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

______________________ KILOPASS TECHNOLOGY, INC., Plaintiff

- Appellee,

v.

SIDENSE CORPORATION, Defendant

- Appellant.

______________________

2013

- 1193

______________________ Appeal from the United States District Court for the Northern District of California in No. 10

- CV

- 2066, Judge Susan Y. Illston.

______________________

Decided: December 26, 2013

______________________

D ARALYN J. D URIE , Durie Tangri, LLP, of San Fra ncisc o, California, argued for plaintiff

- appellee. With her on the brief was E UGENE N OVIKOV

.

R OGER L. C OOK , Kilpatrick Townsend & Stockton, LLP, of San Francisco, California, argued for defendant

appellant. With him on the brief were R OBERT D. T ADLOCK and S ARA B. G IARDINA . Of counsel on the brief

was J OSHUA H. L EE , of Atlanta, Georgia.

______________________KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 2

Before R ADER , Chief Judge, L OURIE and O’ M ALLEY , Circuit Judges.
Opinion for the court filed by Circuit Judge O’M ALLEY

. Concurring opinion filed by Chief Judge R ADER

. O’M ALLEY , Circuit Judge

. This appeal arises from the United States District Court for the Northern District of California. The district court granted summary judgment in favor of Sidense Corporation (“Sidense”), holding that it did not infringe Kilopass Technology, Inc.’s (“Kilopass ’s ”) U.S. Patents 6,940,751 ( “ the ’751 patent”), 6

, 777,757, and 6,856,540. Kilopass Tech., Inc. v. Sidense Corp. , No. 10

- 2066, 2012 WL 3545286 (N.D. Cal. Aug. 16, 2012). We summarily affirmed that decision under Federal Circuit Rule 36

. Kilopass Tech., Inc. v. Sidense Corp ., 501 F. App’ x 980 (Fed. Cir. 2013) . While that appeal was pending, Sidense filed a motion in the district court seeking an award of attorney s’ fees under 35 U.S.C. § 285, which the distr ict court denied. Kilopass Tech., Inc. v. Sidense Corp. , No. 10

- 02066, 2012 WL 6599428 (N.D. Cal. Dec. 18, 2012). Sidense now appeals from the district court’s denial of that motion. We vacate and remand for reconsideration consistent with this opinion.

I
Kilopass and Sidense are competitors in the embe dded non

- volatile memory (“NVM”) market . Memory cells use transistors to store information. NVM memory consists of memory devices that retain their information (or state) when power is removed . Kilopa ss markets technology used to create its 1.5T NVM memory technol ogy. Sidense has a competing 1T

- Fuse product, the design and technology of which it licenses to its customers, who in turn use those designs to build embedded memory cells.KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 3

Kilopass’s patents cover a memory cell comprised of transistors located at the cross

- points of a column bitline and a row wordline. Each transistor has a “gate” connec ted to a column bitline and a “source” connected to a row wordline. ’751 patent col. 5 ll. 32

– 40. Oppo site the source is a “drain” that is not connected to any bitlines or wor dlines. Id. Beneath the gate is a sub strate separated from the gate by a dielectric oxide. Id. col. 7 l. 17. The diele ctric oxide is engineered to “break down” when a sufficient voltage is applied to the gate. Id. col. 7 l l . 14

– 16. If the gate oxide breaks down

, a conductive link forms be tween the source and drain, allowing current to flow through the transistor. Id. co l. 7 ll. 16

– 20. The flow of current ind icates that the transistor is in a pro grammed state, while the absence of current flow indicates that it is in a non

programmed state. Id.
Kilopass’s ’751 patent, which is representative of the patents in suit, is d irected to a programmable memory cell utilizing a transistor at the intersection of a column bitline and a row wordline. ’751 patent Abstract. Repr esentative claim 1 reads as follows:

1. A programmable memory cell useful in a memory array having column bitlines and row wordlines, the memory cell comprising:
a transistor having a gate,
a gate dielectric between the gate and over a su bstrate,

and first and second doped semiconductor regions formed in said substrate adjacent said gate and in a spaced apart relationship to define a channel region there between and under said gate;

and wherein the second doped semiconductor r egion of the transistor is connected to one of said row wordlines

,KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 4

and wherein said gate dielectric is formed such that the gate dielectr ic is more susceptible to breakdown near the first doped semicondu ctor region than said second doped semico nductor region.

Id. col. 14 ll. 30

– 44 (emphas e s added).

Claim 1 of the ’751 patent requires a first and second doped semiconductor region of the memory cell where the second doped region is connected to one of the wordlines. Id. Sidense’s 1T

- Fuse cells, however, utilize a shallow trench isolation (“STI”) region for the transistor drain instead of a first doped region. Kilopass , 2012 WL 3545286, at *10; J.A. 10604. The claim also requires the second doped region to be connected to a row wordline

, but Sidense’s 1T

- Fuse product connects the second doped region to the column bitline. Kilopass , 2012 WL 3545286, at *7; J.A. 10604 –0 5. These differences formed the basis of the district court’s noninfringement determination

, which we affirmed

. Kilopass , 2012 WL 3545286, at *7

– 11
, aff’d

, 501 F. App’x 980 (Fed. Cir. 2013).

II
In 2005, Kilopass’s founder and an inventor on all three of Kilopass’s patents, Jack Peng, reviewed a n inte rnational patent application submitted by Sidense that was directed to protecting Sidense’s competing 1T -F use memory cell. Peng believed that the 1T -F use was similar
to Kilopass’s patented cells, except th at Sidense used a split gate implementation. Kilopass , 2012 WL 3545286, at *9. Peng contacted a patent attorney at the law firm Perkins Coie to discuss potential infringement. In an e

mail to the Perkins attorney, Peng explained that “[Kilopass] did not file [a] dedicated patent for this split gate implementat ion” and that “we should [have]

. . . a long time ago even though we were very busy.” J.A. 10576

, 10580. According to Peng, it was not a priority to Kilopass at that time because Sidense’s “split gateKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 5

[memory cell] is not self

- aligned, so their practical cell size will be larger than [Kilopass’s] 1.5T cell.” J.A. 10576.

The Perkins counsel nonetheless believed that there was a sufficient basis to challenge Sidense with infring ement contentions “ in a friendly way . . . to see what their reaction is.” J.A. 10578. On November 28, 2005, the Perkins counsel sent a letter to Sidense advising that it

“ should be interested in obtaining a license to Kilopa ss’s patents” or otherwise “provide [Kilopass] w ith an expl anation of how these products avoid the claims ” of the patents

- in

- suit, inter alia

. J.A. 105 83

– 86. Sidense responded on January 20, 2006, stating, “[I]t is our opinion that no products produced by Sidense, nor their methods of operation, fall within the scope of the claims.” J.A. 10590. Specifically, Sidense noted:
[E] ach [claim] require [s] that the transistor have (1) first and second doped semiconductor regions formed in the substrate adjacent the gate ; and (2) a second doped semiconductor region connected to the row wordline

. . . . Such elements are not pr esent in Sidense’s memory cell transisto rs. For at least these reasons,

. . . we do not believe any l icense of these patents is necessary.

