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Datatern, Inc. v. Microstrategy, Inc.

United States District Court, D. Massachusetts

June 5, 2018

DATATERN, INC., Plaintiff,
v.
MICROSTRATEGY INC. et al., Defendants.

          ORDER ON DEFENDANTS' MOTIONS FOR AN EXCEPTIONAL CASE DETERMINATION AND ATTORNEYS' FEES

          F. Dennis Saylor, IV United States District Judge.

         This was a case for patent infringement. Plaintiff Datatern, Inc. sued twenty-three defendants in twenty-two separate lawsuits in this District for infringement of U.S. Patent 6, 101, 502, titled “Object Model Mapping and Runtime Engine for Employing Relational Database with Object Oriented Software.” After almost six years, plaintiff's counsel withdrew from the representation. As plaintiff was unable to retain substitute counsel within a reasonable time, the case was dismissed for failure to prosecute.

         Defendant MicroStrategy and the six other remaining defendants have filed motions to recover their attorneys' fees and expert fees pursuant to 35 U.S.C. § 285. For the reasons set forth below, those motions will be granted in part and denied in part.

         I. Background

         A. Factual Background

         DataTern is the owner of U.S. Patent No. 6, 101, 502 (the “'502 patent”). The inventors of the '502 patent filed the utility application on September 25, 1998, claiming priority to provisional application number 60/069, 157 (filed on December 9, 1997), and provisional application number 60/059, 939 (filed on Sept. 26, 1997). The U.S. Patent and Trademark Office issued the patent on August 8, 2000.[1]

         The invention claimed in the '502 patent facilitates interaction between two popular systems for organizing computerized data: object-oriented software applications and relational databases. ('502 patent, col. 1 ll. 22-24). Object-oriented software applications encapsulate information in a collection of discrete “objects” that correspond to “classes, ” which define the type of object. (11-cv-11970, ECF 130-1 ¶¶ 20, 22). For example, an object-oriented software application for a human-resources department might contain the class “employee, ” which corresponds to objects representing particular employees such as “Jane Brown.” The object might contain attributes concerning Jane's employment, such as her wage rate and scheduled hours. Relational databases organize information into rows and columns, with each column representing an attribute and each row representing an instance of those attributes. (Id. ¶ 29). To use the same example, the database would display a table with columns containing information about employees' wages and hours, and rows representing a particular employee, such as Jane. The so-called “object-relational mismatch” arises because of different assumptions and approaches underlying the two systems. (Id. ¶ 35).

         The '502 patent addresses the mismatch by generating intermediaries to translate between the systems, making the interaction easier and more reliable. (Id. ¶¶ 42-43). Representative Claim 1 reads:

A method for interfacing an object oriented software application with a relational database, comprising the steps of:
selecting an object model;
generating a map of at least some relationships between schema in the database and the selected object model;
employing the map to create at least one interface object associated with an object corresponding to a class associated with the object oriented software application; and
utilizing a runtime engine which invokes said at least one interface object with the object oriented application to access data from the relational database.

         '502 patent col. 7 l. 51-col. 8 l.3.

         DataTern contended that MicroStrategy's Business Intelligence Platform infringes the '502 patent, and that the infringement extended to MicroStrategy's customers, at least some of whom are consolidated defendants in this case.

         B. Procedural Background

         On November 7 and 8, 2011, DataTern filed eight lawsuits against eight different defendants, all customers of MicroStrategy, alleging infringement of the '502 patent. All of those cases except that against Blazent, Inc., were voluntarily dismissed by DataTern after six weeks.

         Shortly thereafter, on November 15, 2011, DataTern filed nine more lawsuits against ten more customers of MicroStrategy, again alleging infringement of the '502 patent. Five of those cases-those not assigned to Judge Stearns-were voluntarily dismissed by DataTern within a few months.

         Then, on December 14, 2011, DataTern filed similar complaints against four other MicroStrategy customers and MicroStrategy itself. It marked all these cases as “related” to one of the November 15 suits before Judge Stearns, and all five were thus assigned to Judge Stearns.

         On February 23, 2012, MicroStrategy filed a motion to intervene and stay in the then- pending cases against its customers before Judge Stearns, on the theory that the case against it would be all but dispositive as to the cases against its customers. (e.g., No. 11-cv-12024, ECF 12).

