## United States Court of Appeals for the Federal Circuit

2009-1045 WEDGETAIL, LTD. and BOBBY D. KING, Plaintiffs-Appellees,

v. HUDDLESTON DELUXE, INC., Defendant-Appellant.

Andy Tindel , Provost Umphrey Law Firm, LLP, of Tyler, Texas, argued for plaintiffs-appellees. Marc M. Gorelnik , Townsend and Townsend and Cr ew LLP, of San Francisco, California, argued for defendant-appellant. Wi th him on the brief were Nancy L. Tompkins , and Megan M. Chung

. Appealed from: United States District C ourt for the Eastern District of Texas Judge David Folsom

## United States Court of Appeals for the Federal Circuit

2009-1045

WEDGETAIL, LTD. and BOBBY D. KING, Plaintiffs-Appellees, v. HUDDLESTON DELUXE, INC., Defendant-Appellant.

Appeal from the United States District Court for the East ern District of Texas in case no. 07-CV-0202, Judge David Folsom.

______________________ DECIDED: August 12, 2009

______________________ Before SCHALL, GAJARSA, and DYK, Circuit Judges

. GAJARSA, Circuit Judge

. Huddleston Deluxe, Inc. appeal s from an order of the U.S. District Court for the Eastern District of Texas t hat dismissed with prejudice W edgetail Ltd.’s claims of infringement and Huddleston’s declaratory judgment counterclaims, and established that each party was to bear its own costs and legal fees. Specifically, Huddleston appeals the district court’s decision not to aw ard attorney fees under 35 U.S.C. § 285.Because we find that the district court’s dec ision was not an abuse of discretion and, at most, amounts to harmless error, we affirm. BACKGROUND Wedgetail is the assignee of U.S. Patent No. 6,857,220 B2, which is directed to “flexible fishing lure tails and appendages”—i.e., fishing lu res that simulate swimming motions when dragged through water. Wedget ail filed suit against Huddleston for infringement of the ’220 patent; Huddleston, in turn, filed counterclaims of noninfringement and invalidity. After the district court held a claim construction hearing and issued its claim construction order, Wedgetail determined “that it may be difficult to establish infringement under certain of the Court’s constr uctions.” Wedgetail thus filed a motion to dismiss all claims with pr ejudice, in which it granted Huddleston a covenant not to sue. Huddleston opposed solely on the gr ound that Wedgetail’s proposed order of dismissal would deprive Huddle ston of the opportunity to seek attorney fees as the prevailing party. The district court granted Wedgetail’s moti on, dismissed all cl aims with prejudice, and ordered “that each party s hall bear their own costs and attorney’s fees.” Huddleston immediately appealed to this court. We have jurisdiction over the appeal of the district court’s final judgm ent under 28 U.S.C. § 1295(a)(1). DISCUSSION 35 U.S.C. § 285 provides t hat “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party .” This provision is an exception to the so-called “American Rule”:

2009-1045 2Under the American Rule each party bears its own attorney fees and expenses. As an except ion to that rule, courts have exercised their inherent equitable power to make whole a party injured by an egregious abuse of the judicial proc ess. . . . Congress enact ed Section 285 to codify in patent cases the “bad faith” equita ble exception to the American Rule. . . . Recognizing the good faith/bad fa ith distinction, Congress expressly limited such awards to “exceptional cases.” Sun-Tek Indus., Inc. v. Kennedy Sky Lites, Inc. , 929 F.2d 676, 678 (Fed. Cir. 1991) (internal quotation marks and ci tations omitted). “The determination of whether a case is exceptional and, thus, eligib le for an award of attorney f ees under § 285 is a two-step process. First, the district court must determine whether a ca se is exceptional, a factual determination reviewed for clear error. Afte r determining that a case is exceptional, the district court must determine whether attor ney fees are appropriate, a determination that we review for an abuse of discretion. A di strict court abuses it s discretion when its decision is based on clearly erroneous fi ndings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrar y or fanciful.” Cybor Corp. v. FAS Techs., Inc. , 138 F.3d 1448, 1460 (Fed. Cir. 1998) ( en banc) (citations omitted). “[T]he exceptional nature of the case must be established by clear and convincing evidence.” Cambridge Prods., Ltd. v. Penn Nutrients, Inc. , 962 F.2d 1048, 1050 (Fed. Cir. 1992). As this court has cons istently found, however, only a limited universe of circumstances warrant a findi ng of exceptionality in a patent case: “inequitable conduct before the PTO; litigati on misconduct; vexatious, unjustified, and otherwise bad faith litigati on; a frivolous suit or willful infringement.” Epcon Gas Sys., Inc. v. Bauer Compressors, Inc. , 279 F.3d 1022, 1034 (Fed. Cir.