J.A. 10 590 (emphas e s added). Sidense also proposed that it was “ prepared to consider a third

- party exami nation, on a confidential basis” to confirm whether Sidense’s pro ducts infringed, “ provided [Kilopass] agreed to pay the costs of same and to be bound by any findings in this regard.” J.A. 10593.
After reviewing Sidense’s response

, the Perkins cou nsel sent the following e

- mail to Peng and Kilopass’s CEO : Here is my report on Sidense’s response to our charge of infringement. I still believe given our knowledg e of Sidense’s technology, that they i nfringe our patents. Please keep in mind that I amKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 6

assuming that their memory design is the same as detailed in their patent application

. . . . Note that it is possible that Sidense may have changed their memory design to be different from what is shown

. . . . In speaking with Jack [Peng] earlier today, we speculated that Sidense may have eliminated the first doped region and replaced it with a sha llow trench isolation [STI] of some sort.

. . . [I]f in fact they h ave eliminated the first dope region, then they would NOT infringe our claims literally

. If that is the case, then we would have to go through a “reissue” proceeding in the patent office that may take 2 years in order to modify our claims to include the situation where there is no first doped region

. . . . The most crucial bit of i nformation we need to find out is the design of their memory cell. We have been . . . assuming that their patent application shows their memory cell. This is not always the case and it would be good if we could find out definitively how their memory cell is

con structed. I still feel strongly about our case if they are using the memory cell described in their patent application.

J.A. 10601 ( emphasis in original ). That e

- mail made clear that: (1) the analysis by Perkins counsel up to that point had been based on the assumption that the design of Sidense’s 1T

- Fuse cell was the same as the cell described in Sidense’s international patent application; and (2) if that assumption was incorrect and Sidense had in fact replaced the first doped region ( i.e ., the drain) with a n STI region, then Sidense “ would NOT infringe [the] claims literally. ” Id.
In June 2007, a Kilopass employee obtained a di agram of Sidense’s 1T

- Fuse cell at a presenta tion, which confirmed that Sidense had replaced the drain with an STI. The Perkins counsel then sent the following e- mail to Kilopass officials: “My preliminary review of all theKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 7

Sidense materials indicate s that they have redesigned their memory cell to avoid infringement of our patents. Or at least make our case much tougher .” J.A. 10604 (e mphasis added). Counsel also noted that Sidense employed an opposite wordline and bitline configuration, viz. , the gate of each transistor was connected to a row wordline and the source was connected to a column bitline. Cou nsel stated that he was “ not so worried about the inte rchang e of the bit line and word line,” but that he was

“ more worried about the fact t hat [Sidense’s cell] uses an [STI] on one side of the gate and not a [drain] .” Id

. at 10604

– 05

. Despite that advice from its Perkins patent counsel that Sidense did “NOT infringe [the] claims literally,” and that Kilopass’s case was “much tougher,” Kilopa ss r etained the law firm of Morrison Foerster (“MoFo”) to conduct another analysis. On March 19, 2008, counsel from MoFo e

- mailed Kilopass’s CEO the following:
As we mentioned during the meeting, assum ing Sidense’s NVM product uses . . . [an] STI region [] (as opposed to two N+ regions) to define the cha nnel below the gate . . . Kilopass appears to have a valid claim that Sidense’s NVM product is at least “equivalent” to the invention claimed by claim 1 of Kilopass’s ’751 patent, and therefore that Sidense infringes that patent.
As we also discussed, the next step is for us to co nduct a more detailed investigation and analysis to confirm our initial impressions, which you asked us to complete before your April 2nd meeting with Kilopass’s Board

. J.A. 11487 (emphases added).

MoFo then immediately began its “more detailed i nvestigation” in order to meet Kilopass’s deadline. Howe ver, eight days later, on March 27, 2008, KilopassKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 8

instructed MoFo to stop all work on the project. The reason is unclear, but MoFo subsequently sent Kilopass an invoice for 44 hours of work “relat ing to Kilopass’s investigation of potential infringe ment claims against Sidense.” J.A. 11490. The invoice was accompanied by “a preliminary infringement chart for the ’751 patent refl ec ting [MoFo’s] analysis.” Id.
The infringement chart provided an analysis concer ning the doctrine of equivalents and concluded that “Kilopass appears to have a reasonable argument that Sidense’s field oxide region is equivalent to the doped region in c laim 1 of the ’751 patent, and therefore satisfies this limitation.” J.A. 11497. With regard to literal i nfringement, the MoFo counsel opined:
[I]f “ doped region ” is defined as an area on the semiconductor where the electrical properties have been changed, it may be difficult to argue that the field oxide region is a doped region

. . . . I f, however, “ doped region ” could reasonably be defined more broadly as simply an area to which a dopant is applied, then we may be able to argue that the field oxide region is a “ doped region. ” Determining the potential viability of this argument will require additional investigation, technical feedback from Kilopass and possibly input from an independent expert.

Id

. Although MoFo’s preliminary infringement chart opined favorably to Kilopass regarding the doctrine of equivalents, there is no evidence in the record that MoFo’s analysis was complete at that time, nor is there any

e vidence that Kilopass considered MoFo’s preliminary infringement chart in deciding to bring suit against Sidense. Kilopass retained MoFo to conduct an infring ement analysis but terminated that relationship only eight days later. It does not appear that K ilopass was aware ofKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 9

how much work MoFo had done up to that point or that MoFo was even in the process of completing an infring ement chart. In other words, it appears that Kilopass officials had already set their mind prior to learning of MoFo’s infringem ent analysis.
In 2008, a team of engineers led by Kilopass’s CTO sent an exemplary Sidense memory device to a third

party for reverse

- engineering. After receiving the results, the CTO created a slide presentation for a meeting of Kilopass’s board noting that Kilopass had retained the law firm SNR Denton to investigate potential infring ement against Sidense. The CTO also stated that Denton “[a]ttorneys don’t have a concl usion yet as to the reading of 1st doped region and STI region” and that their “ formal analysis [was] in progress.” J.A. 11296. However, in the CTO’s opinion, “[f]rom an engineer’s perspective,” Sidense infringed under the doctrine of equivalents. Id

. III
On May 14, 2010, Kilopass filed suit against Sidense in the United States District Court for the Northern District of California, alleging both literal infringement and infringement under the doctrine of equivalents.
During the course of the proceedings, the district court discovered that Kilopass was making claim co nstruction argument s to the United States Patent and Trademark Office Board of Patent Appeals and Interfe rences (the “Board”) that were directly contrary to those being made to the court in order to distinguish over a key piece of prior art during a concurrent inter partes reexamination. Kilopass , 2012 WL 3545286, at *6

