# United States **Court of Appeals**  **for the Federal Circuit**

______________________ NOVA CHEMICALS CORPORATION (CANADA), NOVA CHEMICALS INC. (DELAWARE) , Plaintiff s- Appellant s

v.

DOW CHEMICAL COMPANY, Defendant

- Appellee

______________________

2016

- 1576

______________________ Appeal from the United States District Court for the District of Delaware in No. 1:13

- cv

- 01601

- LPS, Chief Judge Leonard P. Stark.

______________________

Decide d: May 11, 2017

______________________

D ONALD R OBERT D UNNER , Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC, argued for plaintiff s- appellant s . Also represented by M ARK J. F ELDSTEIN , D ARRELL C HRISTOPHER K ARL

.

R AYMOND N. N IMROD , Quinn Emanuel Urquhart & Sullivan, LLP, New York, NY, argued for defendant

appellee. Also represented by W ILLIAM A DAMS , C LELAND B. W ELTON , II; H ARRY J. R OPER , A ARON A. B ARLOW , P AUL D AVID M ARGOLIS , Jenner & Block LLP, Chicago, IL.NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 2

______________________

Before P ROST , Chief Judge, D YK and H UGHES , Circuit Judges.

P ROST , Chief Judge

. N OVA Chemicals Corp. (Canada) and N OVA Chem icals Inc. (Delaware) (collectively, “N OVA ”) appeal the district court’s award of approximately $2.5 million in attorney fees to Dow Chemical Co. (“Dow”) under 35 U.S.C. § 285. N OVA filed the underlying action in equity

, seeking relief from a prior judgment that it had infringed certain Dow patents. The only issue in this appeal is whether the district court abused its discretion in fi nding this case exceptional for purposes of § 285. Because it did not abuse its discretion, we affirm.

I. B ACKGROUND We pro vide only a brief summary of the background

, which is recounted in more detail in our opinions addres sing the merits of the underlying patent litigation

. See Dow Chem

. Co. v. Nova Chems

. Corp. (Canada) (“ Dow I ”), 458 F . App’x 910 (Fed. Cir. 2012) ; see also Dow Chem. Co. v. Nova Chems. Corp. (Canada) (“ Dow II ”), 803 F.3d 620, 635 (Fed. Cir. 2015), cert. denied , 136 S. Ct. 2452 (2016)

. A
In 2005, Dow filed an infringement action in the U.S. District Court for the District of Delaware, alleging that N OVA infring ed U.S. Patent No. 5,847,053 and U.S. Patent No. 6,111,023 (“the asserted patents”). N OVA asserted numerous defenses, i ncluding arguments that the accused product did not infringe and that Dow lacked standing to sue because it had transferred ownership of the asserted patents. The court held a jury trial, followed by a bench trial on stand ing. The district court ultimately held that Dow had standing to sue and entered judg ment against N OVA for over $61 million in damages (“the 2010NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 3

judgment”) . J.A. 442; see also Dow Chem. Co. v. Nova Chems. Corp. (Canada) , 726 F. Supp. 2d 459 (D. Del. 2010); Dow Chem. Co. v. Nova Chems. Corp. (Canada)

, No. 05

- 737

- JJF, 2010 WL 3070189 (D. Del. July 30, 2010); Dow Chem. Co. v. Nova Chems. Corp. (Canada) , No. 05

- 737

- JJF, 2010 WL 3056617 (D. Del. July 30, 2010). We affirmed that judgment on appeal

. Dow I , 458 F . App’x at 921

. In a s eparate appeal from the district court’s subs equent award of supplemental damages, w e held the asserted patent claims to be invalid as indefinite under the Supreme Court’s interven ing indefiniteness standard in Nautilus, Inc. v. Biosig Instruments, Inc. , 1 34 S. Ct. 2120 (2014). Dow II , 803 F.3d at 635. Our decision in Dow II did not disturb the 2010 judgment relating to pre

verdict infringement

. The district court had entered final judgment pursuant to Federal Rule of Civil Procedure 54(b), which NOVA had already paid at the time of the second appeal.
During the supplemental

- damages phase of the i nfringement action, N OVA beca me aware of evi dence allegedly showing that Dow and its counsel had commi tted fraud on the court in the course of obtaining the 20 10 judgment. By then, however, N OVA was time

- barred from filing a motion under Federal Rule of Civil Proc edure 60(b)(3) to set aside that judgment for fraud, misre presentation, or misconduct. See Fed. R. Civ. P. 60(c)(1) (setting a one

- year time bar)

. A ccordingly, i n September 2013, N OVA filed a separate action in equity against Dow (“the equity action”) for relief from t he 2010 judgment.
In its amended complaint, N OVA alleged two frauds on the court . First, N OVA asserted with respect to stan ding that Dow and its counsel had misrep resented Dow’s ownership of the asserted patents

