35 U.S.C. § 285 Archives

35 U.S.C. § 285

No Attorneys’ Fees Available for Successful IPR in Parallel Court Proceedings

by Lillian Spetrino | May 30, 2024 | Patents

The US Court of Appeals for the Federal Circuit concluded that a party that voluntarily elects to pursue parallel proceedings before the Patent Trial & Appeal Board and the district court is not entitled to recover attorneys’ fees under 35 U.S.C. § 285 (exceptional case doctrine) in connection with the Board proceedings, nor does § 285 entitle a party to hold opposing counsel jointly and severally liable for fees. Dragon Intellectual Property LLC v. Dish Network L.L.C., Case Nos. 2022-1621; -1777; -1622; -1779 (Fed. Cir. May 20, 2024) (Moore, C.J.; Stoll, J.) (Bencivengo, J., dissenting).

Dragon sued DISH Network, Sirius XM Radio (SXM) and eight others for patent infringement. The district court stayed proceedings as to DISH and SXM while they pursued inter partes review (IPR) but proceeded with claim construction for the other defendants. Following claim construction, all parties stipulated to noninfringement, and the district court accordingly entered a noninfringement judgment that was subsequently vacated following appeal to the Federal Circuit. Following the Board’s determination that the asserted claims were unpatentable, DISH and SXM filed a motion for attorneys’ fees in the district court proceeding. The district court granted the motion for time spent litigating the district court case but denied for fees incurred solely during the IPR proceedings and recovery from Dragon’s former counsel. DISH and SXM appealed the denial-in-part, and Dragon cross-appealed the grant-in-part.

The Federal Circuit affirmed the district court’s grant-in-part, finding that the district court did not abuse its discretion in declaring these cases exceptional. The Federal Circuit explained that the vacated noninfringement judgment did not require the district court to ignore its claim construction order in determining exceptionality. The Court further explained that even though Dragon was not entitled to a claim construction “do-over,” the prosecution history disclaimer issue was independently considered during the exceptionality inquiry, and Dragon did not provide any grounds for the conclusion that this constituted an inadequate inquiry.

The Federal Circuit also affirmed the denial of attorneys’ fees with regard to fees incurred during the IPR proceedings and Dragon’s former counsel’s liability for fee awards under § 285.

First, the Federal Circuit rejected DISH and SXM’s argument that § 285 allows recovery of fees incurred during parallel IPR proceedings, principally on the grounds that the IPR proceedings were pursued voluntarily. The Court reasoned that there are many advantages to leveraging IPR proceedings and, therefore, “where a party voluntarily elects to pursue an invalidity challenge through IPR proceedings, we see no basis for awarding IPR fees under § 285.”

Second, the Federal Circuit relied on the statutory text and determined that liability for attorneys’ fees awarded under § 285 does not extend to a party’s counsel. The Court explained that while other statutes explicitly allow parties to recover costs and fees from counsel, § 285 is silent as to who can be liable for a fee award, and therefore it is reasonable to conclude that fees cannot be assessed against counsel.

Sitting by designation, Judge Bencivengo of the US District Court for the Southern District of California dissented [...]

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Still Exceptional: Fee-Shift Appropriate in View of Noninfringement Stipulation

by Connor M. Larson | Nov 16, 2023 | Patents

In a split decision, the US Court of Appeals for the Federal Circuit affirmed a district court’s award of more than $5 million in attorneys’ fees, finding that the district court did not abuse its discretion in finding the underlying case “exceptional” under 35 U.S.C. § 285 or in calculating the total fees awarded. In re PersonalWeb Tech., Case No. 21-1858 (Fed. Cir. Nov. 3, 2023) (Reyna, Lourie, JJ.) (Dyk, J., dissenting).

Under 35 U.S.C. § 285, a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” In Octane Fitness (2014), the Supreme Court of the United States 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,” and the court considers the totality of the circumstances in making this determination.

PersonalWeb’s litigation positions at issue date back to 2011, when PersonalWeb first asserted five patents against an e-commerce company. After an unfavorable claim construction ruling, PersonalWeb stipulated to dismiss the action, and the district court entered the dismissal with prejudice.