         On February 24, 2012, Judge Stearns entered an order consolidating those nine cases and naming No. 11-cv-12220, that against MicroStrategy, as the lead case. He then denied the motion to intervene and stay as moot. At that time, the case naming Blazent as the defendant was not yet consolidated. The Court entered a scheduling order on March 21, 2012, and gave DataTern a deadline of June 1, 2012, to indicate whether it intended to pursue claims of infringement against MicroStrategy's customers separate from their use of MicroStrategy's software.

         A few months later, on April 26, 2012, DataTern filed a notice with the Court explaining that it did not intend to pursue claims of patent infringement against MicroStrategy's customers that were unrelated to their use of MicroStrategy's software, and moved to voluntarily dismiss those claims without prejudice pursuant to Fed.R.Civ.P. 41(a). (No. 11-cv-12220, ECF 42). Five of MicroStrategy's customers opposed the dismissal and cross-moved for summary judgment, arguing that because DataTern had not filed infringement contentions on the customer claims in accordance with the Court's scheduling order, it had waived those claims and they should be dismissed with prejudice. (No. 11-cv-12220, ECF 45). That motion also requested that all claims against MicroStrategy's customers should be stayed until the claims between MicroStrategy and DataTern were resolved.

         On May 10, 2012, MicroStrategy moved for judgment on the pleadings on the ground that the patent was drawn to patent-ineligible subject matter. (11-cv-12220, ECF 43).

         On May 25, 2012, MicroStrategy moved to compel DataTern to produce adequate infringement contentions. Judge Stearns granted that motion in part and denied it in part, requiring DataTern to provide amended contentions that “clearly identif[ied] the accused products (or combinations of products) that is alleged to infringe each asserted claim, and where each asserted claim element is found within each accused product or combination and supporting evidence” but explaining that “[a]t this preliminary stage, it is not necessary for plaintiff to provide highly detailed or ultimately successful contentions” and that “[p]laintiff is not required to know or disclose all possible theories of infringement at this point, and may uncover and disclose additional theories of infringement in the course of discovery.” (No. 11-cv-12220, Electronic Order, July 2, 2012). DataTern filed amended contentions on July 20, 2012. (No. 11-cv-12220, ECF 72).

         On July 5, 2012, Judge Stearns denied the customers' motion for summary judgment and allowed the dismissal of the claims without prejudice. As to the motion to stay, he explained that “the court will not entertain inefficient and duplicative multiple proceedings, and will stay the cases against the customer-defendants if and only if every customer-defendant agrees to be bound by the adjudication as to liability as to MicroStrategy.” (11-cv-12220, Electronic Order, July 5, 2012). In the next few weeks, all the customer-defendants agreed to be so bound, and the case as to them was stayed on July 17.

         Judge Stearns denied MicroStrategy's motion for judgment on the pleadings on July 31, 2012, without prejudice to its renewal after claim construction, explaining that “the patentability issue in this case turns on the significance of certain claim elements” and that it would be prudent to construe the claims first. (11-cv-12220, Electronic Order, July 31, 2012).

         That same day, the case was randomly reassigned to the undersigned judge. (11-cv-12220, ECF 78).

         MicroStrategy made its source code available to DataTern on August 10, 2012. (See 11-cv-11970, ECF 156-2). Pursuant to the parties' joint scheduling statement, DataTern had proposed that it would supplement its infringement contentions within 90 days of that production with specific citations to the source code. (11-cv-12220, ECF 27 at 8). Although that part of the joint scheduling statement had not been explicitly adopted by the Court, DataTern represented that it needed the source code to provide more accurate infringement contentions and that it would so supplement its contentions. (11-cv-11970, ECFs 156-1, 156-4).

         Meanwhile, the '502 patent was also the subject of litigation in the United States District Court for the Southern District of New York. See Microsoft Corporation v. Datatern, Inc. (11-cv-02365-KBF) and SAP AG and SAP of America v. DataTern, Inc. (11-cv-02648-KBF). That litigation involved DataTern, but not MicroStrategy. On August 24, 2012, the New York court issued an order on claim construction in which it construed the terms “object model” and “to create at least one interface object, ” among others in the '502 patent. It construed the term “object model” to mean “a template with a predetermined standardized structure both relating to an object-oriented software application and including object classes and inheritance relationships among classes.” Microsoft Corp. v. DataTern, Inc., Nos. 11-cv-02365, 11-cv-02648, 2012 WL 3682915, at *14 (S.D.N.Y. Aug. 24, 2012). It construed the term “to create at least one interface object” to mean “to generate code for at least one class and instantiate an object from that class, where the object is not part of or generated by the object oriented application and is used to access the database.” Id.

