a legally sufficient evidentiary basis to find for the non-moving party." Dotson v. Pfizer, Inc., 558 F.3d 284, 292 (4th Cir. 2009). A jury verdict will not be disturbed if sufficient evidence exists for a reasonable jury to find in the non-movant's favor. Id. " A trial court may not appropriately enter [JMOL] unless it concludes, after consideration of the record as a whole in the light most favorable to the non-movant, that the evidence presented supports only one reasonable verdict, in favor of the moving party." Id. (internal quotation marks and citations omitted) (alteration in original); see also Morpho Detection, Inc. v. Smiths Detection, Inc., 957 F.Supp.2d 655, 659 (E.D. Va. 2013) (citing Price v. City of Charlotte, 93 F.3d 1241, 1249 (4th Cir. 1996) (" Because federal courts do not directly review jury verdicts, constrained, as we are, by the Seventh Amendment, the [proponent of a JMOL motion] bears a hefty burden in establishing that the evidence is not sufficient to support the [jury's findings]." ); cf. Tights, Inc. v. Acme-McCrary Corp., 541 F.2d 1047, 1055-56 (1976) (indicating in a patent case decided before the creation of the Federal Circuit that " the rules governing appellate review of patent cases," including the rules governing a motion for a directed verdict, are " no different than in other types of civil litigation" )).

In patent cases, the law of the regional circuit also governs a motion for a new trial. Bettcher Industries, Inc. v. Bunzl USA, Inc., 661 F.3d 629, 638 (Fed.Cir. 2011). Rule 59(a) states that a district court " may, on motion, grant a new trial on all or some of the issues--and to any party . . . for any reason for which a new trial has heretofore been granted in an action at law in federal court." Fed.R.Civ.P. 59(a)(1)(A). In the Fourth Circuit, a new trial will be granted under Rule 59(a) if " (1) the verdict is against the clear weight of the evidence, or (2) is based upon evidence which is false, or (3) will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict." Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 301 (4th Cir. 1998) (quoting Atlas Food Sys. & Servs., Inc. v. Crane Nat'l Vendors, Inc., 99 F.3d 587, 594 (4th Cir. 1996)). The decision to grant or deny a new trial rests within the sound discretion of the district court. Id.

Unlike a Rule 50(b) motion, " [u]nder Rule 59 of the Federal Rules of Civil Procedure, a trial judge may weigh the evidence and consider the credibility of the witnesses and, if he finds the verdict is against the clear weight of the evidence, is based on false evidence or will result in a miscarriage of justice, he must set aside the verdict, even if supported by substantial evidence, and grant a new trial." Poynter by Poynter v. Ratcliff, 874 F.2d 219, 223 (4th Cir. 1989) (citing Wyatt v. Interstate & Ocean Transp. Co., 623 F.2d 888, 891-92 (4th Cir. 1980); Williams v. Nichols, 266 F.2d 389, 392 (4th Cir. 1959)).

1. Invalidity for Improper Inventorship

LendingTree moves for the Court to set aside the jury's verdict that the patents-in-suit are invalid for incorrect inventorship under 35 U.S.C. § 256 because the jury did not have sufficient evidence to legally support an invalidity verdict. LendingTree

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argues that Defendants presented no evidence that Richard Stiegler (who is named as an inventor on the patents) was not an inventor of any claim of the patents-in-suit. (Doc. No. 596). Instead, LendingTree contends the evidence only showed, if at all, that Jamey Bennett (whose name does not appear as an inventor on the patents) should be added as an inventor to the patents-in-suit.

Defendants disagree and oppose Plaintiff's motion for several reasons: (1) the jury had sufficient evidence to support its decision of invalidity; (2) the jury's verdict does not specify the particular error or errors on which the jury allegedly based its determination, and LendingTree did not timely request a special verdict on this issue; (3) LendingTree has failed to establish that the inventorship error should be corrected by this Court; and (4) LendingTree's request to add Mr. Bennett as an inventor is barred by the doctrine of laches.