. The district court admonished Kilopass for engaging in “gamesmanship

. ” J.A. 5990

– 91. Additionally, the district court ruled that Kilopass had attempted to amend its infringement contentions and advance p reviously undisclosed theories under the do c-KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 10

trine of equivalents long past the applicable deadline and without the court’s approval. Kilopass , 2012 WL 3545286, at *8. The district court noted that “Kilopass’s assertion of a new theory of equivalence is p articularly inappropr iate in light of evidence that Kilopass has known for many years that Sidense does not literally infringe its patent s.” Id. at n.8 (emphasis added).
After ruling that Kilopass had disavowed claim scope and striking evidence relating to Kilopass’s theory of equivalence, the district court granted Sidense summary judgment of noninfringement. Id. at *10. The district court reasoned that Kilopass ignored “numerous diffe rences” between the patent claims and Sidense’s accused products and that Peng, a named inventor on all three patents in suit, admitted before Kilopass filed suit that Kilopass had actually considered using Sidense’s design but chose not to because it resulted in a larger cell size. Id. at *9.
Kilopass appealed the district court’s grant of su mmary judgment to this court, and we summarily affirmed pursuant to Federal Circuit Rule 36. Kilopass , 501 F. App’ x at 980 . While that appeal was pending, Sidense filed a m otion in the district court for an award of atto rney s’ fees pursuant to 35 U.S.C. § 285. Relying on the standard set forth by a panel of this court in Brooks Furniture M anufacturin g v. Dutailier, Inc ., 393 F.3 d 1378 (Fed. Cir. 2005), the district court de nied the motion, stating:
Although Sidense was the prevailing party on the patent cl aims, the Court concludes that Sidense has not met its burden of establishing with “clear and convincing evi dence” that Kilopass brought or maintained the prosecution of i ts patent i nfringement in bad faith. Kilopass performed su bstantial pre

- filing investigation and was able to obtain opinions from two different law firms thatKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 11

Kilopass had a non

- baseless claim against Sidense. In addition, Kilopass’s Chief Technology Off icer performed his own independent analysis bas ed on the results of an outside intellectual

property forensics firm to determine that a p atent

- infringement suit was appro priate.
Kilopass , 2012 WL 6599428

, at *3 (citations omitted).
Sidense now appeals the district court’s denial of its motion for § 285 attorney s’ fees. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

IV

A determination of whether to award attorney s’ fees under § 285 involves a two

- step process. First, a district court must determine whether the prevailing party has proved by clear and convincing evidence, Ruiz v. A.B. Chance Co. , 234 F.3d 654, 669 (Fed. Cir. 2000), that the case is “exceptional.” 3 5 U.S.C. § 285; Cybor Corp. v. FAS Techs., Inc. , 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc). Under Brooks Furniture

, A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as willful i nfringement, fraud or inequitable conduct in pr ocuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates [Federal Rule of Civil Procedure] 11, or like infractions. See, e.g.

, Cambridge Prods. Lt d. v. Penn Nutrients, Inc. , 962 F.2d 1048, 1050

– 51 (Fed. Cir. 1992); Beckman Instruments, Inc. v. LKB Produkter AB , 892 F.2d 1547, 1551 (Fed. Cir. 1989). Absent misconduct in the litigation or in securing the patent, sanctions may be imposed against the p atentee only if both (1) the litigation is brought in subjective bad faith, and (2) the lit igation is objectively baseless. Professional RealKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 12

Estate Investors v. Columbia Pictures Industries

, 508 U.S. 49, 60

– 61

. . . (1993); see also Forest Labs., Inc. v. Abbott Labs. , 339 F.3d 1324, 1329

– 31 (Fed. Cir. 2003).

393 F.3d at 1381.

We review de novo whether the court applied the proper legal standard under § 285, and review the court’s factual findings for clear error. Brasseler, U.S.A. I, L.P. v. Stryker Sale s Corp. , 267 F.3d 1370, 1378 (Fed. Cir. 2001). A finding is clearly erroneous when, despite some su pporting evidence, “the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United Sta tes v. U.S. Gypsum Co. , 333 U.S. 364, 395 (1948). Second, if the district court finds the case to be exceptional, it must then determine whether an award of attorney s’ fees is appr opriate. Cybor , 138 F.3d at 1460. We review that dete rmination for an abu se of discretion. Id

. Sidense argues that the district court erred in not finding this case “exceptional” under Brooks Furniture because Kilopass’s claims were objectively baseless and brought in subjective bad faith. I n the alternative, Sidense urges us to change the standard for assessing exceptionality under § 285 as set out in Brooks Furniture and cases that followed . Kilopass responds that , as the trial court found, it had a good faith basis for bringing and pursuing its infringement claims against Sidense’s pro ducts

. Kilopass also argues that we should not alter our exceptional case standard

. V

A

Sidense first faults the district court for its reliance on our decision in Marc T ec , LLC v. Johnson & Johnson , 664 F.3d 907 (Fed. Cir. 2012), whi ch, in Sidense’s view, r equires too great a showing to establish subjective badKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 13

faith. Quoting iLOR, LLC v. Google, Inc. , 631 F.3d 1372, 1377 (Fed. Cir. 2011)

, Marc T ec stated that, when a d efendant seeks fee shifting under § 285 based on the all egation th at the plaintiff’s claims were objectively baseless, the “patentee’s case ‘must have no objective foundation, and the plaintiff must actually know this.’” Marc T ec , 664 F.3d at 916 (emphasis added). Requiring actual knowledge that claims are baseless, according to Sidense, sets too high a bar for establishing that a case is exce ptional . These concerns are echoed in the recent successful petition for a writ of certiorari in Octane Fitness, LLC v. Ic on Health & Fitness, Inc.

, 496 F.3d 57 (Fed. Cir. 2012), cert. granted , 81 U.S.L.W. 3567 (U.S. Oct. 1, 2013) (No. 12

– 1184) . Petitioners argued that requiring defendants to prove actual knowledge results in impermissibly di sparate treatment of plaintiffs a nd defendants under § 285 because a plaintiff can demonstrate exceptionality by proving willful infringement, which only requires a sho wing of recklessness. See Petition for Writ of Certiorari, Octane Fitness, LLC v. Icon Health & Fitness, Inc.

, 2013 WL 1 309080 , at *28

– 29 ( U.S. Mar. 27, 2013) (No. 12

– 1184); s ee also Fogerty v. Fantasy, Inc. , 510 U.S. 517, 534 (1994) (stating that “[p]revailing plaintiffs and prevailing defendants are to be treated alike” in the context of a ssessing entitlement to attorneys’ fees under 17 U.S.C. § 505) ; Eltech Sys. Corp. v. PPG Indus., Inc ., 903 F .2d 805, 811 (Fed. Cir. 1990) (“[T]here is and should be no difference in the standards applicable to patentees and infringers who engage in bad faith litigation.”)