In 2018, PersonalWeb asserted the patents against customers of the e-commerce company. The e-commerce company intervened and filed a new action against PersonalWeb seeking a declaratory judgment to bar the infringement actions against the customers based on the 2011 dismissal. Some of the cases proceeded while others were stayed. The district court granted summary judgment against PersonalWeb on claims directed to two allegedly infringing products for two separate reasons: because of the Kessler doctrine and claim preclusion, and because PersonalWeb conceded that it could not prevail after an unfavorable claim construction order.

The district court also entered an award of attorneys’ fees and costs against PersonalWeb, finding the case to be “exceptional” for the following reasons:

The infringement claims were “objectively baseless and not reasonable when brought because they were barred due to a final judgment in the [2011 action].”
PersonalWeb frequently changed its infringement positions to overcome the hurdle of the day.
PersonalWeb unnecessarily prolonged this litigation after claim construction foreclosed its infringement theories.
PersonalWeb’s conduct and positions regarding the customer cases were unreasonable.
PersonalWeb submitted declarations that it should have known were inaccurate.

The district court calculated the attorneys’ fees to be more than $5 million and costs to be more than $200,000. PersonalWeb appealed.

PersonalWeb argued that the district court erred in awarding fees and, even if fees were warranted, the court erred in assessing almost $2 million of the $5 million award. The Federal Circuit found that the district court did not abuse its discretion in any of its findings related to the fee grant, agreeing with the district court’s application of the Kessler doctrine. In Kessler, the Supreme Court ruled that after a final judgment of noninfringement, follow-up suits by the same patentee over the same non-infringing product against customers of the party [...]

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Blunt Rejection of Attorney Fees in Stipulated Dismissal

by Lillian Spetrino | May 18, 2023 | Patents

The US Court of Appeals for the Federal Circuit affirmed the rejection of attorney fees, finding that neither inequitable conduct nor a conflict of interest rendered the case exceptional given the limited factual record following a stipulated dismissal in a patent case. United Cannabis Corp. v. Pure Hemp Collective Inc., Case No. 22-1363 (Fed. Cir. May 8, 2023) (Lourie, Cunningham, Stark, JJ.).

United Cannabis Corporation (UCANN) sued Pure Hemp for patent infringement. After the litigation was stayed pending bankruptcy proceedings, the parties stipulated to the dismissal. Pure Hemp then sought attorney fees based on alleged inequitable conduct by UCANN during prosecution of the asserted patent due to nondisclosure of a prior art reference used in the patent’s specification and based on a purported conflict of interest by UCANN’s litigation counsel. The district court denied Pure Hemp’s request, finding that the case was not exceptional. Pure Hemp appealed.

Pure Hemp argued that the district court erred by (1) failing to find Pure Hemp to be the prevailing party in the litigation, (2) not concluding that the undisputed facts established inequitable conduct and (3) not recognizing that UCANN’s attorneys had a conflict of interest.

The Federal Circuit found that although the district court erred in not finding Pure Hemp to be the prevailing party, this was a harmless error. The Court explained that by fending off UCANN’s lawsuit with a stipulation dismissing UCANN’s claims with prejudice, Pure Hemp is a prevailing party under § 285. However, the Court concluded that this error was harmless because the district court ultimately concluded that this case was unexceptional.

The Federal Circuit found Pure Hemp’s arguments on inequitable conduct without merit. The Court explained that it had no findings to review because Pure Hemp voluntarily dismissed its inequitable conduct counterclaim and did not seek any post-dismissal inequitable conduct proceedings. Although Pure Hemp argued that it could prevail based on the undisputed facts in the record, the Court disagreed. It explained that even the limited record demonstrated at least a genuine dispute as to both the materiality and intent prongs of inequitable conduct and, therefore, the district court properly determined that Pure Hemp did not demonstrate that this case was exceptional.