. NOVA based this allegation on the testimony of a former Dow tax depar tment employee, Edward Valenzuela, in an unrelatedNOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 4

Louisiana tax case (“the Louisiana action”)

. Mr. Vale nzuela testified in that case: “I think [around the end of 2001] all of Dow’s patents were contributed to an intang ibl e holding company. ” J.A. 22554.
Second, N OVA allege d that Dow’s counsel knew or should have known of a “scheme to mislead the jury” with respect to infringement. J.A. 21055, 21081, 21087, 21089 (capitalization omitted). In particular, N OVA contended that Dow’s expert, Dr. Joao Soares, had provided co nflic ting testimony about testing o n the accused product during a separate litigation in Canada (the “Canadian action”).

Dow moved to dismiss the equity action. The court grant ed the motion and dismissed the complaint , holding that “[t]here [wa]s fundamentally no adequate allegation of the grave miscarriage of justice that is required u nder the extraordinary circumstances” for setting aside a prior judgment based on fraud. J.A. 21496. Specifically, the court noted that Mr. Valenzuela’s testi mony in the Lou isiana action was “immaterial and irrelevant” to Dow’s standing b ecause the terms of the relevant patent tran sfer agreement were clear on their face , and Mr. Valenzu ela’s testimony “ha[d] nothing to do with the authenticity of [the version of] Schedule A” that had been held to be the controlling portion of th e agreement. J.A. 21497. W ith respect to noninfringement, the district court held that N OVA had merely identified “arguably inconsistent
state ments by

. . . Dr. Soares” that neither “plausibly alleged perjury” nor reach ed any fact that had been in materi al dispute at trial in the infringement action. J.A. 21498.

We affirmed the dismissal of the equity action. Nova Chems. Corp. (Canada) v. Dow Chem. Co. (“ Dow III ”), 607 F. App’x 993 (Fed. Cir. 2015) (Mem.).NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 5

B
Dow subsequently moved in the district court for sanctions, attorney fees , and costs under 35 U.S.C. § 285

, 28 U.S.C. § 1927, and the district court’s inherent san ctioning authority. In opposing the motion, N OVA submi tted declarations regarding its pre

- suit diligence , which allegedly showed it had filed the equity action i n good faith

. The district court denied Dow’s motion under 28 U.S.C. § 1927 and the court’s inherent sanctioning a uthority . It h eld that , as demonstrated by the extent of

pre

- suit diligence, N OVA did not file the equity action in bad faith. Nova Chems. Corp. v. Dow Chem. Co. (“ Dow IV ”) , No. 13

- 1601, 2015 WL 5766257, at *4 –5 (D. Del. Sept. 30, 2016). T he court , however, granted Dow’s motion under § 285, which allows courts to award “re asonable attorney fees to the prevailing party” in “exce ptional cases .” 35 U.S.C. § 285. The district court d id so based on the weakness of N OVA ’s litigating position and the manner in which N OVA pursued this case

. Dow IV

, 2015 WL 5766257, at *5 –7. In particular, the court reiterated that N OVA ’s claims for relief “just didn’t stand up” and were “not even plausible

. ” Id. at *6 (internal quotation marks omitted) ; see also id. at *2

– 3 ( reiterating the insufficiency of N OVA ’s allegations) . It also stated that N OVA “ could have dealt with the situation” in “less inflam matory ways.” Id. at * 5

. The court concluded that, despit e the “high burden” applicable

, N OVA “nonetheless moved forward with its theo ries, theories which the [c] ourt ultimately found were not even plausible.” Id. at *6.

T he district court then awarded Dow nearly $2.5 mi llion in § 285 attor ney fees. J.A. 1. N OVA timely a ppealed. We have jurisdiction under 28 U.S.C. § 1295(a)(1).NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 6

II. D ISCUSSION On appeal, N OVA only challenges the district court’s exceptional- case determination under § 285 . It does no t dispute the amount of attorney fee s awarded . Nor does it dispute that § 285 is applicable. See Dow IV , 2015 WL 5766257, at *5 n.2 ( noting that N OVA did not dispute the applicability of § 285 before the district court ).
An exceptional case under § 285 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 unre asonable manner in which the case was litigated.” Octane Fitness , LLC v. Icon Health & Fitness, Inc. , 134 S. Ct. 1749, 1756 (2014). “District courts may determine whet her a case is ‘exceptional’ in the case

- by

- case exercise of their discretion, considering the totality of the circu mstances.” Id. We review “all aspec ts of a district court’s § 285 determination” for abuse of discretion. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. , 134 S. Ct. 1744, 1749 (2014). “A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence. ” Id. at 1748 n.2 ( quoting Cooter & Gell v. Hartmarx Corp.