. It is unclear whether the district court, in its brief analysis, required Sidense to demonstrate that Kilopass had actual knowledge that its claims were baseless. But, to the extent that the district court did require actual knowledge of objective baselessness , it erred . The la nguage from iLOR and Marc T ec that Sidense interprets asKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 14

requiring actual knowledge does not reflect this court’s law governing § 285

, 1 and is dictum

. 2 A s we made clear in Highmark, In c . v. Allcare Health Management , 687 F.3d 1300 (Fed. Cir. 2012), subjective bad faith only requires proof that the “lack of objective foundation for the claim ‘was either known or so obvious that it should have been known’ by the party asserting the claim.” Id. at 1309 (emphases added) (quoting In re Seagate Tech., L LC , 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc) ). Thus, actual knowledge of baselessness is not required

. Like a plaintiff seeking to recover attorneys’ fees under § 285 based on alleged willful infringement, a defendant need only prove reckless condu ct to satisfy the subjective component of the § 285 analysis. See Highmark , 687 F.3d at 1309; Seagate , 497 F.3d at 1371 (“[T]o establish willful infringement, a patentee must show by clear and convin cing evidence that the infringer acted despite an objectiv ely high likelihood that its actions constituted infringement of a valid p a tent.”).

1 Indeed, if iLOR had attempted to increase the r equired showing for demonstrating subjective bad faith, it would have been unable to do so as a panel decision because such a change would contravene this court’s established precedent. See Eltech , 903 F.2d at 810

– 11 (stating that actual knowledge of basel essness is not required to prove subjective bad faith ).

2 In iLOR , we resolved the appeal on the objective prong and never reached the subjective prong. See iLOR

, 631 F.3d at 1374. In MarcTec , we not only found that the plaintiff did know during the cou rse of the litigation that its claims were baseless, we also relied on litigation misconduct as an alternative ground to support the § 285 fee award. See MarcTec , 664 F.3d at 917

– 20. The court’s discussion of the level of knowledge required under the sub jective prong was not critical to either holding.KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 15

In addition to any errors the district court may have made by requiring too great a showing of subjective bad faith, the court erred by taking too narrow a view of the proof that can satisfy the subjective prong of the § 285 analysis. The court rejected Sidense’s request for fees based solely on Sidense’s purported failure to establish subjective bad faith. Kilopass , 2012 WL 6599428

, at *3 (“ [T]he Court concludes t hat Sidense has not met its burden of establishing with ‘clear and convincing ev idence’ that Kilopass brought or maintained the prosec ution of its patent infringement in bad faith.”). The court reached this determination, however, without addressing the o bjective merits of Kilopass’s claims. Id. Instead, it focused exclusively on evidence it considered to be indic ative of good faith on Kilopass’s part

— including opinions of counsel and Kilopass’s own independent infringement analysis. Id. This focus was inappropriately narrow, rendering the district court’s analysis incomplete.
Our case law has long held that

, “in considering a pa rty’s subjective state of mind, we are ‘to take into account the totality of the circumstances.’” Highmark , 687 F.3d at 1311 (quoting Mach . Corp. , 774 F.2d at 473). In Eltech

, we exam ined the difficulty of proving w hat a party actua lly knew or did not know, explaining:
The “should know” rubric obviously applies when a party attempts to escape the consequences of its conduct with the bare statement, “I didn’t know.” A party confronted with the difficulty of proving what is in an adversary’s mind must be at liberty to prove facts establishing that that adversary should have known, i.e. to prove facts that render the “I didn’t know” excuse unacceptable.

903 F.2d at 810. Thus, focusing first and only on subje ctive factors, as the district court did here, is inadequate to obtain the justice that § 285 is intended to achieve. Subjective bad faith is difficult to prove directly , es sentia l-KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 16

ly requiring the discovery of a smoking gun, and evidence of a lack of subjective bad faith is easy to provide , as occurred here. Kilopass, knowing that it had no literal infringement case, i.e. , that Sidense’s product was not within the scope of its claims, was able to overcome Sidense’s § 285 fee motion simply by showing that it had consulted counsel who opined about the possibility of prevailing on an infringement claim under the doctrine of equivalents . Lack of direct proof of subjective bad fai th should not alone free a party from the threat of asses sment of attorney s’ fees under § 285 , however

. The district court prematurely ended the § 285 inquiry without determining whether Kilopass’s doctrine of equivalents theory was objectively baseless a nd whether that fact or other circumstantial evidence would support an inference

o f bad faith on the part of Kilopass

. The primacy of objective evidence over assertions of subjective good faith or lack of knowledge is well esta blished in our § 285 case law

. 3 The totality of the circu mstances does include an evaluation of subjective good faith, but mostly as a negative. If a smoking gun is found, revealing that a patentee knew that he had no chance of winning a lawsuit, then subjective bad faith is easily shown. But one’s misguided be lief, based on zealousness rather than reason, is simply not sufficient by itself to show that a case is not exceptional in light of objective

3 Because objective baselessness is an independent requirement under Brooks Furniture and can influence assessment of the subjective component under § 285, it is in the interests of judicial economy for a court to consider the objective merits of a case first, and then assess the parties’ proofs of subjective intent. See Prof’l Real Estate Investors , 508 U.S. at 60 (“Only if challenged litigation is objectively meritless may a court examine the litigant’s subjective motivation.”).KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 17

evidence that a patentee has pressed meritless claims. Thus , we have observed that

, where “the patentee is manif estly unreasonable in assessing infringement, while continuing to assert infringement in court, an inference is proper of bad faith.” Eltech , 903 F.2d at 811.

In discussing the requirement of bad faith to support a finding of exceptionality under § 285, Brooks Furniture did not speak at all to the type of proofs that are adequate to establish bad faith. Brooks Furniture thus did nothing to discourage courts from drawing an inference of bad faith from circumstantial evidence thereof when a paten tee pursu es claims that are devoid of merit. Factors such as the failure to conduct an adequate pre

- suit investig ation, vexatious or unduly burdensome litigation tactics, misconduct in procuring the patent, or an oppressive purpose are factors which can be indicat ive of bad faith. Th e wide variety of ways available to establish bad faith is why our case law has long required a party seeking fees under § 285 “to prove the other guilty of bad faith litig ation by clear and convincing evidence in light of the total ity of the circumstances .” Eltech , 903 F.2d at 811 (emphasis added); see also Highmark , 687 F.3d at 1311 (quoting Mach. Corp. , 774 F.2d at 473); Forest Labs., Inc. v. Abbott Labs. , 339 F.3d 1324, 1330 (Fed. Cir. 2003) (considering the record as a whole in determining whether the patentee maintained its infringement counterclaim in bad faith). T hus

, we vacate the district court’s judgment denying fees and remand for consideration o f whether Kilopass acted in bad faith in light of the totality of the circumstances

— with particular attention paid to the objective merits of Kilopass’s claims and other objective evidence indicative of bad faith

. B
Sidense also argues that it should not e ven be r equired to pr ove that Kilopass acted in bad faith to show exceptionality . Proof of objective baselessness , inKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 18

Sidense’s view, should be enough to demonstrate exceptionality under § 285

. Sidense does not contend that a finding of exceptionality pr edicated on objective baseles sness w ould demand that the district court shift fees, only that it should permit it to do so in its discretion in light of the totality of the circumstances

. Sidense’s argument is not without some force.
In 1946, Congress amended the then patent remedy statute, section 4921 of the Revised Statutes of 1874, to state that the “court may in its discretion award reason able attorney fees to the prevailing party.” Mach. Corp.

