Kessler doctrine Archives

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

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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Patent Owner’s Disavowal of Appeal from District Court’s Noninfringement Judgment Moots IPR Appeal

Addressing the standard for mootness in inter partes review (IPR) proceedings following a district court noninfringement judgment, the US Court of Appeals for the Federal Circuit held that a petitioner’s IPR appeal was moot after the patent owner decided not to appeal the final judgment of noninfringement. ABS Global, Inc. v. Cytonome/ST, LLC, Case No. 19-2051 (Fed. Cir., Jan. 6, 2021) (Stoll, J.) (Prost, C.J., dissenting in part).

In June 2017, Cytonome/ST filed a complaint against ABS asserting infringement of six patents, including the patent of interest in this case. ABS filed a petition for IPR of all claims of the patent. In April 2019, the Patent Trial and Appeal Board (PTAB, the Board) issued its final written decision invalidating certain claims of the patent. Two weeks later, the district court granted ABS partial summary judgment, holding that the accused products did not infringe any of the asserted patent’s claims. In June 2019, ABS appealed the PTAB’s final written decision. In a briefing before the Federal Circuit, Cytonome/ST’s counsel filed an affidavit stating that Cytonome/ST “has elected not to pursue an appeal of the district court’s finding of non-infringement as to the patent and hereby disclaims such an appeal.” In June 2020, the district court entered final judgment, including as to non-infringement of the patent.

The Federal Circuit dismissed ABS’ appeal of the PTAB’s final written decision on the ground that the appeal was moot in view of the district court’s non-infringement judgment. The Court characterized the question as one under the voluntary-cessation doctrine. In the context of intellectual property infringement cases, the voluntary-cessation doctrine requires the property owner claiming mootness to prove that the “allegedly wrongful behavior could not reasonably be expected to recur,” i.e., that it will not assert the intellectual property right against the same accused products again. If it does, the burden shifts to the accused infringer to show that it “engages in or has sufficiently concrete plans to engage in activities” that would not be covered by the property owner’s non-assertion decision.

Applying the doctrine, the Federal Circuit concluded that Cytonome/ST could not reasonably be expected to assert infringement of the patent against ABS because ABS had already secured a district court judgment that the accused products do not infringe and Cytonome/ST disclaimed any appeal of the non-infringement judgment. In effect, ABS was insulated from liability for infringement, including for future infringement for products that are “essentially the same” as ABS’ currently accused products pursuant to the Kessler doctrine. Further, the Court found that ABS had not demonstrated it could reasonably expect Cytonome/ST to sue it for infringement of the patent in the future as ABS had not shown it had current or concrete future plans to engage in activities not covered by Cytonome/ST’s disavowal: “Cytonome’s disavowal of its right to appeal the summary judgment of noninfringement ‘estops Cytonome from asserting liability against ABS for infringement of the…patent claims in connection with the accused products, thereby allowing ABS to make, use, and sell those products [...]

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

Patent Owner’s Disavowal of Appeal from District Court’s Noninfringement Judgment Moots IPR Appeal

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