The Court summarily agrees with Defendants' arguments that more than sufficient evidence supports the jury's verdict on improper inventorship, including the evidence directly related to Mr. Bennett's participation in developing the patented process. LendingTree has not satisfactorily demonstrated that the evidence presented, taken in the light most favorable to Defendants, supports only one reasonable verdict in LendingTree's favor. Nor has LendingTree established that the verdict is against the clear weight of the evidence, based on false evidence, or will result in a miscarriage of justice. Accordingly, LendingTree's Rule 50 and Rule 59 motions on this basis are DENIED.

This is not to say that the failure to identify Mr. Bennett on the patents is the sole basis for the jury's finding of invalidity. Based on the evidence currently before the Court, there are several combinations of inventors that the jury could have reasonably concluded should be listed on the patent, including, but not limited to: (1) Mr. Lebda acting alone; (2) Mr. Lebda and Mr. Bennett; or (3) Mr. Lebda, Mr. Bennett, and Mr. Stiegler. In light of these multiple, plausible options, coupled with LendingTree's failure to timely request identification of the inventors by the jury, LendingTree now moves the Court to correct inventorship under 35 U.S.C. § 256.

According to the relevant part of Section 256:

The error of omitting inventors or naming persons who are not inventors shall not invalidate the patent in which such error occurred if it can be corrected as provided in this section. The court before which such matter is called in question may order correction of the patent on notice and hearing of all parties concerned and the Director shall issue a certificate accordingly.

35 U.S.C. § 256 (emphasis added).

The Federal Circuit has interpreted the language from § 256 as giving courts the power to " correct . . . inventorship when all parties are given notice and an opportunity to be heard." Fina Technology, Inc. v. Ewen, 265 F.3d 1325, 1326 (2001) (citing Stark v. Advanced Magnetics, Inc., 119 F.3d 1551, 1553 (Fed. Cir. 1997)). Section 256 permits district court jurisdiction over disputes of inventorship. Bd. of Educ. ex rel. Bd. of Trustees of Florida State Univ. v. Am. Bioscience, Inc., 333 F.3d 1330, 1337 (Fed. Cir. 2003); MCV, Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1570 (Fed. Cir. 1989). Thus, § 256 authorizes federal courts to resolve such errors; however, the plain language of the statute falls short of requiring the federal court to do so. Furthermore, the Court is unconvinced that the Pannu v. Iolab Corp., 155 F.3d 1344, (Fed. Cir. 1998), case

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cited by LendingTree mandates that this Court resolve inventorship disputes, particularly whereas here, LendingTree had every opportunity to include a special verdict form asking the jury to identify the correct inventors upon a finding of invalidity for that reason.

Other district courts have acknowledged that section 256 expressly allows both the PTO and the courts to correct inventorship errors in patents, and that improper inventorship may be resolved by either the PTO or a court. Stevens v. Broad Reach Companies, L.L.C., 05-647-CV-W-GAF, 2006 WL 15563113 (W.D. Mo. May 31, 2006) (" Section 256 explicitly empowers both the Director of the PTO and the federal courts to remedy inventorship errors in issued patents." ); Mas-Hamilton Grp. v. LaGard, Inc., 21 F.Supp.2d 700, 711 (E.D. Ky. 1997) aff'd, 156 F.3d 1206 (Fed. Cir. 1998) (" A patent invalid for improper inventorship may be corrected by the Patent Office or a court." ). Therefore, the Court, in its discretion, may or may not exercise jurisdiction over an inventorship dispute. If the Court does not exercise jurisdiction over the inventorship dispute, the inventorship dispute may be resolved by the PTO.

The Court declines to resolve this issue for several reasons. As already discussed, LendingTree did not ask the jury to decide the issue of correct inventorship. Also, based on the evidence currently before the Court, there are several combination of inventors that the jury had could have reasonably concluded regarding identification of the proper inventor. ...


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