, 774 F.2d at 471 (quoting Patent Act of August 1, 194 6, § 1, 60 Stat. 778, 35 U.S.C. § 70 (1946 ed.) ). T he legisl ative history indicates that a key aim of this provision was “‘to enable the court to prevent a gross injustice to an alleged infringer.’” See Mathis v. Spears , 857 F.2d 749, 755 (Fed. Cir. 1988) (quoting S. Rep. No. 1503, 79th Cong., 2d Sess. (1946), reprinted in 1946 U.S. Code Cong. Serv. 1386, 1387). This statute was interpreted by the circuit courts of appeals as giving district courts broad discretion to award attorney fees in “extraordinary ci rcumstances.” See, e.g.

, id. (“The statute was construed to allow the award of fees in extraordinary cases . . . .”); Park

- In

- Theatres v. Perkins , 190 F.2d 137, 142 (9th Cir. 1951) (“[I]n granting this power, Congress made plain its intention that suc h fees be allowed only in extraordinary circumstances.”). An extraordinary case was one “ bo ttomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable co nsideration of similar force, which makes it grossly unjust that the winner of the particular law suit be left to bear the burden of his own counsel fees. ” Park

- In

- Theatres

, 190 F.2d at 142 (emphasis added) (listing additional cases that “support this view”).
The 1952 Patent Act slightly modified and incor p orated the 1946 statute into the present day patent remedy statute, 35 U.S.C. § 285. See Mach. Corp. , 774 F.2d atKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 19

471. Section 285 states, “ The court in exceptional cases may award reasonable attorne y fees to the prevailing party.” 35 U.S.C. § 285 (195 2). Although the word “e xceptional” was added and the word “discretion” was removed, the legislative history makes clear that no change in meaning was intended:
This section is substantially the same as [the] corresponding provision in R.S. 4921, [except] “ in e xceptional cases ” has been added as expressing the intention of the present statute as shown by its legislative history and as interpreted by the
courts.

S. Rep. No. 1979, 82nd Cong., 2d Sess. (1952), reprinted in 1952 U.S. Code Cong. & Ad. N ews 2394, 2423; see also Rohm & Haas Co. v. Crystal Chem. Co. , 736 F.2d 688, 691 (Fed. Cir. 1984) (quoting P.J. Federico, Commentary on the New Patent Act, Title 35, United States Code Ann otated, page 1, at 56 reprinted in 75 J. Pat. & Trademark Off. Soc’y 161, 216 (1993)).

Thus , a central aim of § 285, as well as its predece ssor, is to prevent an alleged infringer from suffering a

“ gross injustice.” The injury to the alleged infringer is the focus

— an injury that can occur regard less of a plaintiff’s
st ate of mind. In the same vein, we have stressed that § 285 “is remedial and for the purpose of compensating the prevailing party for the costs it incurred in the pros ecution or defense of a case where it would be grossly unjust

. . . to require it to bear its own costs.” Highmark

, 687 F.3d at 1310. Again, it is clear that the aim of § 285 is to compensate a defendant for attorneys’ fees it should not have been forced to incur . The aim is not to punish a plaintiff for bringing those claims

— an inquiry tha t legi timately would involve inquiry into the plaintiff’s state of mind. Thus, relevant legislative history and our own case law at least suggest that we should focus on the “grossKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 20

injustice” to the defendant, if any, and not necessarily on the plaintiff’ s subjective state.

Even Federal Rule of Civil Procedure 11

— which a llows the imposition of punitive sanctions

— does not i nvolve inquiry into a party’s subjective good faith. Rule 11 allows courts to impose sanctions where a filing contains “claims, defens es, and other legal contentions [that] are [not] warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” Rule 11 functions to assure that parties assert litigation positions that are objectively reasonable at the time of filing. See Hall v. Bed Bath & Beyond, Inc. , 705 F.3d 1357, 1372 (noting that Rule 11 sanctions are appropriate when a plaintiff asserts frivolous claims in its complaint). Importantly, however, Rule 11 doe s not require a showing of bad faith. See Chambers v. NASCO, Inc. , 501 U.S. 32, 47 (1991) (“Rule 11

. . . imposes an objective standard of reasonable inquiry which does not mandate a finding of bad faith.”). Because subjective bad faith is not required in the context of Rule 11, it follows that the question of exceptionality under § 285

— a compensatory provision

— should involve an objective inquiry as well, under which a party’s asse rtions of subjective good faith or lack of knowledg e do not bear on whether a case is exceptional

. Again, while those factors might influence a trial court’s exercise of its di scretion under the second part of the § 285 inquiry ( i.e.

, when determining whether to award fees after finding exceptionality)

, i t is arguable they should not impact the initial exceptionality finding.
It does not seem, moreover

, that the Supreme Court’s decision in Professional Real Estate Investors would require that we retain the requirement of subjective bad faith as a predica te to a finding of exceptionality

. We cited Professional Real Estate Investors in Brooks Furn iture for the proposition that both subjective bad faith and objective baselessness are required under § 285 in theKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 21

absence of litigation misconduct or misconduct in securing the patent at issue. Brooks Furniture , 373 F.3d at 1381. But, Professional Real Estate Investors does not seem to demand the bad faith requirement we glea n ed from it . It is true that, in Professional Real Estate Investors , the Court does demand inquiry into a “litigant’s subjective motivation.” 508 U.S. at 60. But, the Court’s subjective inquiry ha s nothing to do with what a litigant knew or should have known regarding the merits of its claims

— the inquiry that currently forms the subject ive prong of our § 285 analysis

. Instead, the Supreme Court focused on “whether the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor through the use [of] governmental process

— as opposed to the outc ome of that process

— as anticompet itive weapon.” Id. at 60

– 61 (alteration and emphases in original) (citations and internal quotation marks omitted). Thus, t he subjective component in Professional Real Estate Investors

, as Sidense argues, may only pertain to antitrust concerns not present in § 285 analyses

. If that is true

, Professional Real Estate Investors would not demand that subjective considerations remain a nece ssary component of findings of exceptionality under § 285. 4

4 As Sidense argues, this appears to be how other circuit courts interpret identical language in the Lanham Act. See 15 U.S.C. § 1117(a) (“The court in exceptional cases may award reasonable attorney fees to the prevai ling party.”). No other circuit court interpreting the La nham Act has held that the Supreme Court’s decision in Professional Real Estate Investors requires both objective baselessness and subjective bad faith to support exce ptionality when other independent bases for such a finding are absent. Instead, the circuit courts interpreting the Lanham Act allow exceptionality to be predicated on baselessness alone, or on numerous other grounds, suchKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 22

While Sidense’s arguments may constitute good faith assertions that our law should be something other than it is, as a panel, we are not able to entertain them . We must, and do, apply our current law, which requires proof of objective baselessness and subjective bad fai th as a prerequisite to a finding of exceptionality

— the first prong in the court’s § 285 inquiry

. See Brooks Furniture

, 393 F.3d at 1381. Consequently, on remand, the district court should require Sidense to prove Kilopass’s subjective bad faith. W e rei terate , however, that a subjective bad faith requirement is not the obstacle to fee shifting that the district court in this case appears to have believed. As explained above, a wide variety of proofs can provide the requisite showing of bad faith under § 285, which must be assessed in light of the totality of the circumstances. Objective baselessness alone can create a sufficient infe rence of bad faith to establish exceptionality under § 285, unless the circumstances as a whole show a lack of rec kas bad faith litigation, vexatious or unreasonable conduct, and similar misconduct. See, e.g.