, 596 U.S. 384, 405 (1990) ).

A

N OVA argues that the district court committed legal error, and thus abused its discretion, by looking to N OVA ’s pursuit of the equity action as “[t]he overriding factor,” rather than considering the totality of the circu mstances , and also erred in finding that the filing of an equity action

— regardless of its merit

— could be subject to a fee award . Appellants’ Opening Br. 34. According to N OVA , the court improperly viewed N OVA ’s pursuit of the equity action to be an “extreme[] tactic” and incorrec tly suggested that there were “other, less inflammatory ways [N OVA ] could have dealt with the situation.” DowNOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 7

IV

, 2015 WL 5766257, at *5

– 6. N OVA acknowledges that it faced a “high burden ” in the equity action but argues that the district court legally erred by rel ying on the extraordinary nature of relief sought to create a “Catch

22” situation wherein the mere filing of an independent action to set aside a prior judgment would render a case exceptional under § 285. Appellants’ Opening Br. 36

– 38 (internal quotation marks omitted)

. W e agree with N OVA
t o the extent that the filing of an action to set aside a prio r judgment, without more , does not render a case exceptional per se

. Due to the applicable Rule 60(b)(3) time

- bar and other circumstances, N OVA is correct that the pursui t of a separate action in equity was “ the only federal court option” available for it to set aside the 2010 judgment. 1 Appellants’ Opening Br. 35. Dow submits that rather than file the equity action, N OVA could have requested additional discovery in the infringement action or filed a motion under Federal Rule of Civil Procedure 60(b)(4) o n ground s that the 2010 judgment was void for lack of standing. But th o se sugges tions are unhelpful . Dow conceded at oral argument that even armed with add itional evidence from further discovery, N OVA would have still been required to file a separate ac tion to set aside the 2010 judgment. Oral Argument 17:55

– 18:36

, available at http:// oralarguments.cafc.uscourts.gov/mp3/2016

- 1576 .mp3

. And Dow’s suggestion of filing a Rule 60(b)(4) motion relates only to raising a lack of standing; it does

1 Such an action is permitted under Federal Rules of Civil Procedure 60(d)(1) and 60(d)(1)(3). See Fed. R. Civ. P. 60(d)(1), (3) (stating that Rule 60 “does not limit a court’s power to: (1) entertain an independent action to relieve a party from a judg ment []

. . . or (3) set aside a judgment for fraud on the court ” ).NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 8

not necessarily allow N OVA to also challenge how the infringement determination was previously procured

. 2
A party whose only option for relief from a prior judgment is to file a separate action in equity should not be disincentivized from doing so if th at party has a pla usible basis for relief . T herefore, despite the extr aordinary nature of relief t hat N OVA sought

, the district court erred to the extent it based its exceptional

- case determi nation on NOVA ’s filing of the equity action itself.

B

But that does not end our review of the district court’s exceptional- case determination. The district court did not base its analysis sole ly, or even primarily, on the fact that N OVA filed an equity action . Rather, it expressly relied on alternative grounds, holding the case to be “exceptio nal, both in the substantive strength of NOVA ’s litigating position and in the manner in which the case was litiga ted.” Dow IV , 2015 WL 2766257, at *5 (emphas e s added)

. At a minimum, t he court did not abuse its discretion in concluding that the case was exception al due to the su bstantive strength of N OVA ’s litigating position.

T he substantive strength of a party’s litigating pos ition can

— i.e. , whether it is objectively baseless

— independently support an exceptional

- case determination

. See Octane Fitness

, 134 S. Ct. at 1756 ( “[A]n ‘exceptional’ case is simply one that stands out from others with r espect to the substantive strength of a party’s litigating position .

. . or the unreasonable manner in which the case was litigated.” (emphasis added))

. Thus, “a case presen ting .

. . exceptionally meritless claims may sufficiently set

2 Dow states in its briefing that a Rule 60(b)(4) m otion “would have failed.” Appellee’s Br. 48. It is unclear if Dow means that such a motion would have been proc edurally improper or fa iled on the merits.NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 9

itself apart from mine

- run cases to warrant a fee award.” Id. at 1757. In this regard, “ [i] t is the ‘substantive strength of the party’s litigating position’ that is relevant to an exceptional case determination, not the correctness or eventual success of that position.” SFA Sys., LLC v. Newegg Inc. , 793 F.3d 1344, 1348 (Fed. Cir. 2015) (quo ting Octane Fitness , 134 S. Ct. at 1756 ).

