I never imagined I'd be mentioning Justin Timberlake and Britney Spears in a post for this blog, but there's a first time for everything. In a nonprecedential per curiam opinion issued today, Large Audience Display Systems v. Tenman Productions, LLC, the Federal Circuit vacated an award of attorneys' fees in favor of the defendants Justin Timberlake, Tennman Productions, LLC, Britney Spears, and Spears King Pole, Inc. The plaintiff, which owns a patent relating to a “panoramic imaging and display system for the imaging and displaying of visual-media content,” filed suit against the defendants based on their use of allegedly similar systems at concerts. While the suit was pending, the defendants initiated an inter partes reexamination, which ultimately resulted in the invalidation of all of the claims the plaintiff was asserting in the infringement litigation (though some other claims of the patent survived reeexamination, and some new ones were added). The district court then granted the defendants' motion to dismiss and their motion for attorneys' fees pursuant to 35 U.S.C. § 285.
In vacating the award, the Federal Circuit first concludes that "that the district court based its ruling, to some extent, on both a misunderstanding of what factors are relevant to an exceptionality determination and a clearly erroneous view of the record evidence" (p.9). First, the court states that "argument that LADS was formed in the Eastern District of Texas to create jurisdiction is not convincing. Specific jurisdiction is based on the defendant’s contacts with a forum state, not the plaintiff’s contacts" (id.) Second, "The fact that the PTO canceled the asserted claims after LADS filed its complaint, without more, does not support a finding of frivolousness," given the difference in the burden of proof (preponderance of the evidence) and the standard for claim construction (broadest reasonable interpretation) that the USPTO uses. Third, the court states that "the record does not support the district court’s finding that" certain prior art "was dispositive in the reexamination" (p.10). Thus, on remand, "[t]he district court may properly consider the totality of the circumstances in making its determination, including LADS’s use of the Langsam email to oppose Appellees’ motion for attorney’s fees, its opposition to the motion to transfer venue to the Central District of California, and the objective reasonableness of LADS’s claims given the standards and burdens that apply in district court, including the reasonableness of LADS’s proposed claim constructions. . . . But the district court must assure both that the circumstances on which it relies are accurate and that the court affords only the appropriate measure of weight to each" (p.11).
In addition, the court disagrees with the district court's methodology for calculating attorneys' fees. The district court had acknowledged that fees are usually calculated based on the "lodestar" method, which involves multiplying a reasonable hourly rate by the number of hours reasonably billed; but ultimately it awarded the defendants their requested fees of $755,925 on the ground that this figure was “in accord with the costs of defending a patent infringement suit as they are lower than the average cost to defend against patent infringement suits in which as little as less than $1 million is at stake, according to a 2013 [AIPLA] Report of the Economic Survey” (pp. 6-7). The Court of Appeals disagrees:
The average cost of typical patent infringement suits . . . was not the sole evidence upon which the district court should have relied to determine attorney’s fees. In addition, the comparison was not appropriate because the survey provided only two benchmarks for average fees: (1) the end of discovery; and (2) through trial. In this case, little discovery had been conducted by the parties, and the case was dismissed with prejudice before trial.
On remand, if the district court finds the case exceptional, it must use the lodestar method to calculate attorney’s fees determining the reasonable hours and rates for the lodestar calculation. Though Appellees were represented by attorneys from New York, the litigation occurred in the Central District of California. California fee rates should be used to calculate the lodestar figure unless there is some special expertise Appellees’ counsel had that warrants a different rate, or a showing is made that there is a prevailing national rate applicable in patent cases (p.12).
The court also questions whether some of the fees requested were indeed reasonable, and remands for further consideration.