Section 285 of the Patent Act provides that a district “court in exceptional cases may award reasonable attorney fees to the prevailing party.” The Supreme Court in Octane Fitness v. Icon Health held that an exceptional case “is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” (parenthesis in original). Under 35 U.S.C. § 285, parties show entitlement to fees by preponderance of the evidence; district courts determine exceptionality based on the totality of the circumstances; and an appellate court reviews “all aspects of a district court’s § 285 determination” for abuse of discretion. Highmark v. Allcare.
Reasonable attorney fees. The determination of reasonable attorney fees is “a matter that is committed to the sound discretion” of a district court judge. Lumen View v. Findthebest. The fees awarded, however, must “bear some relation to the extent of the misconduct.” Large Audience Display v. Tennman (2016). This is because “attorney fees under § 285 are compensatory, not punitive.” Rembrandt v. Comcast. The district court must explain relationship between the awarded fees and the misconduct “at least to the extent practicable.” Id.
Lodestar method. In calculating reasonable attorney fees, a district court usually applies the lodestar method, “which provides a presumptively reasonable fee amount.” Lumen View (vacating attorney fees award and remanding). Under the lodestar method, the district court calculates the attorney fees “by multiplying a reasonable hourly rate by the reasonable number of hours required to litigate a comparable case.” Id.; see also Tennman I (the court calculates fees by “multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate”). In some instances it may be error for the district court to not consider the lodestar method. Tennman I (holding that the district court below must use the lodestar method to calculate fees because the prevailing party’s argument that the requested fees are “below average” for a typical patent infringement suit of this size is inappropriate here).
Reasonable hourly rate. A reasonable hourly rate “should reflect the prevailing market rate.” Tennman I. The applicable rates for the lodestar method are the rates from the forum where the litigation occurred. Id. (holding that California rates applied for the lodestar the prevailing party was represented by New York attorneys); but see SRI International v. Cisco (“We take no issue with the district court’s award of attorneys’ fees at the attorneys’ billing rates without adjusting them to Delaware rates.”). In addition, the court “must examine the attorneys’ comparable skill, experience, and reputation.” Tennman I.
Hours reasonably expended. Section 285 “permits a prevailing party to recover reasonable attorneys’ fees, but not fees for hours expended by counsel that were excessive, redundant, or otherwise unnecessary.” SRI International. In Tennman I, the Federal Circuit questioned “whether it was reasonable for seven partners to have billed 79 percent of the total hours on this case—almost quadruple the amount billed by associates—for tasks including electronic filing of documents and preparing pro hac vice applications.” (remanding the case for a determination of the reasonableness of the attorney fees amount awarded should the district court find the case exceptional). The district court should similarly reduce the prevailing party’s total hours by removing “attorney hours clearly included by mistake.” SRI International.
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Fees based on litigation misconduct. A finding of exceptionality based on litigation misconduct “usually does not support a full award of attorneys’ fees.” Rembrandt. A “fee award may go no further than to redress the wronged party for losses sustained.” Id. Thus, where a party’s misconduct only affects part of the litigation, the district court may only award fees for the affected parts of the litigation. See National Oilwell Varco v. Omron Oilfield & Marine (district court did not err in awarding all attorney fees starting from the date that the losing plaintiff refused to produce a document dispositive to standing because the plaintiff was on notice of the standing issue, and “intentionally withheld” the assignment document, “unreasonably claiming” it was not relevant to any claim or defense in the case); see also Rembrandt. In Rembrandt, the Federal Circuit vacated the award of fees for the entire litigation, $51 million in total, as excessive and unreasonable because the case “featured nine patents and dozens of defendants, and the claimed misconduct affected only some patents asserted against some defendants.”
Fees for the entire litigation. A district court may award fees for the entire litigation where the losing party misconduct “permeated every stage of the litigation.” Drop Stop v. Zhu; see also Large Audience Display v. Tennman (2018). In Tennman II, the Federal Circuit affirmed attorney fees for the entire litigation where “the factual bases for the exceptionality finding— from the venue fight, to the unreasonable claim constructions, to the use of the privileged email—permeated the entire litigation.” The Federal Circuit in Drop Stop similarly held that the district court did not err by awarding an aggregate attorney fees amount (without apportioning issue by issue) where the district court indicated that the prevailing plaintiff’s “fees were incurred largely due to Defendants’ actions—including delay tactics, chilling defenses, and re-raised arguments— taken during the course of the litigation.”
Enhancing the fee award. “[The] amount the client paid the attorney…does not establish an absolute ceiling” for reasonable attorney fees. Lumen View. “In rare and exceptional cases, a district court may enhance the lodestar amount based on various factors, provided they are not adequately taken into account by the lodestar calculation.” Id. Adjusting the lodestar has been condoned for situations in which “the prevailing party’s attorney’s performance or conduct somehow is not factored into the lodestar calculation”, such as where the lodestar does not adequately measure attorney’s “true market value,” the attorney is subjected to “extraordinary outlay of expenses” for protracted litigation, or in cases involving “exceptional delay” in payment of fees. Id. “However, factors outside the realm of performance or conduct attributable to the prevailing party’s attorney have not been accepted as justifying an enhancement.” (vacating attorney fees where enhancement was based on the lower “court’s proactive case management and expeditious resolution on the merits” and on a policy of deterring the “predatory strategy of baseless litigation”).