         At that point, in September 2012, MicroStrategy threatened to request sanctions against DataTern if it did not immediately dismiss the case the prejudice. In response, DataTern filed a motion to stay the litigation in Massachusetts pending the entry of final judgment in the New York cases. (11-cv-12220, ECF 83). The scheduling order in place at that time would have required that opening claim-construction briefs be filed by October 1, 2012. DataTern proposed that that exercise was unnecessary in light of the fact that the terms construed by the New York court were sufficient to show noninfringement. MicroStrategy contended that the case was baseless, its continuance was prejudicial to its business, and that claim construction should move forward so that the Federal Circuit could address all the disputed claim terms at once (as there were disputed terms the New York court had not reached). (11-cv-12220, ECF 86).

         The Court stayed the case on October 5, 2012, pending the issuance of final judgment in New York. At that hearing, DataTern disputed its obligation to supplement its infringement contentions within 90 days of the source code being produced, contending that its July 20, 2012 contentions were adequate to allow the parties to proceed to claim construction and that citations to source code were not normally provided until the expert reports. (11-cv-12220, ECF 98 at 14-18). The Court noted that the scheduling order did not require such a supplementation, and permitted DataTern to inspect the source code during the stay. (Id. at 18-19, 32-33). The Court deferred ruling on whether DataTern was required to file amended infringement contentions including citations to the source code, explaining that it was “not prepared to make a final binding decision right now” although it might be “the first sentence of [MicroStrategy's] first motion” after the lift of the stay. (Id. at 36-37).

         The New York court issued a final judgment in the consolidated cases before it on December 26, 2012. (11-cv-12220, ECF 105 at 4).

         On January 4, 2013, the Court granted a joint motion to consolidate the cases consolidated under 11-cv-12220 with the case against Blazent; at that point, case number 11-cv-11970-FDS became the lead case. Blazent also agreed to be bound by the adjudication as to liability against MicroStrategy. (11-cv-11970, ECFs 25, 26).

         On January 24, 2013, DataTern appealed the judgment of the New York court to the Federal Circuit.

         On February 4, 2013, DataTern filed a motion for judgment in favor of MicroStrategy as a matter of law in this Court, conceding that if the New York court had correctly construed the term “to create at least one interface object, ” the accused MicroStrategy product could not be held to infringe the '502 patent. Specifically, under that construction, the accused product here would not meet the claim limitation to “create at least one interface object” because it does not “generate code for at least one class and instantiate an object from that class.” (No. 11-cv-11970, ECF 30). Although DataTern had offered to stipulate to judgment in MicroStrategy's favor, MicroStrategy did not accept that stipulation. Instead, MicroStrategy filed a motion for summary judgment of noninfringement and attorneys' fees, detailing five separate grounds- over and above DataTern's concession-on which it believed it deserved summary judgment. (No. 11-cv-11970, ECF 32).

         On February 7, 2013, the Court granted summary judgment to MicroStrategy based on the concession by DataTern that MicroStrategy could not be held to have infringed the '502 patent based on the New York court's construction of “create at least one interface object.” (No. 11-cv-11970, ECF 39). It declined to address the other grounds MicroStrategy advanced, and deferred consideration of the fees question until after any decision by the Federal Circuit. DataTern then appealed the judgment in this case.

         On May 5, 2014, the Federal Circuit upheld the New York court's judgment of non-infringement. Microsoft Corp. v. DataTern, Inc., 755 F.3d 899, 909 (Fed. Cir. 2014). In so doing, it upheld the New York district court's determination that the term “object model” required classes. Id. It did not, however, review the district court's construction of “to create at least one interface object, ” as that proved unnecessary to render its decision. Id. at 908 n.5.

         On December 19, 2014, the Federal Circuit vacated this Court's order of summary judgment, finding that the New York court's construction of the term “to create at least one interface object” (which this Court had essentially adopted) was incorrect. DataTern, Inc. v. Epicor Software Corp., 599 Fed.Appx. 948, 954-55 (Fed. Cir. 2014). It construed the term “to create at least one interface object” to mean “to instantiate at least one interface object from a class.” Id. The Federal Circuit remanded the case to this Court for further proceedings. Id. at 955.

