Monday, June 5, 2017

Federal Circuit Issues Two Precedential Opinions on Recovery of Attorneys' Fees

In two decisions handed down this morning, the U.S. Court of Appeals for the Federal Circuit reversed district court decisions on the recovery of attorneys' fees in patent cases.  As readers may be aware, under 35 U.S.C. § 285 U.S. courts may award the prevailing party in a patent matter its attorneys’ fees only in “exceptional” cases.  In Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014), the U.S. Supreme Court held that courts should consider whether a case is "exceptional" based on the totality of the circumstances and on the preponderance of the evidence; and in Highmark Inc. v. Allcare Health Management System, Inc., 134 S. Ct. 1744 (2014), the Court held that the standard of review on appeal is "abuse of discretion."  Highlighting the fact-specific nature of the inquiry, in the first case fr0m this morning, Rothschild Connected Devices Innovations, LLC v. Guardian Protected Services, Inc., the court (in an opinion by Judge Wallach, joined by Chief Judge Prost and Judge Mayer) concluded that it was an abuse of discretion to deny a request for attorneys' fees in a case in which the plaintiff moved to voluntarily dismiss its complaint for infringement of U.S. Patent No. 8,788,090, for a "[a] system and method for creating a personalized consumer product."  According to the panel, the district court "clearly erred by failing to consider [plaintiff's] willful ignorance of the prior art" (p.8). In addition, according to the panel, "in the absence of evidence demonstrating that [plaintiff] engaged in reasonable conduct before the District Court, the undisputed evidence regarding [plaintiff's] vexatious litigation warrants an affirmative exceptional case finding here" (p.11).  (According to the defendant, plaintiff "has asserted claim 1 of the '090 patent in fifty-eight cases against technologies ranging from video cameras to coffeemakers to heat pumps," and "has settled the vast majority, if not all, of these cases for significantly below the average cost of defending an infringement lawsuit" (id.).  Finally, the district court "improperly conflated" Federal Rule of Civil Procedure 11, which provides a "safe harbor" under which a litigant can withdraw a challenged allegation within 21 days without incurring sanctions under that rule, with the standard for an "exceptional" case under § 285 (p.12).  Judge Mayer added a separate concurring opinion, stating that the plaintiff's complaint "was frivolous on its face," and that its "continued assertions that its patent extends to products simply because they are configured using the Internet . . . are risible rather than simply unreasonable" (concurring opinion p.2).  Judge Mayer would find claim 1 unpatentable for lack of patentable subject matter (concurring opinion p.3).

By contrast, in the other opinion, Checkpoint Systems, Inc. v. All-Tag Security S.A., the panel (in an opinion by Judge Newman, joined by Judges Lourie and Moore) concludes that the court abused its discretion by awarding fees, in a case involving U.S. Patent No. 4,876,555, which the court describes as relating to "improved anti-theft tags that are attached to merchandise, and deactivated when the goods are purchased" (p.2).  The panel concludes, among other things, that contrary to the district judge's opinion there was no "harassment or abuse" on the part of the plaintiff in this case, and that "[t]here was no representation by [defendant] that the accused products were different from" the products tested by the plaintiff's expert" and "no allegation of falsity or fraud or bad faith on the part of [plaintiff] or its expert witness" (pp. 7-8).

Again, given the fact-specific nature of the inquiry, it's probably not appropriate to read too much into these two contrasting opinions.  Still and all, given the deferential standard of review, it's unusual to see two cases in one day both finding an abuse of discretion with regard to a fee award, with the abuse of discretion tending in different directions in the two cases.  

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