Federal Circuit on finding a case exceptional as to qualify for attorney fees – Federal Circuit on Damages and other Remedies

Because of the spate of recent Federal Circuit cases on the attorney-fees standard, I will write a post on the current state of the law of exceptionality under § 285.

Supreme Court

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 laid out the standard for exceptionality: 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). District courts determine exceptionality using their discretion, considering the totality of the circumstances. Under 35 U.S.C. § 285, parties show entitlement to fees by preponderance of the evidence.

Octane Fitness relaxed the standard for finding a case exceptional, reversing the more restrictive Brooks Furniture standard. Under Octane Fitness, litigation misconduct that is not sanctionable, may nonetheless make a case exceptional as to justify attorney fees. Further, a case either brought in “subjective bad faith”, or presenting “exceptionally meritless claims” may provide a basis for attorney fees.

The Supreme Court in Highmark v. Allcare further added that an appellate court should review “all aspects of a district court’s § 285 determination” for abuse of discretion, noting that “[a]lthough questions of law may in some cases be relevant… that inquiry generally is, at heart, rooted in factual determinations.”

Federal Circuit

Here’s what we’ve learned from the Federal Circuit since Octane Fitness and Highmark:

Prevailing party. Attorney fees under § 285 may be awarded only to a prevailing party. Sealant (affirming the denial of fees).

Litigation positions. Although the substantive strength of a party’s litigating position is relevant, a party’s legal position need not be correct to be reasonable. SFA Systems (affirming the denial of fees). On review, the appellate court will not rule on the correctness of all legal issues underlying the district court’s exceptionality determination. Rather the appellate court will review the district court’s evaluation of the losing party’s position. Id. In BIAX, the Federal Circuit reversed an award of fees because “neither the expert testimony nor the claim construction orders foreclosed the losing party’s position and there was nothing unreasonable about [its] infringement position.” In Mankes, the Federal Circuit affirmed a denial of fees because the party “in good faith pressed arguments for plausibly result-altering changes in governing legal standards.” In Lumen View, the Federal Circuit affirmed a finding of exceptionality because “allegations of infringement were ill-supported, particularly in light of the parties’ communications and the proposed claim constructions.”

Litigation tactics. A district court may find a case exceptional based on unreasonable and vexatious litigation tactics, even where the legal theories aren’t objectively baseless. SFA Systems (affirming the denial of fees). Thus, the district court, in determining exceptionality, can turn to the pre-Octane Fitness case law for guidance as to whether the case was litigated in an unreasonable manner. Id. Bad lawyering (or “sloppy argument”) is not litigation misconduct as to support a finding of exceptionality. Gaymar (reversing the district court’s exceptionality finding). In Homeland Housewares, the Federal Circuit affirmed a finding of exceptionality where the losing party failed to produce admissible evidence of infringement in opposing summary judgment, and filed repetitive and unsolicited motions and briefs. In Lumen View, the Federal Circuit affirmed a finding of exceptionality where the losing party’s “motivation for filing suit was to extract a nuisance settlement,” and the party’s “predatory strategy of baseless litigation showed the need for deterrence.” In Oplus Technologies, the Federal Circuit affirmed a finding of exceptionality where the losing party “consistently twisted the Court’s instructions and decisions and attempted to mislead the Court.”

Refusing to award fees after finding a case exceptional. After finding a case exceptional, the district court’s refusal to award fees may be an abuse of discretion. Oplus Technologies (affirming as to the exceptionality finding, but vacating as to the refusal to award fees)

Addendum (subsequent relevant Federal Circuit cases):

Generally:

Seventh Amendment does not require a jury trial for attorney-fees factual inquiries (AIA America v. Avid)

Prevailing party:

Attorney fee award vacated because party no longer the prevailing party (Chaffin v. Braden)

Dismissal with prejudice for lack of standing makes defendant a prevailing party for attorney fees (Raniere v. Microsoft)

Attorney fees reversed because plaintiff was no longer the prevailing party (Imperium v. Samsung)

Litigation positions:

In calculating attorney fees, the trial court should use market rates of the forum state (Large Audience Display v. Tennman)

Attorney fees warranted where Plaintiff’s position was contradicted by the evidence and by its own witnesses (Bayer v. Dow)

Federal Circuit lists non-exclusive factors to consider when assessing exceptionality under § 285 (University of Utah v. Max Planck)

False marking damages require concrete evidence of causation, not general assertions (Gravelle v. Kaba)

Equity action to set aside judgment is exceptional because of meritless allegations (Nova Chemicals v. Dow)

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Case not exceptional where defendant did not seek summary judgment of noninfringement (Prism v. T-Mobile)

Case not exceptional where accused products were different than those earlier held non-infringing (Parallel Networks v. Kayak)

District court erred in holding that Octane Fitness does not apply to the Lanham Act (Romag Fasteners v. Fossil)

Fees awarded because plaintiff continued with meritless eligibility arguments after Alice (Inventor Holdings v. Bed Bath & Beyond)

Losing a summary judgment motion does not automatically make the plaintiff’s case exceptional (Honeywell v. Fujifilm)

Courts may deny fees after finding inequitable conduct but must explain (Energy Heating v. Heat On-The-Fly)

Expert’s royalty methodology properly apportioned the value of nonpatented features and of standardization (Chrimar Holding v. ALE USA)

Invalidity contentions did not provide clear notice of patent’s invalidity for attorney fees (Stone Basket v. Cook Medical)

In considering attorney fees, the district court need not resolve issues mooted by the case (Spineology v. Wright Medical)

Litigation tactics:

Attorney fees warranted for litigant’s refusal to produce an issue-dispositive document (Oilwell Varco v. Omron)

Fees warranted where party showed pattern of suing and settling for sums below costs of defense (Rothschild v. Guardian)

Pattern of enforcing patent rights doesn’t make a losing case exceptional (Checkpoint v. All-Tag)