, Retail Servs., Inc. v. Freebies Publishing , 364 F.3d 535 (4th Cir. 2004) (stating that an alleged infringer can show exceptionality by showing “something less than bad faith” and noting that groundless arguments can demonstrate excep tionality (citation and internal quotation marks omitted)); Tamko Roofing Prods., Inc. v. Ideal Roofing Co ., 282 F. 3d 23, 32 (1st Cir. 2002) (“Willfulness short of bad faith or fraud will suffice when equitable considerations justify an award and the district court supportably finds the case exceptional.”); Hartman v. Hallmark Cards, Inc ., 833 F.2d 117, 124 (8th Cir. 1987) (clarifying that the “absence of bad faith is not alone determinative on the Lanham Act fee issue” because an exceptional case can be one that is “groundless, unreasonable, vexatious, or

. . . pursued in bad faith”) (emphasis added) (citation and internal quot ation marks omit ted)).KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 23

lessnes s on the patentee’s part. See Eltech , 903 F.2d at 811. Thus, the retention of the subjective bad faith requirement may prove to have little effect on this case, as well as many that follow

. C
Sidense also contends that it should not be required to

prove exceptionality by clear and convincing evidence, as our law currently requires. According to Sidense, proof by a preponderance of the evidence should be sufficient under § 285. Again, Sidense’s argument is not a frivolous

one.
We have justified the requirement that a party prove exceptionality by clear and convincing evidence by citing the “‘presumption that an assertion of infringement of a duly granted patent is made in good faith.’” Highmark

, 687 F.3d at 1310 (quoting Medtronic Navigation, Inc. v BrainLAB Medizinische Computersysteme GmbH , 603 F.3d 943, 954 (Fed. Cir. 2010)). According to our case law, this presumption of good faith originated in the Supreme Court’s decision in Virtue v. Creamery Package Manufa cturing Co. , 227 U.S. 8, 37

– 38 (1913)

. See C.R. Bard, Inc. v. M3 Sys., Inc. , 157 F.3d 1340, 1369 (Fed. Cir. 1998). In Virtue , however, the Court merely stated that “[p]a tents would be of little value i f infringers of them could not be

. . . proceeded against in the courts. Such action, considered by itself, cannot be said to be illegal.” 227 U.S. at 37

– 38. This language does not establish, or even suggest, that there is a presumption that pat ents are asserted in good faith. It simply states that the assertion of a patent, in and of itself, is not a proper predicate for antitrust liability. And even if Virtue could be read to create a presumption, there seems to be no basis for requiring a defendant to overcome that presumption by clear and convincing evidence. See Micros oft Corp. v. i4i Ltd. P’ship , 131 S. Ct. 2238, 2246 (2011) (recognizing that it is “unusual to treat a presumption as alon e establishingKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 24

the governing standard of proof”); see also Fed. R. Evid. 301 (noting that, where there is a presumption in a civil

cas e, the typical effect is that “the party against whom [the] presumption is directed has the burden of producing evidence to rebut the presumption”). Virtue thus does not clearly demand that we require that exceptionality be proved by clear and convincing evidence.

Other cases trace our requirement of clear and co nvincing evidence with respect to exceptionality under § 285 to our decision in Hycor Corp. v. Schlueter Co. , 740 F.2d 1529, 1538 (Fed. Cir. 1984), a case in which atto rneys’ fees were sought based on fraud on the PTO. Hycor noted that “[f]raud must be proved by clear and convin cing evidence.” In Reactive Metals & Alloys Corp. v. ESM, Inc. , 769 F.2d 1578 (Fed. Cir. 1985), we cited Hycor for the proposition that “[t]he q uantum of proof required to prove bad faith conduct is clear and convincing evidence.” Id. at 1582 ; see also Mach. Corp. , 774 F.2d at 471 (citing Reactive Metals , 769 F.2d at 1582, for the proposition that a party must “establish[ ] the exceptional nature of the case by clear and convincing evidence”).

The pronouncement in Reactive Metals , however,
seems to reflect an unneeded expansion of the clear and convincing burden to all aspects of the § 285 analysis

. A preponderance -of- the

- evidence standard is typ ical in civil

cases

— particularly with respect to compensatory prov isions such as § 285. See Herman & MacLean v. Huddl eston , 459 U.S. 375, 390 (1983) (noting that “the preponderance -of- the

- evidence standard [is] generally applicable in civil actions”); Highmark , 687 F.3d at 1310. The heightened burden of proof that applies to allegations of fraud is an exception to th e general rule

. See Addington v. Texas , 442 U.S. 418, 424 (1979) (observing that clear and convincing evidence is typically required “in civil cases involving allegations of fraud or some other quasi

- criminal wrongdoing by the defendant”) ; see also Grogan v. Garner , 498 U.S. 279, 286 (1991) (“Because theKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 25

preponderance -of- the

- evidence standard results in a roughly equal allocation of the ris k of error between litigants, we presume that this standard is applicable in civil actions between private litigants unless particularly important individual interests or rights are at stake.”). A lthough fraud certainly is a ground upon which a finding of exceptionality under § 285 may be predicated , other forms of misconduct ( e.g. , recklessly pursuing a baseless infringement claim) can support an exceptionality finding as well

. And, b ecause exceptionality can be based on conduct less culpable than fraud, there is arguably no reason to depart from the typical preponderance standard with respect to § 285 where fraud is not at issue

. 5 Again, while we cannot fault Sidense for making good faith arguments asking that we change our current law, as a panel we m ay not indulge it . Thus, on remand, the court will apply a clear and convincing evidence standard to the exceptionality component of the § 285 inquiry.

5 To the extent Sidense argues we should align our jurisprudence with that of other circuits interpreting the parallel fee shifting provision under the Lanham Act, we note that the c ircuits are split on the burden of proof they impose upon a prevailing party in these circumstances. Compare Bd. of Supervisors for La. State Univ. Agric. & Mech. Coll. v. Smack Apparel Co. , 550 F.3d 465, 491 (5th Cir. 2008) (“The prevailing party bears the burden of demonstrating the exceptional nature of the case by c lear and convincing evidence.”), and Fin. Inv. Co. (Bermuda) Ltd. v. Geberit AG , 165 F.3d 526, 533 (7th Cir. 1998), with Eagles, Ltd. v. Am. Eagle Found. , 356 F.3d 724, 729 (6th Cir. 2004) ( indicating that exceptionality can be proven by a preponderance ).KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 26

D

Sidense finally urges an even greater overhaul of our standard for assessing exceptionality under § 285, su ggesting that fee shifting should be appropriate when a patentee has “filed and or maintained a patent infring ement suit having little likelihood of success, under ci rcumstances where it would be ‘unjust’ for the prevailing [defendant] to bear its own attorney fees.” Appellant’s Br. at 31. Sidense thus suggests that we depart from Brooks Furniture ’s requirement that a case be objectively bas eless to support fee shifting in the absence of litigation misconduct or misconduct in securing the asserte d patent. In Sidense’s view, fee shifting should only require an alleged infringer to show, “for the objective prong, that the patent owner brought and maintain[ed] the claims of infringement despite an objectively low likelihood that it would prevail on its infringement claim.” Appellant’s Br. at 49 (emphasis in original)

. We find this to be Sidense’s weakest argument for a change in our jurisprudence . As we explained in iLOR

, Section 285 must be interpreted against the bac kground of the Supreme Court ’s decision in Professional Real Estate Investor s , Inc. v. Columbia Pictures Industries, Inc.

