The precedential decision, released this morning, is mCom IP, LLC v. City National Bank of Florida, opinion by Judge Taranto joined by Judges Dyk and Mayer. According to the opinion, petitioner mCom owns U.S. Patent No. 8,862,508, relating to a “‘unified electronic banking system” and a method of constructing a “unified electronic banking environment’”. A 2023 IPR resulted in most of the claims of the ’508 patent being found invalid, after which mCom filed an action against City National Bank alleging the infringement of the four remaining claims. The district court dismissed the action, finding that these claims too were invalid “on the same obviousness grounds asserted in the IPR against the other claims of the ’508 patent, and that mCom had not adequately pleaded infringement” (p.2). The court thereafter awarded fees and costs against mCom pursuant to 35 U.S.C. § 285, and against mCom’s attorney pursuant to 28 U.S.C. § 1927. The Federal Circuit reverses, concluding that the evidence does not disclose that the case was “exceptional,” as required for an award of fees under § 285, or that the attorney "knowingly or recklessly pursue[d] a frivolous claim or needlessly obstruct[ed] the litigation of a nonfrivolous claim," as required under the Eleventh Circuit’s interpretation of § 1927.
Following a fairly lengthy recitation of the underlying history of the litigation, the court rejects the petitioner’s appeal from the judgment of invalidity and states that, as a result, it need not address the finding of noninfringement. There is nonetheless no basis for a fee award: “mere invalidity is not legally sufficient to find a case exceptional. For a patent-infringement case to ‘stand[ ] out . . . with respect to the substantive strength of a [patentee’s] litigating position’ by reason of invalidity, there must be (as the language of § 285 indicates) unusually or extraordinarily weak patent claims” (p.14). Here, the court states, “City National made its fees argument on this issue in conclusory terms: It never explained why the asserted claims in this case—which enjoyed the statutory presumption of validity, 35 U.S.C. § 282, and which were not even challenged in the IPR—could not have been reasonably thought by mCom to have a scope materially different for obviousness purposes from the claims deemed unpatentable in the IPR, even taking that unpatentability as a starting point. . . . And because in district court a fact-dependent obviousness challenge faces a higher burden of persuasion than in an IPR, mCom could reasonably have believed that an invalidity analysis in district court could not simply take the IPR result for different claims as a starting point (based on issue preclusion) and address only patentable distinctness" (pp. 14-15). In addition, the fact that the court had dismissed a first complaint on procedural grounds (for faulty pleading) does not go to the merits of the infringement claim; and, with respect to the respondent’s defense that it already was licensed to use the patent in suit (under a settlement agreement between mCom and NCR), the appellate court states there is an “absence of findings that a license existed or could have been discovered by mCom with reasonable diligence” (pp. 15-16). Moreover, the district court’s reference to mCom’s having filed other suits does not disclose that these other suits were frivolous or even involved the same patent (pp. 16-17). For much the same reasons, the court reverses the award under § 1927.
Whether fees should be awarded, as a matter of course, to the prevailing plaintiff or defendant is of course a matter upon which the world’s legal systems differ, as I discuss in chapter 4 of my new book Wrongful Patent Assertion: A Comparative Law and Economics Analysis (hard copies of which go on sale next week). My personal view is that the policy arguments in favor of some form of mandatory fee shifting are stronger than the arguments against; but as readers are no doubt aware, that sort of regime runs contrary to longstanding U.S. practice—hence the term “American Rule” for the default principle that each side bears its own fees.
No comments:
Post a Comment