Appeals from the United States District Court for the
District of Delaware in Nos. 1:13-cv-00239-LPS,
1:13-cv-00287-LPS, 1:13-cv-00288-LPS, 1:13-cv-00289-LPS,
1:13-cv-00326-LPS, 1:13-cv-00330-LPS, 1:13-cv-00331-LPS,
1:13-cv-00404-LPS, 1:13-cv-00408-LPS, Chief Judge Leonard P.
Pazuniak, O'Kelly, Ernst, & Bielli, LLC, Wilmington,
DE, argued for plaintiff-cross-appellant.
Elliott, Latham & Watkins LLP, Washington, DC, argued for
defendant-appellant. Also represented by Rachel Weiner Cohen.
Dyk, Taranto, and Stoll, Circuit Judges.
parties appeal and cross appeal from various rulings by the
U.S. District Court for the District of Delaware in a patent
and breach of contract dispute. Because there was no final
decision on the merits, we dismiss the appeal for lack of
Digital Image Corporation ("PDIC") owns U.S. Patent
No. 4, 813, 056 ("the '056 patent"), which
relates to methods for encoding image data and allegedly
covers the encoding of digital images in the JPEG file
format. In June 2011, PDIC licensed the '056 patent to
Adobe, Inc. In the license agreement, PDIC promised not to
sue Adobe or Adobe's customers for claims arising
"in whole or part owing to an Adobe Licensed
Product." J.A. 1538-39.
in December 2012, PDIC sued numerous customers of Adobe,
alleging that the encoding of JPEG images on the
customers' websites infringed claims of the '056
patent. In November 2014, Adobe moved to intervene to defend
nine of its customers, contending that its customers were
using Adobe products to display images on their websites,
which was covered by PDIC's license to Adobe. The
district court granted Adobe's motion to intervene on May
8, 2015, Adobe filed a complaint in intervention, asserting
that PDIC breached its license agreement with Adobe by suing
Adobe's customers. For this breach of contract claim,
Adobe sought damages consisting of (1) its attorneys'
fees expended in connection with defending its customers and
responding to customers' indemnity requests and (2) its
fees expended in bringing the breach of contract claim
31, 2015, PDIC had dismissed each of the infringement actions
brought against Adobe's customers in which Adobe had
intervened. Adobe moved for attorneys' fees under 35
U.S.C. § 285, which permits an award of attorneys'
fees to the prevailing party in "exceptional
cases," and for sanctions under Federal Rule of Civil
Procedure 11. The district court denied both fees and
sanctions. As to § 285 fees, the district court
concluded that it "cannot determine at this time whether
PDIC or Adobe is the prevailing party." J.A. 26.
Assuming that Adobe was the prevailing party, the court found
that the case was "exceptional" in that it
"stand[s] out from the rest," J.A. 39-40, but that
in its discretion, it would deny the request for
attorneys' fees because the conduct was not
"so exceptional," J.A. 41 (emphasis in
original) (citation omitted). As to Rule 11 sanctions, the
court concluded that it "cannot say that PDIC's
pre-suit investigation was inadequate or that any filing was
made for any improper purpose." J.A. 42.
continued on Adobe's breach of contract claim. On August
1, 2017, the district court granted in part and denied in
part PDIC's motion for summary judgment based on
liability and damages. As to liability, the court held that
there were "genuine issues of material fact precluding
summary judgment," because a "reasonable juror
could accept Adobe's view that PDIC's infringement
allegations . . . cover the use of Adobe products,"
which would violate the license agreement's covenant not
to sue. J.A. 60. But as to damages, the court held that Adobe
could only collect "defense" fees-"that is,
those Adobe incurred in defending [its customers] from
PDIC's infringement suit, suits that were brought in
alleged violation of the covenant not to sue." J.A. 64.
Adobe could not recover the fees that Adobe incurred "in
attempting to vindicate its contract rights," that is,
"any attorney fees Adobe incurred in the affirmative
breach-of-contract suit." J.A. 64. The court ordered
Adobe to file a supplemental report disclosing Adobe's
defense fees. Adobe filed the supplemental report on August
August 17, 2017, the court struck Adobe's supplemental
report because it did "not separate Adobe's defense
fees from its affirmative fees" but instead
"claim[ed] all fees as defensive so long as they were
incurred while at least one Defendant (who requested
indemnification) was still involved in litigation with
PDIC." J.A. 82. The court concluded, however, that
"there is sufficient evidence in the record to determine
the amount of Adobe's fees that are purely defense
fees," and therefore directed Adobe to file a letter
disclosing the total amount of such fees and the record
support for the claimed amount. J.A. 86-87. When Adobe filed
its letter, however, the court struck it because it too
"did not disclose a purely defensive number." J.A.
court nevertheless declined to grant summary judgment to PDIC
on damages, explaining that it was "undisputed that some
amount of Adobe's legal fees are purely defensive."
J.A. 106. It ruled that Adobe would be permitted to present a
purely defensive number to the jury, but Adobe would have to
disclose that number to PDIC before opening statements.
effort to secure an appealable decision, Adobe then requested
that the court enter judgment in favor of PDIC, contending
that in light of the court's rulings, "Adobe
doesn't have damages to present," which Adobe
contended was "an element of what is to be tried."
Tr. of Pre-Trial Conference at 67:23-24, Princeton
Digital Image Corp. v. Office Depot Inc., No.
1:13-cv-00239-LPS (D. Del. Sept. 1, 2017), ECF No. 281. The
court reiterated its conclusion "that there are purely
defensive damages that can be proven on this record,"
but granted Adobe's request and entered judgment in favor
of PDIC. J.A. 106-08.
appeals, contending that the district court erred in (1) not
awarding fees under § 285 and sanctions under Rule 11;
(2) limiting the damages for Adobe's breach of contract
claim; and (3) refusing to compel PDIC to produce additional
documents (regarding PDIC's pre-suit investigation and