Pacific Surf Designs Awarded Attorneys’ Fees in “Exceptional” Win Against Whitewater West Industries’ Subsidiaries

Pacific Surf Designs, Inc. (“PSD”) was awarded an “exceptional” victory when the honorable Judge Roger Benitez of the Southern District of California (the “Court”) granted PSD’s motion for attorneys’ fees under U.S.C. Section 285 in Flowrider Surf, Ltd; and Surf Waves, Ltd. v. Pacific Surf Designs, Inc. (Case No. 3:15-cv-01879-BEN-BLM).

The issue before the Court was whether the litigation brought by Whitewater West Industries, Ltd. subsidiaries Flowrider Surf, Ltd. (amalgamated into Whitewater in February 2016) and Surf Waves, Ltd. (collectively, “Whitewater”) was an “exceptional case” justifying an award of attorneys’ fees, which could be determined either (i) with respect to the substantive strength, or lack thereof, of Whitewater’s litigating position, or (ii) the unreasonable manner in which the case was litigated. The Court found that “based on the totality of circumstances, this case is ‘exceptional’ on both grounds.”

Substantive Strength of Whitewater’s Litigating Position

PSD argued that Whitewater’s litigating position was exceptionally weak and the Court agreed by finding “this case exceptional because [Whitewater] knew or should have known that the ‘016 Patent was objectively unreasonable and frivolous.” In refusing to drop the ‘016 Patent against PSD, PSD was forced to file an IPR action and incur substantial additional costs to invalidate the ‘016 Patent, which the PTAB granted, invalidating all of Whitewater’s asserted claims. The Court stated, “the PTAB’s Final Decision (affirmed by the Federal Circuit) confirmed that [Whitewater’s] litigation positions …were not only exceptionally weak, but were also frivolous in view of the prior art.” The Court summed up the strength of Whitewater’s arguments with:

“[Whitewater] relied on nothing more than their own speculative aspirations, derived from weak circumstantial indicators – rather than clear language taken from controlling legal documents to reach the conclusions asserted in response to [PSD’s] motion. As such, [Whitewater] have no reasonable basis for arguing that its claims are well grounded. Thus, this case stands out as ‘exceptional’ with respect to the substantive strength of [Whitewater’s] litigating position.”

Manner in Which the Case was Litigated

PSD also argued that Whitewater litigated the case to (i) exert significant financial pressure on PSD in order to settle, and (ii) to force PSD to hand over its financial records. Again, the Court sided with PSD and found:

“In sum, [Whitewater] initiated this suit without adequately investigating the validity of the ‘016 Patent (and despite warning signs to the contrary), insisted on maintaining this suit despite mounting evidence regarding the validity of the ‘016 Patent, and obfuscated the fact that the ‘016 Patent had validity issues, the manner in which it litigated this case also makes this case stand out as ‘exceptional.’”

In a telling finding, the Court stated that “…[Whitewater] stuck their head in the sand and proceeded to file this lawsuit.”

With this attorneys’ fees award in favor of PSD, the Court is sending a clear message to Whitewater that their unreasonable litigious behavior will not be tolerated. PSD CEO Yong Yeh stated: “Whitewater’s unreasonable and aggressive litigation tactics created a heavy burden for PSD for a number of years, and recovering our attorneys’ fees is an important step to obtaining justice; however, PSD’s total losses arising from Whitewater’s improper litigation tactics are enormous and go well beyond its direct legal fees expenditures. Despite Whitewater’s unmeritorious litigation attacks, PSD remains financially strong, and still makes the very best sheet wave machines in the industry. With this chapter behind us, we are poised to get even better.”

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