         On February 11, 2015, MicroStrategy filed two separate motions for summary judgment, one on the basis of invalidity for non-patentable subject matter and the other on the basis of non-infringement. (11-cv-11970, ECFs 49, 53). On September 4, 2015, the Court denied both motions, explaining that the '502 patent was not drawn to patent-ineligible subject matter and that the motion for summary judgment was premature because it depended on the construction of the term “class.” (11-cv-11970, ECF 101). Although the Court was troubled by the fact that DataTern had taken inconsistent positions as to the construction of the term “class” in this litigation and the New York litigation (in which it had stipulated to a different construction than the one it advanced here), it declined to hold that DataTern was estopped because the matter had not been fully briefed.

         On February 19, 2016, MicroStrategy filed a motion to require DataTern to post a $2.5 million bond to cover its expected attorneys' fees in the event that MicroStrategy prevailed and was awarded fees. (11-cv-11970, ECF 103). The Court denied that motion without prejudice on March 9, 2016, on the ground that the “[l]ittle has changed since the Court denied summary judgment in September 2015: the parties still have not begun claim construction and the judicial estoppel argument on the term ‘class' remains undeveloped.” (11-cv-11970, ECF 107 at 9).

         On July 29, 2016, MicroStrategy filed a motion to compel production of documents from prior litigation involving the '502 patent. (11-cv-11970, ECF 132). On August 5, 2016, DataTern filed a motion to compel production of MicroStrategy's source code, which MicroStrategy argued it should not have to do because DataTern had had an opportunity to view the source code back in 2012 and forfeited it. (No. 11-cv-11970, ECFs 140, 156). On September 7, 2016, Magistrate Judge Dein granted in part and denied in part MicroStrategy's motion, ordering MicroStrategy to obtain as many of the documents as possible from publicly available sources and accepting DataTern's representations as to the non-existence of certain statements, but requiring DataTern to provide hard copies of anything not publicly available and allowing MicroStrategy to file a further motion to compel if there were additional documents it thought it deserved. Judge Dein also granted DataTern's motion to compel MicroStrategy to produce its source code. (11-cv-11970, ECF 169).

         On September 26, 2016, the Court held a Markman hearing on the seven disputed claim terms. The Court issued its Markman order on February 7, 2017. (11-cv-11970, ECF 204). The Court ultimately agreed with MicroStrategy's construction of “class, ” but, the matter having been fully briefed, found that MicroStrategy had failed to demonstrate that DataTern would derive an unfair advantage from its position being adopted by the Court, and therefore DataTern was not judicially estopped from asserting its position on the proper construction of the term “class.”

         Following that order, DataTern filed amended infringement contentions in March 2017. (11-cv-11970, ECF 206). Those infringement contentions did not include citations to MicroStrategy's source code. In April 2017, MicroStrategy filed amended invalidity and noninfringement contentions. (11-cv-11973, ECF 210). It then filed a motion to compel adequate infringement contentions from DataTern in June 2017. (11-cv-11973, ECF 212).

         Before the Court could rule on that motion, DataTern's counsel file a motion to withdraw on August 22, 2017. Therein, DataTern's counsel explained (obliquely, to avoid violating the attorney-client privilege), that their representation agreement “provides that the client will consent to [counsel]'s withdrawal upon the occurrence of certain circumstances that include material disagreement over the conduct of the case, non-payment of expert fees and non-payment of other disbursements” and that one or another of those circumstances had come to pass. (Docket No. 227 at 1-2). On August 28, 2017, the Court granted the motion to withdraw effective September 18, 2017, in order to give DataTern the opportunity to find substitute counsel. The Court later extended that deadline to October 20, 2017. DataTern was not able to find substitute counsel, and, because a corporation is not permitted to proceed pro se, the Court dismissed the action for failure to prosecute on that date.

         MicroStrategy requested leave to file another motion for summary judgment, which the Court denied. (11-cv-11970, ECF 241). Subsequently, MicroStrategy filed this motion for fees. The other six remaining defendants have filed follow-on motions for fees incurred prior to the cases being consolidated.

         II. Standard of Review

         “The court in exceptional cases may award reasonable attorney fees to the prevailing party” in a patent dispute. 35 U.S.C. § 285. In order to be a “prevailing party, ” a party must have received “relief on the merits.” Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1033-34 (Fed. Cir. 2006). The “‘touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties.'” CRST Van Expedited, Inc. v. Equal Emp't Opportunity Comm'n, 136 S.Ct. 1642, 1646 (2016) (quoting Tex. State Teachers Ass'n v. Garland Indep. Sch. Dist., 489 U.S. 782, 789 (1989)). That change “must be marked by ‘judicial imprimatur'”; in other words, the party must have prevailed “because he has received a ‘judicially sanctioned change in ...


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