The Federal Circuit also rejected Pure Hemp’s argument that copying and pasting portions from the prior art in the patent’s specification (but not disclosing the same prior art references) was inequitable conduct. The Court explained that unlike the nonbinding cases Pure Hemp relied on, the district court here did not find that the copied prior art was material, and the record gave no reason to disbelieve the explanation provided by UCANN’s prosecution counsel. The Court was also unpersuaded by Pure Hemp’s arguments to support inequitable conduct, explaining that the Court was not free to make its own findings on intent to deceive and materiality and, further, the district court was not required to provide its reasoning for its decision in attorney fee cases.

As to Pure Hemp’s argument that the case was exceptional because UCANN’s attorneys [...]

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This Case Is Both Hot and Exceptional—Attorneys’ Fees and Inequitable Conduct

by Paul Devinsky | Oct 28, 2021 | Patents

In a second visit to the US Court of Appeals for the Federal Circuit, after the Court affirmed a finding of unenforceability due to inequitable conduct based on “bad faith” non-disclosure of statutory bar prior sales on the first visit, the Court affirmed a remand award of attorneys’ fees based on a finding of exceptionality under 35 U.S.C. § 285. Energy Heating, LLC v. Heat On-The-Fly, LLC, Case No. 20-2038 (Fed. Cir. Oct. 14, 2021) (Prost, J.)

In its earlier decision, the Federal Circuit remanded the case after reversing a district court’s denial of attorneys’ fees, finding that while the district court correctly found that Heat On-The Fly (HOTF) committed inequitable conduct in failing to disclose to the US Patent & Trademark Office multiple instances of prior use of the claimed method, the district court failed to articulate a basis for denying attorneys’ fees other than that HOTF articulated substantial arguments (experimental use) against the finding of inequitable conduct.

On remand, the district court found the case “exceptional” because it “stands out from others within the meaning of § 285 considering recent case law, the nature and extent of HOTF’s inequitable conduct, and the jury’s findings of bad faith.” HOTF appealed.

HOTF contended that the district court abused its discretion by relying on the jury’s bad-faith finding because that finding “had nothing to do with the strength or weakness of HOTF’s litigation positions.” Citing the 2014 Supreme Court decision in Octane Fitness, the Federal Circuit rebuffed that argument, explaining that “HOTF made representations in bad faith that it held a valid patent [which] was within the district court’s ‘equitable discretion’ to consider as part of the totality of the circumstances of HOTF’s infringement case.”

HOTF also argued that the district court erroneously relied on the jury verdict in finding exceptionality because, since the jury found that HOTF did not commit the tort of deceit, it could not have engaged in inequitable conduct. The Federal Circuit rebuffed this argument as well, noting that inequitable conduct was tried to the district court—not the jury—resulting in a judgment of unenforceability that the Court affirmed in the prior appeal and that the jury’s finding of no state-law “deceit” had no bearing on inequitable conduct.

The Federal Circuit further explained that HOTF’s assertion that under the Court’s 2020 decision in Electronic Communication Technologies v. ShoppersChoice.com, the district court was not required to affirmatively weigh whether HOTF’s purported “lack of litigation misconduct” was incorrect. Rather, “the manner in which [patentee] litigated the case or its broader litigation conduct” is merely “a relevant consideration.” Under Octane, the test for whether a case is “exceptional” under § 285 is whether it is “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.”

Finally, the Federal Circuit noted that the district court correctly explained that “[a] finding of inequitable conduct [...]

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Determination of ‘Exceptional’ Under § 285 Must Be Made at the ‘Case’ Level

by Paul Devinsky | Jan 15, 2020 | Patents

Addressing the proper test for shifting fees under 35 U.S.C. § 285, the US Court of Appeals for the Federal Circuit held that a district court erred when it shifted fees to the accused infringer because the district court found that only a series of events was exceptional but did not determine that the “case ” was exceptional. Intellectual Ventures LLC v. Trend Micro Inc., Case No. 19-1122 (Fed. Cir. Dec. 19, 2019) (Stoll, J.). Because it was unclear what standard the district court used when making its “exceptional case” determination, the Federal Circuit vacated and remanded for an analysis under the proper legal standard.

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