, 508 U.S. 49

. . . (1993). There, the Court recognized that the right to bring and defend litigation implicated First Amendment rights and that bringing allegedl y frivolous litig ation could only be sanctioned if “objectively bas eless in the sense that no reasonable litigant could realistically expect success on the merits.” Id. at 60

. . . . 631 F.3d at 1376 ; see also Highmark , 678 F.3d at 1310

– 11 (explaining tha t the objective prong is a “single bac kwards

- looking inquiry” that asks whether a reasonab le litigant could have expected to succeed in light of the entire record generated in the infringement proceedings)

.KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 27

In light of patentees’ First Amendment right to petition the government (by, for instance, filing a lawsuit seeking relief in the courts)

, we do not think Congress intended to discourage patentees from bringing reasonable claims of infringement by raising the specter of fee shifting —even when the patentee’s legitimate claims are on less than the firmest ground

. While Professional Real Estate Investors involved the assertion of claims under the Sherman Act, and is, thus, not binding in the patent context, its reasoning on this point is persuasive. Patent owners possess presumptively valid property rights which convey the right to exclude other s from practicing the claims in their patents. The property right conveyed by a patent has constitutional underpinnings. See U.S. Const. art. I, § 8, cl. 8 ( granting Congress the right “[t]o promote the Progress of Science and useful Arts, securing for l imited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”). And, p atentees have a const itutional right to petition the government to enforce or otherwise vindicate those rights . Thus, where there is no basis upon which to predicate exceptionality other than the viability of the claims asserted, we conc lude that § 285 fees should not be awarded as long as the patentee had an objectively reasonabl e basis for its claims , or, as the Supreme Court put it in Profe ss ional Real Estate Inve stors
, “[i]f an objective litigant could conclude that the suit is reasonably calc ulated to elicit a favorable out come .” 508 U.S. at 60.
Instead, when a plaintiff presses reasonable

, but weak, claims of infringement, a prevailing defendant must look to the many other bases for fee shifting under § 285 . Our law sets out a number of such circumstances under which a case can be considered “ exceptional”— providing significant flexibility that critics of our § 285 jurisprud ence often overlook. Our decision in Perricone v. Medicis Pharmaceutical Corp. , 432 F.3d 1368 (Fed. Cir.KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 28

2005), reinforces the fact that attorneys’ fee determin ations retain a great deal of flexibility , even after Brooks Furniture

. In MarcTec , we stresse d that “a case may be deemed exceptional under § 285 where there has been willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vex atious or unjustified litigation, conduct that violate s Fe deral Rule of C ivil Procedure 11, or like infractions

. ” 664 F.3d at 916 (citation and internal quotation marks omi tted). A nd, we recently reiterated that “‘[l]itigation mi sconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.’” Monolithic Power Sys., Inc. v. O2 Micro Int’l Ltd. , 726 F.3d 1359, 1366 (Fed. Cir. 2013) (alteration in original) (quoting Rambus, Inc. v. Infineon Techs. AG , 318 F.3d 1081, 1106 (Fed. Cir. 2003)). Thus, trial courts retain broad discretion to ma ke findings of exceptionality under § 285 in a wide variety of circumstances

. Proving obje ctive baselessness and subjective bad faith is just one avenue for seeking fee shifting under § 285. 6
In sum, we vacate the district court’s decision denying the motion for attorneys’ fees and remand for consider ation of whether Kilopass’s doctrine of equivalents theory was objectively baseless, and then , whether the totality of the circumstances demonstrates that Kilopass acted with subjective bad faith. If the d istrict court determines that the case is exceptional after applying the correct legal

6 We do not need to go so far as to overrule Brooks Furniture , as the concurrence proposes, to give trial courts flexibility to award fees. As we have explained here, in almost every case to address the issues, and in Brooks Furniture itself, the Brooks Furniture framework that requires a showing of objective baselessness and subjective bad faith only comes into play where other grounds for an award of fees do not exist.KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 29

standards, it should then determine, in its discretion, whether to award attorneys’ fees under § 285. Altern atively, the trial court may, in its discretion, award fees based on alternative grounds for doing so, if such grounds exist.

VI
Because the district court’s decision was premised on an incorrect legal standard, the decision of the district court is vacated and remanded.

VACATED AND REMANDED

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

______________________ KILOPASS TECHNOLOGY, INC., Plaintiff

- Appellee,

v.

SIDENSE CORPORATION, Defendant

- Appellant.

______________________

2013

- 1193

______________________ Appeal from the United States District Court for the Northern District of California in No. 10

- CV

- 2066, Judge Susan Y. Illston.

______________________ R ADER , Chief Judge , concurring

I welcome and jo in the court’s thoughtful analysis , legal scholarship, and improvement in the application of our fee

- shifting law. I also endorse t he changes proposed by Sidense that objective baselessness alone should be sufficient for an award of attorney’s fees, and that proof by a preponderance of the evidence should suffice. Majo rity Op. at 18 (“Sidense’s argument is not without some force

. ”); Majority Op. at 23 (“ Sidense’s argument is not a frivolous one .”).

I wish to add to some of the court’s reasoning with my hope that our court will return to its original binding precedent on fee

- shifting. O ur earlier jurisprudence governs over the subsequent case of Brooks Furniture.KILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 2

See Newell Cos., Inc. v. Kenney Mfg. C o ., 864 F.2d 757, 765 (Fed. Cir. 1988) ( “[P]rior decisions of a panel of the court are binding precedent on subsequent panels unless and until overturned in banc .” ). Before Brooks Furniture

, district courts enjoyed broad discretion to shift fees under 35 U.S.C. § 285 . In my view, th is court should return to the rule that a district court may shift fees when

, based

on the totality of the circumstances, it is necessary to prevent a gross injustice. See Eltech Sys. Corp. v. PPG Indus., Inc ., 903 F .2d 805, 810

– 11 (Fed. Cir. 1990)

. I.

