UPC Court of Appeal Reverses Moral Prejudice Damages Award

The case is Bhagat Textile Engineers v. Oerlikon Textile GmbH & Co. KG, decided by Panel 1b of the UPC Court of Appeal on December 9, 2025.  In one respect at least it resembles the Federal Circuit decision I blogged about earlier this week, in requiring non-speculative evidence of alleged reputational harm.

Plaintiff Oerlikon owns EP 2145848 for a “false twist texturing machine.”  In July 2023, Oerlikon initiated an action for infringement in the Milan Local Division of the UPC.  That court found Bhagat liable based upon its “promotion and offer to the public of a structuring/textiling machine exhibited at the ITMA trade fair in June 2023 in Milan” (para. 6).  It also entered an injunction and awarded “provisional damages in the amount of €15,000 as a result of reputational  damage to Oerlikon’s image” and “ordered Bhagat to bear 80% of the proceedings costs” (id.) 

On appeal, the court notes that, consistent with IPRED article 13, UPCA article 68 “distinguishes between situations in which the infringer knew or had reasonable grounds to know that he or she was engaging in a patent infringing activity (Art. 68(1) to (3) UPCA) and situations where the infringer did not knowingly, or with reasonable grounds to know, engage in the infringing activity (Art. 68(4) UPCA)” (para. 18).  For the first situation, the court shall award “damages appropriate to the harm actually suffered,” taking into account “all appropriate aspects,such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the injured party by the infringement (Art. 68(3)(a) UPCA) or, alternatively, may decide to set the damages as a lump sum under certain conditions (Art. 68(3)(b) UPCA)” (paras. 19-20).  On the other hand, “[w]here the infringer did not knowingly, or with reasonable grounds to know, engage in the infringing activity, the Court may order the recovery of profits or the payment of compensation (Art. 68(4) UPCA)” (para. 21).  Here, there was no “evidence of negative economic consequences such as lost profits . . . or unfair profits made by Bhagat,” but the parties disagree regarding damages for moral prejudice (para. 22).  First, Bhagat argues that it did not know or have reasonable grounds to know that the product it exhibited at the trade fair was infringing, but the court disagrees:

Bhagat . . . presents itself as an international leading manufacturer of texturing and winding machines (see a press release in the magazine Textile Insights dated 13 July 2023, cited in Oerlikon Exhibit # 20) and is a direct competitor of Oerlikon in the field of textile and winding machines. It actively participated in the ITMA trade fair, which Bhagat does not deny is the most important textile machines trade fair globally, and exhibited a sizable textile machine (the attacked embodiment).

 

It follows that, being an active stakeholder in the industry, Bhagat was at least reasonably expected to monitor the patent landscape before exhibiting its product on the market and should have had reasonable grounds to know about the existence of the Patent and the infringing nature of the attacked embodiment. Failure to do so was at least negligent . . . (paras. 24-25).

Nevertheless, there was no evidence of reputational harm resulting in moral prejudice.  Oerlikon’s evidence consisted merely of “general statements” made by Bhagat about its success at promoting its products at the trade fair; and that further evidence submitted by Oerlikon for the first time on appeal concerning the accused product exhibited at the fair, even if admissible, did not change this result.

On costs, the court affirmed that Bhagat was liable for 80% of Oerlikon's recoverable costs, and Oerlikon 20% of Bhagat's, in accordance with UPCA article 69.  Oerlikon did not cause Bhagat to suffer any unnecessary costs by not first sending a warning letter, given the urgency and the short time frame of the fair.  The specific amount of costs to be recovered, however, will be determined in view of the value of the proceedings, which the court lowered from €750,000 to €250,000 (meaning that recoverable costs cannot exceed €38,000).  

Alba, Helmers and Love on Octane Fitness’ Effect on PAEs and Innovation

Tommaso Alba, Christian Helmers, and Brian J. Love have posted a paper on ssrn titled A Tale of Trolls and Fees:  The Role of Fee-Shifting in Patent Litigation.  Here is a link to the paper, and here is the abstract:  

Patent Assertion Entities (PAEs) are often viewed as taxing innovative activity; we show how fee shifting in patent litigation can effectively deter their more frivolous assertions, increasing exposed firms' R&D, innovation output, and startup success. Our identification relies on the U.S. Supreme Court's 2014 ruling in Octane Fitness v. ICON Health & Fitness, which broadened courts' discretion to award attorneys fees against exceptionally weak infringement claims. Using a quasi-regression discontinuity design comparing cases pending at Octane's release with those filed and decided before or after, we find that the decision increased defendants' willingness to contest weak claims and prompted plaintiffs, especially PAEs, to file stronger ones. Pending cases saw more fee awards and lower settlement as well as plaintiff success rates; subsequent PAE cases involved stronger patents and higher success rates. A difference-in-differences analysis further shows that Octane boosted innovation: public firms that were particularly exposed to PAE assertions prior to Octane increased R&D and patenting in response, and private startup firms performed better in venture capital markets.