N OVA ’s allegations of fraud in this case mainly rested

on “purportedly conflicting testimon y” from the Louisiana

a ction and the Canadian a ction. Dow IV , 2015 WL 2766257, at *7

. But a s explained by the district court, the

a rguable inconsistencies in those other ac tions , even if proven, were immaterial to the 2010 judgment. We previously held w ith respect to standing that , as a legal matter, the relevant patent transfer agreement unambi guously provided that Schedule A define d the scope of the transfer

. Dow I , 458 F. App’x at 914

. T he district court did not abuse its discretion in holding that N OVA had failed to sufficiently challenge, based on a generic i nco nsisten t statement , the authenticity of the document held to be the operative version of Schedule A. Dow IV , 2015 WL 2766257

, at * 2. N OVA ’s allegations of fraud regar ding the infringement determination are just as baseless , if
not more

. As the district court observed, Dr. Soares’s testimony in the Canadian action was not necessarily inconsistent with his prior infringement testimony and

, in any event, did not directly relate to the limitat ion that had been the focus of the parties’ underlying infringement dispute

. Id. The district court th erefore did not abuse its discretion in holding that N OVA ’s litigating position was objec tively baseless

. NOVA contends that the district court “compoun d[ed] its error” by relying on the extensiveness of N OVA ’s pre

suit investigation to support the exceptional

- case dete rmination. Appellants’ Opening Br. 38. The court point ed
out that N OVA ’s pre

- suit diligence “ confirm[ed] the e xtraordinary nature of this case.” Dow IV , 2015 WLNOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 10

5766257, at *6. To the extent the district court relied on N OVA ’s extensive pre

- suit diligence to support an exceptional

- case find ing

, doing so would appear counterintu itive. I n context
, though, we th ink the better reading is that the district court properly relied on the extensiveness of N OVA ’s pre

- suit diligence to confirm N OVA ’s high burden and the gravity of its allegations. The court did not rely on the pre

- suit diligence itself as an independent basis to find the case e xceptional. It later clarified that even though N OVA ’s pre

- suit diligence “undercut[] Dow’s assertion” of bad faith

, “it d[id] nothing to sway the [c]ourt to find that this case [wa] s not exceptional .” Id. We

agree, as a general matter, that the extent of a party’s

pre

- suit investigation or how ferventl y it believed in its allegations does not affect the objective strength of that party’s litigating position.
At a minimum, the district court did not abuse its di scretion in holding that N OVA ’s litigating position was objectively baseless.

C

N OVA also argues that the district court legally erred by “consider[ing] this case in comparison to the full pan oply of patent cases.” Id. at *7. According to N OVA , the court should have considered whether the equity action stood out from other actions to set aside a prior judgment, rather than considering whether the equity action stood out from other patent cases more generally . Other wise, it contends, an action to set aside a prior judgment would always be excepti onal because, “[b]y necessi ty,” it would “stand out” from the traditio nal patent infringement case.” Appellants’ Opening Br. 40. N OVA ’s argument is unavailing.

N OVA fails to cite any legal precedent to support its position that a district court ’s baselin e for comparison is

so restricted in a § 285 analysis. Oral Argu ment 0:32

– 2:29. O ne could always search for more similar cases forNOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 11

comparison. Taken to its logical conclusion, continuing to

n arrow the universe of comparators to cases resolved on similar procedural postures

, legal grounds, or fac ts would leave few or no comparators remaining. We decline to hold that the district court erred in comparing this case to other patent cases more generally

. A ny concern regarding the district court’s comparison is tempered because , again, it did not hold that this case stood out merely because N OVA requested that a prior judgment be set aside for frau d whereas many other patent cases do not present such circumstances

. The equity action w as a direct extension of, and intertwined with, the prior infringe ment action. 3 Requiring the di s trict court in this circumstance to narrow its compar ison to other independent actions requesting relief from jud g ment would run counter to the Supreme Court’s general instruction tha t “[d] istrict courts may determine wheth er a case is ‘ excep tional’ in the case

- by

- case exercise of their discretion, considering the totality of the circu mstances.” Octane Fitness , 134 S. Ct. at 1756. The district
court therefore did not commit reversible err or in compa ring this case to patent cases more generally.

We have considered NOVA ’s remaining arguments and find them unpersuasive.

III. C ONCLUSION For the foregoing reasons, the district court did not abuse its discretion in determin ing , under the totality of

3 But for the relevant time

- bar, N OVA may have filed its request to set aside the 2010 judgment through a Rule 60(b)(3) motion, in which case its argument for excising patent infringement cases from the universe of § 285 comparators would lose considerable, if not all, force.NOVA CHEMICALS CORPO RATION v. DOW CHEMICAL COMPANY 12

the circumstances, that t his case was exceptional under § 285.

AFFIRMED.

C OSTS Costs to Appellee.