As th is court notes
, in 1946, Congress amended the Revised Stat utes of 1874 to state that the “court may in its discretion award reasonable attorney fees to the pr evailing party.” Majority Op. at 18 ; Mach. Corp. of Am. v. Gullfiber AB , 774 F.2d 467, 471 (Fed. Cir. 1985) (quoting Patent Act of August 1, 1946, § 1, 60 Stat. 778, 35 U.S.C. § 70 (1946 ed.)). Before the creation of this court, the various circuit courts interpreted this statute as giving district courts broad discretion to shift fees in “extraord inary ” cases. See

, e.g. , Park

- In

- Theatres v. Perkins , 190 F.2d 137, 142 (9th Cir. 1951) . E xtraordinary case s were those “bottomed upon a finding of unfairness or bad faith in the conduc t of the losing party, or some other equitable consideration of similar force , which makes it grossly unjust that the winner of the particular law suit be left to bear the burden of his own counsel fees.” Id. (emphas e s added) (listing additional cases tha t “support this view” ).

This court properly concludes that although the 1952 Patent Act slightly modified the 1946 statute by adding the word “exceptional” and removing the word “discr etion,” th is change did not depart from the original unde rstanding

. Majority Op. at 19

. And for a long period of time, this court did just that

, reading 35 U.S.C. § 285 as applying a totality of the circumstances test

. See

, e.g. , Mach. Corp. , 774 F.2d at 472; Mathis v. Spears , 857 F.2dKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 3

749, 758 (Fed. Cir. 1988); Eltech

, 903 F .2d at 810

– 11 (“[I]nterests of the patentee and alleged infringer are adequately taken into account in the required evaluation of the totality of the circumstances

. . . .”); Sun

- Tek Indus., Inc. v. Kennedy Sky Lites, Inc ., 929 F.2d 676, 679 (Fed. Cir . 1991)

. During this time , d istrict courts found cases to be “e xceptional” in a variety of contexts . For example, “willful or intentional infringement,

. . . vexatious or unjustified litigation, or other misfeasant behavior” was sufficient

. Multiform Desiccants, Inc. v. Medzam, Ltd ., 133 F.3d. 1473, 1481

– 82 (Fed. Cir. 1998 ) . “[U]nprofessional beha vior [was also found to be] relevant to the award of atto rney fees, and may suffice, by [itself], to make a case exceptional.” Epcon Gas Sys., Inc. v. Bauer Compressors, Inc ., 279 F.3d 1022, 1034 (Fed. Cir. 2002).

T his court’s first and binding reading of § 285 did not require a district court to independently parse through evidence related to subjective bad faith and evidence that the lawsuit was objective ly baseless. Rather, t hese co nsiderations were implicit in the district court’s obligation to consider the totality of circumstances.

II

. In 2005, a panel of this court in Brooks Furniture drastically altered this court ’ s jurisprudence regarding 35 U.S. C. § 285 : “Absent misconduct in conduct of the litig ation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Brooks Furniture Mfg. v. Dutailier, Inc ., 393 F.3d 1378, 1381 (Fed. Cir. 2005) (emphasis added). Th is court based this new reading on the S upreme Court ’ s decision in Professional Real Estate Inve stors, Inc. v. Columbia Pictures Indus tries , Inc ., 508 U.S. 49, 60

– 61 (1993)

. From my perspective, this interveningKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 4

Supreme Court case does not change this court’s trad itional fee

- shifting rule.

As t his court notes, Professional Real Estate Investors
rests on antitrust concerns that are not present in the § 285 analysis

. Majo rity Op. at 21

. In the antitrust context, both subjective bad faith and objective baseles sness might be reasonable to protect parties from claims for punitive damages

. See 15 U.S.C. § § 1

, 2

. On the other hand

, 35 U.S.C. § 285 is a compensatory fee

- shifting
statute

. Highmark, Inc. v. Allcare Health Mgt. Sys ., 687 F.3d 1300, 1310 (Fed. Cir. 2012). The Supreme Court itself counsel s against requiring both subjective bad faith and objective baselessness in compensatory fee

- shiftin g statutes. Christiansburg Garment Co. v. Equal Emp’t Opportunity Comm’n , 434 U.S. 412, 416 (1978).

In Christiansburg

, the Supreme Court analyzed se ction 706(k) of Title VII of the Civil Rights Act of 1964

. The Title VII language is very similar t o the 1946 patent remedy statute

. The Court in Christiansburg described section 706(k) as “flexible, authoriz ing the award of attorney’ s fees to either plaintiffs or defendants, and entrusting the effectuation of the statutory policy to the discretion of the district courts .” Christiansburg

, 434 U.S.
at 416 (emphasis added)

. Indeed, the Court expressly determined that subjective bad faith was not a barrier to shifting fees : “[A] district court may in its discretion award attorney’s fees to a prevailing defendant in a Title VII case upon a finding that the plaintiff’s action was frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith .” Id . at 421 (emphasis added) ; see also Fogerty v. Fantasy , Inc., 510 U.S. 517, 534 (1994) ( inferring that a prevailing defen dant in the context of copyright law can prove even less than a prevailing defendant in Christian s burg to recover fees and holding th at fees are within the district court’ s discretion: “ There is no precise rule or formula for making these determinations, but instead equitable discretionKILOPASS TECHNOLOGY , INC

. v. SIDENSE CORPORATION 5

should be exer cised in light of the considerations we have identified.” ).

Brooks Furniture , to my eyes, does not fully account for Supreme Court precedent and does not align with decisions of other circuit courts of appeals. For example, the Lanham Act’s fee

- shifting clause, 15 U.S.C. § 1117(a), is identical to section 285: “The court in excep tional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117. Yet, in applying that identical language, no other circuit court requires both subjective bad faith and objective baseless ness

. See

, e.g ., Tamko Roofing Prods., Inc. v. Ideal Roofing Co ., 282 F.3d 23, 31

– 32 (1st Cir. 2002) (“[A] finding of bad faith or fraud is not a necessary precondition [ to find a case exceptional ].” ); Securacomm Consulting, Inc. v. Securacom, Inc

., 224 F.3d 273, 280

– 82 (3d Cir. 2000) ; Retail Servs. v. Freebies Publ’g , 364, F.3d 535, 550 (4th Cir. 2004); Hartman v. Hallmark Cards, Inc ., 833 F.2d 117, 124 (8th Cir. 1987) (“An exceptional case is one

. . . that ‘was groundless, unreasonable, vexatious, or was pursued in bad faith.’”); Secalt S.A. v. Wuxi Shenxi Constr. Mach. Co ., 668 F.3d 677, 687 (9th Cir. 2012); Reader’s Digest Ass’n, Inc. v. Conservative Digest, Inc ., 821 F.2d 800, 808

– 09 (D.C. Cir. 1987) (“[S]omething less than ‘bad faith [ ]’ suffices to mark a case as ‘exceptional’

. . . .”).
Thus, in this setting, this court should have remained true to its original reading of 35 U.S.C. § 285. Eltech , 903 F.2d at 810

– 11

. This original standard aligns well with the language of the statute, the legislative intent in adopting this language

, this court’s precedent, Supreme Court precedent, and decisions from other circuit courts of

ap peals. This original standard also properly empowers district courts, the entities best situated to recognize and address litigation excesses and misconduct, to supply a fee reversal remedy.