On a somewhat related note, the Federal Circuit last week affirmed a judgment awarding fees in EscapeX IP, LLC v. Google LLC, precedential opinion by Judge Stark joined by Judges Taranto and Stoll.  The court found no abuse of discretion in view of the district court’s finding—“well-supported in the record and . . . part of the totality of circumstances,” that "EscapeX failed to conduct an adequate pre-suit investigation” (p.8).  The court also affirmed additional fees and an award pursuant to 28 U.S.C. § 1927, in connection with the patentee’s Rule 59(e) motion to amend the judgment.

Upcoming Speaking Engagement at AIPLA Spring Meeting

The American Intellectual Property Law Association (AIPLA) is holding its Spring Meeting in Minneapolis on May 13-15.  Tuesday, May 13 will feature a concurrent session on remedies in IP cases.  The first session (from 10:15—11:00 a.m.) is titled “Crafting Monetary Remedies in Trademark, Copyright and Unfair Competition Cases (Part 1),” and will feature Professor Mark McKenna (moderating) and (Krista Holt, Charlie Eblen, and Jeffrey M. Gould).  The second session (from 11:15-noon) is titled “Attorney Fees Awards in IP Cases & Crafting Remedies in Patent Cases (Part 2),” and will be moderated by Ashe Puri.  Sue Stuckwisch and I will be presenting.  My focus will be on attorneys’ fee awards in IP cases and extraterritorial damages in patent infringement actions.  Maybe I will see some of you there!

Federal Circuit Vacates Award of Attorneys’ Fees

The case is Realtime Adaptive Streaming L.L.C. v. Sling TV, L.L.C., precedential opinion by Judge Alan Albright sitting by designation, joined by Chief Judge Moore and Judge Lourie.  The plaintiff originally filed suit for the infringement of three patents (‘897, ‘610, and ‘535) relating to digital data compression.  The plaintiff withdrew its claims relating to ‘535, after the PTAB found claims 1-14 of ‘535 unpatentable on obviousness grounds.  The opinion doesn’t say what happened to ‘897, but apparently the case proceeded on ‘610 alone (an IPR concerning that patent having been terminated as untimely by the PTAB, and that judgment having been affirmed on appeal).  The district court thereafter granted summary judgment in favor of the defendants (collectively referred to in the opinion as DISH, which is the parent of Sling) on ‘610, on subject matter grounds, and the Federal Circuit affirmed that decision per curiam in 2023.  The district court then granted the defendants’ motion for attorneys’ fees, finding this to be an exceptional case in view of six “red flags.”  The Court of Appeals now vacates the fee decision as an abuse of discretion.

The six flags (no relation to the amusement parks) consisted of (1) and (2), decisions by other district courts in cases brought against Google and Netflix, finding claim 15 of the ‘535—said to be “virtually identical,” “essentially the same in substance,” to claim 1 of ‘610—patent-ineligible; (3) the Federal Circuit’s unpublished decision in Adaptive Streaming Inc. v. Netflix, Inc., 836 Fed. Appx. 900 (Fed. Cir. 2000), affirming “the ineligibility of claims directed to receiving a video signal in one format and broadcasting the signal to other devices in a different, more suitable format” (p.9); (4) the PTAB’s invalidation of claims 1-14 of ‘535 on novelty and obviousness grounds; (5) two nonfinal Office Actions, made during an ex parte reexamination proceeding, rejecting claim 1 of ‘610 on obviousness grounds (later affirmed by the PTAB, but only after the fee decision at issue here); and (6) a letter sent by DISH to Realtime in February 2021, advising the latter that ‘610 was likely unpatentable in view of (1), (2), and (3) above.  On appeal, the court agrees that (1) and (2) were part of the relevant totality of circumstances for the district court to consider in making its exceptionality determination, but not (3) through (6).  In particular, the Adaptive Streaming decision “was about a different technology altogether” (p.10); the invalidation of ‘535 and the Office Action relating to ‘610 related to novelty and/or obviousness, which did not eliminate the possibility that ‘610 was patentable subject matter; and the notice letter didn’t add anything additional to the mix.  As for the novelty and nonobviousness issues relating to ‘535 and ‘610 in particular, while there is some overlap in the considerations relevant to these issues and to the second Alice step (whether the claims transform otherwise ineligible subject matter into an inventive concept, or merely recites “well-understood, routine, and conventional” activities or elements), the Federal Circuit indicates that the district court inferred too much.  “At best, the [PTAB decisions related to ‘535] establish that the throughput limitation was known to the prior art,” but that “does not mean it was well-understood, routine, and conventional,” and thus the PTAB decisions did not “put Realtime on notice that its arguments regarding the eligibility of its claims were entirely without merit” (p.11); and to the extent the district court relief on the Office Actions relating to ‘610 as red flags, “it analysis is lacking for many of the same reasons,” even though it involved the same patent as the patent in suit, and in view of “the fact that the examiner and the Board used the broadest reasonable interpretation standard of claim construction” to construe the “throughput” limitation more broadly than did the district court (p.12).           

