Tuesday, August 6, 2019

Federal Circuit: A Case Is Not Per Se Exceptional, Just Because Expenses Exceed Maximum Damages

The precedential opinion, authored by Judge Moore and joined by Judges Wallach and Taranto, is Aten Int'l Co. v. Uniclass Tech. Co.  The plaintiff and the defendant are competitors
involved in making and selling keyboard-video-mouse switch systems that allow a user to control multiple computers from a single keyboard, video device, and mouse. In 2011, Uniclass stopped making payments on a license agreement it entered with ATEN in 2009. In 2014, ATEN sued Uniclass and the customer defendants alleging infringement, seeking damages and injunctive relief (p.2).
There were two patents in suit.  As described in a companion opinion, also published this morning, one is "directed to technology for switching between computers that share a keyboard, monitor, and mouse through a KVM [keyboard-video-mouse] switch, the other to "technology for stringing together several KVM switches."  The jury found the first of these invalid, and both noninfringed.  In the companion opinion, the Federal Circuit reverses the finding of invalidity but affirms on noninfringement.  (Regarding the latter issue, the court affirms the trial court's finding that Aten waived any challenge to the defendants' expert's trial testimony, some of which amounted to claim construction, by not timely objecting.)  

The opinion I will be highlighting affirms the judgment finding the case not to be exceptional, and thus denying the defendants' request for attorneys' fees. From that opinion:
Appellants focus their arguments on appeal on a theory that the district court erred in not finding this case exceptional based on ATEN’s disregard for the “foundational policy” of proportionate litigation. . . .  Appellants summarize ATEN’s expenses as including over $700,000 in expert witness fees alone, without considering other expenses including attorney fees. Appellants argue that ATEN could recover, at most, $678,337 in reasonable royalty damages. . . . Accordingly, Appellants argue this case is exceptional because the cost of litigating the case exceeded ATEN’s potential recovery at trial. . . . We reject this argument. We see no error in the court’s legal analysis and no clear error in its fact findings.
There is no per se rule that a case is exceptional if litigation costs exceed the potential damages. . . . Litigation strategies motivating a patent suit are many, with monetary damages being one. We routinely hear cases in which damages are not at issue—for example, in appeals from the International Trade Commission, in some Hatch-Waxman cases, and other cases where only an injunction is sought. A patentee may also bring suit to deter other competitors from infringement, encourage licensing, or test a patent’s ability to withstand validity challenges. . . . 
Moreover, ATEN sought injunctive relief against Uniclass, its direct competitor. This alone undermines Appellants’ argument. The case could have proceeded to trial requesting only an injunction, and there would be no potential damages to compare to ATEN’s expenses. We cannot conclude that the district court’s decision denying Appellants’ motion for fees under these circumstances amounts to an abuse of discretion (pp.4-5).
The court also rejects the argument that fees were warranted based on the allegedly "frivolous" methodology relating to the plaintiff's lost profit theory (which theory was disposed of on a motion for summary judgment), stating that although "ATEN’s lost profits theory was not strong enough to withstand summary judgment, “[a] party’s position . . . ultimately need not be correct for them to not ‘stand[ ] out.’” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015) (quoting Octane, 572 U.S. at 544)" (p.6).   

Overall, not a very surprising outcome in view of the deferential, abuse-of-discretion standard that applies under Octane Fitness.

No comments:

Post a Comment