Tuesday, February 24, 2015

Objective Reasonableness Remains Relevant Even After Octane Fitness

In Biax Corp. v. Nvidia Corp., a nonprecedential opinion published today (link here), the Federal Circuit reversed a judgment awarding attorneys' fees to the prevailing defendants.  In 2010, the district court entered claim construction orders concerning the patents in suit (which relate to parallel processing computer systems), and in 2012 it granted summary judgment of noninfringement to the defendants.  The Federal Circuit (in an earlier appeal) affirmed without opinion.  While that appeal was pending, the district court granted attorneys' fees to the defendants under 35 U.S.C. § 285 (exceptional case), under the then-prevailing Brooks Furniture standard (objective baselessness and subjective bad faith).  Specifically:
The district court found objective baselessness and bad faith (based on the continued assertion of an objectively baseless claim) and awarded fees for the period between Biax’s expert’s deposition and the district court’s summary judgment decision. The district court reasoned that its 2010 claim construction orders foreclosed Biax’s infringement contentions, but that Biax nonetheless continued to pursue litigation until the court issued its summary judgment order in 2012. Specifically, the district court found that Biax’s litigation position was objectively baseless because Biax “persistent[ly] disregard[ed] . . . the Court’s unambiguous statements in orders,” and that Biax “aggressively pursu[ed] this litigation [in the district court], even after the unequivocal statement of its own expert that defendants’ devices could not infringe the asserted patents . . . .” J.A. 13. On these findings, the district court awarded fees from the time Biax’s expert (supposedly) admitted that Biax had no infringement position under the district court’s claim construction orders to the time when the district court decided summary judgment.
The defendants also sought an award of fees against the plaintiff's trial counsel under 28 U.S.C. § 1927.  This latter statute reads "Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." The district court denied that request, however, on the ground that trial counsel "did not 'exceed[] the bounds of zealous advocacy.' J.A. 22."  

Biax appealed, and the defendants cross-appealed the denial of the § 1927 motion.  While the appeals were pending, the Supreme Court decided Octane Fitness and Highmark (for previous discussion on this blog, see here.)  Octane Fitness overruled the Brooks Furniture standard, which it viewed as "overly rigid," and held instead that "District courts may determine whether a case is 'exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances"; it also held that the standard of proof is preponderance of the evidence, not clear and convincing evidence.  Highmark further holds that the standard of appellate review is abuse of discretion. 

These changes notwithstanding, Judge Dyk (writing for the panel) observes that "objective reasonableness remains a relevant factor."  Reviewing the evidence, the court concludes that, even after the 2010 claim construction, the plaintiff had an objectively reasonable basis for pursuing its infringement theory, concluding among other things that "the district court misread the [plaintiff's] expert’s testimony" and that "the district court’s pre-summary judgment claim construction [did not] foreclose Biax’s infringement position."  As a result:
Because neither the expert testimony nor the claim construction orders foreclosed Biax’s position and there was nothing unreasonable about Biax’s infringement position, the basis for the district court’s award of fees no longer exists. Thus, even applying the deferential standard of review under Highmark, the district court’s fee award must be set aside. In some cases decided under the old Brooks Furniture standard, we have remanded for the district court to consider whether the case is “exceptional” in light of the new Octane Fitness standard. See, e.g., Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 572 F. App’x 988 (Fed. Cir. 2014). A remand is not necessary here because neither the defendants nor the district court has suggested any basis for awarding fees other than the lack of objective reasonableness, and the resulting bad faith from continuing to litigate an objectively baseless position. Therefore, we reverse rather than vacate the fee award.
The court also affirmed the denial of fees under § 1927.

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