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Non-Prevailing Software Maker Faces $2M in Fees in Patent Case

February 8, 2016 | Posted in : Defense Fees / Costs, Fee Request, Fees as Sanctions

A recent The Recorder story, “Apple Goes After Quinn Client on Patent Fees” reports that Massachusetts software maker Aylus Networks Inc. must have breathed a sigh of relief when four of its 33 patent claims escaped Apple Inc.'s bid for inter partes review last year at the Patent Trial and Appeal Board (PTAB).

Now the company might be wishing it hadn't been so fortunate.  After proceeding with a stripped-down version of its patent infringement case in San Francisco over Apple's AirPlay feature, Aylus not only has lost on summary judgment, it's facing a $2 million fee motion from the iPhone maker.

Based on disclaimers it made to the PTAB, Aylus knew or should have known that its case against Apple had no chance, DLA Piper partner Mark Fowler argues in his Feb. 4 fee motion.  Nevertheless Aylus "proceeded with the lawsuit and forced Apple to incur significant fees and costs during fact discovery, expert discovery, summary judgment and Daubert and trial preparation."

The dispute is over Aylus' RE44,412 patent, which describes using a computer or mobile device to control video display signals.  Aylus sued Apple in U.S. district court in San Francisco in 2013, saying Apple TV infringes the patent when users project images from their mobile devices to TV screens.

After the PTAB cast a cloud over most of the patent claims, Aylus agreed to limit its San Francisco case to two of the claims that survived, to avoid having the litigation stayed.  But U.S. District Judge Edward Chen agreed with Apple last month that, based on the language of the patent and the way Aylus itself had interpreted it before the PTAB, there could be no genuine argument that Apple infringed.

Specifically, Aylus had contended that infringement occurs when Apple's iTunes Store servers and its mobile-device software direct content delivery to Apple TV. Apple argued, and Chen agreed, that the two patent claims describe negotiating content only from a control point proxy, in this case the iTunes servers.

In fact, that's what distinguished the two claims from the many others that the PTAB swept up into inter partes review, Chen wrote in his summary-judgment order.  And Aylus confirmed the distinction in its arguments to the PTAB, which Chen analogized to a prosecution disclaimer.

Quinn partner Amar Thakur had downplayed those arguments as just "scattered statements" at the PTAB, and accused Apple of trying to rewrite the claims after the PTAB decision.

Though the litigation dates to 2013, Apple said it's being "conservative" by asking for fees only from May of last year, after the PTAB decision and after Apple explained in discovery that AirPlay doesn't work the way described in Aylus' patent.  By then, Fowler writes, "there can be no doubt that Aylus had no objectively reasonable basis for continuing its patent infringement suit against Apple."