Federal Circuit Affirms Denial of Attorneys’ Fees Following Dismissal Without Prejudice

The case is Giesecke & Devrient GmbH v. United States, nonprecedential opinion authored by Judge Stoll, joined by Judges Prost and Hughes.  The case is an appeal from the United States Court of Federal Claims, which hears claims against the federal government.  Patentee G&D filed suit against the U.S. claiming infringement of a patent directed to a “contactless data carrier,” which according to the patent includes “readable identification documents, such as passports and identity cards” (p.2).  HID, which provides the U.S. with permanent resident cards and global entry cards, joined the case and moved to dismiss with prejudice.  G&D then “sought leave to amend its complaint to drop the claims against HID’s card-based products.”  The court granted leave to amend and denied the motion to dismiss as moot, after which it “voluntarily dismissed the withdrawn claims without prejudice” (p.3).  HID moved for attorney fees, which the court initially granted pursuant to 35 U.S.C. § 285 on the grounds that HID was the prevailing party and the case exceptional.  The case was then transferred to a new judge, Judge (and former law professor) Ryan Holte, who after additional briefing concluded that the court lacked jurisdiction to consider the motion for fees under § 285.

The Federal Circuit affirms, reasoning that “the touchstone of the prevailing party inquiry must be the material alteration of the legal relationship of the parties” (p.4, quotation omitted), and that under Federal Circuit precedent defendants are not prevailing parties if the plaintiff voluntarily dismisses the case without prejudice (but would be if the dismissal were with prejudice) (p.5).  From the opinion:

We hold that, under our precedent, HID cannot be a “prevailing party” because the Court of Federal Claims permitted G&D to withdraw the claims then dismissed them without prejudice and, thus, G&D may refile or reassert the withdrawn claims against HID. See O.F. Mossberg & Sons, 955 F.3d at 991, 993. Like O.F. Mossberg & Sons and RFR, this case “involve[s] voluntary rather than involuntary dismissal[s] without prejudice.” Oscar, 541 F.3d at 981. But regardless of whether the dismissal is voluntary or involuntary, “the risk of re-filing underlying their reasoning applies in both procedural postures.” Id. Indeed, the Court of Federal Claims’ decision to dismiss without prejudice lacks “an adjudication on the merits,” Raniere, 887 F.3d at 1308, and therefore is not the “judicially sanctioned change in the legal relationship of the parties” that “effects or rebuffs a plaintiff’s attempt to effect a ‘material alteration in the legal relationship between the parties.’” Id. at 1306 (quoting CRST, 578 U.S. at 432) (p.6).

I’m not sure if the above language, suggesting that a dismissal “on the merits” is a prerequisite, is necessarily accurate in view of other Federal Circuit precedent, but this case is consistent with precedent indicating that, for the Federal Circuit, the key distinction appears to be whether the dismissal is with or without prejudice.  For previous discussion on this blog, see here and here. 

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In other news, Florian Mueller's new blog notes two potentially very far-reaching developments, one in Germany relating to extraterritorial damages stemming from domestic infringement, and one from China regarding the jurisdiction of Chinese courts to set FRAND royalties for patent pools.  I will have more to say about the first and possibly the second next week. 

Rantasaari on Fee Shifting and the UPC

Krista Rantasaari has published an article titled Patent Litigation in Europe:  intermediate fee shifting and the UPC, 18 JIPLP 642 (2023).  Here is a link to the paper, and here is the abstract:

 

            This writing explores the European understanding of fee shifting rules and how the unitary patent regime addresses fee shifting rules. In European jurisdictions, the IP Enforcement Directive has harmonized some parts of the remedies, even though they are mainly governed by national law.  European jurisdictions often apply fee shifting rules, meaning that the losing party pays the winning parties’ expenses and fees.

 

            However, in most cases, costs are not fully covered. Instead, European jurisdictions use intermediate fee shifting that allows the winning litigant to recover some, but not all, of its litigation expenses.

 

            The UPC follows intermediate fee shifting. Hence, the UPC may lower or raise the ceiling of the recoverable costs or, upon request, wholly or partially reimburse expenses. For example, the recoverable cost might be disproportionate if the unsuccessful party is a small and medium size company. Like national rules, fee shifting in the unitary patent regime has limitations and discretionary elements, such as proportionality, equity, and partial success. In addition, the UPC will follow the case law of the Court of Justice of the European Union related to the interpretation of the IP Enforcement Directive.

I’ve been working on a book chapter that addresses, among other matters, fee shifting, and I found this article very informative.  The UPC approach reminds me a bit of the aborted attempt by the U.S. Congress in 2013 to incorporate a version of intermediate fee shifting into U.S. patent law—it would have made fee shifting mandatory  “unless the court finds that the position and conduct of the nonprevailing party or parties were reasonably justified in law and fact or that special circumstances (such as severe economic hardship to a named inventor) make an award unjust.”  Although compromises are not always the best solution, it may be that some sort of intermediate fee shifting is the best way to reconcile the positive and negative effects of fee shifting, though I’m still inclined to think that in most cases the prevailing party should recover the majority of their actual fees and expenses.