2009-1045 32002); see also, e.g. , Brasseler, U.S.A. I, L.P ., v. Stryker Sales Corp. , 267 F.3d 1370, 1380 (Fed. Cir. 2001) (same); id. (“Exceptional cases are no rmally those involving bad faith litigation or those involving inequitabl e conduct by the patentee in procuring the patent.”); Hoffman-La Roche Inc. v. Invamed Inc. , 213 F.3d 1359, 1365 (Fed. Cir. 2000) (“Among the types of conduct which can form a basis for finding a case exceptional are willful infringement, inequitabl e conduct before the P.T.O., misconduct during litigation, vexatious or unjustified litigati on, and frivolous suit. Such conduct must be supported by clear and convincing evidence.” (quoting Beckman Instruments, In c., v. LKB Produkter AB , 892 F.2d 1547, 1551 (Fed. Cir. 1989))); Multiform Desiccants, Inc. v. Medzam, Ltd. , 133 F.3d 1473, 1481–82 (Fed. Cir. 1998) (“Findings of exceptional case have been based on a variety of factors; for example, willful or intent ional infringement, inequitable conduct before the Patent and Trademark Office, vexatious or unjustified litigation, or other misfeasant behavior.”); Mahurkar v. C.R. Bard, Inc. , 79 F.3d 1572, 1579 (Fed. Cir. 1996) (“Bad faith litigation, willful infringement, or ine quitable conduct are among the circumstances which may make a case exceptional.”); Cambridge Prods. , 962 F.2d at 1050–51 (“In the case of awards to prevailing accused infri ngers . . . ‘exceptional cases’ are normally those of bad faith litigation or those involvi ng fraud or inequitable conduct by the patentee in procuring the patent.”); Bayer Aktiengesellschaft v. Duphar Int’l Research B.V. , 738 F.2d 1237, 1242 (Fed. Cir. 1984) (“In awarding attorney fees to a prevailing accused infringer, such exceptional circumstances include, inter alia, inequitable conduct during prosecution of a patent, misconduct during litigation, vexatious or unjustified litigation, or a frivolous suit.”).

2009-1045 4“[M]indful of the limited ci rcumstances in which an awar d of attorney fees is appropriate,” Forest Labs., Inc. v. Abbott Labs. , 339 F.3d 1324, 1329 (Fed. Cir. 2003), this court has rejected an “expansive readi ng of § 285,” which would permit findings of exceptionality in circumstances other than thos e listed above, id. , and (absent litigation misconduct or inequitable conduct before the PT O) has permitted the award of attorney fees to a prevailing accused infringer “ only if both (1) the liti gation is brought in subjective bad faith, and (2) the li tigation is objectively baseless,” Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc. , 393 F.3d 1378, 1381 (Fed. Cir. 2005) (emphasis added). Because of the high level of deference owed to district courts on this issue and the limited circumstances that could qualify as exceptional, th is court has not imposed a blanket requirement that a dist rict court provide its reasoni ng in attorney fee cases. See, e.g. , Serio-US Indus., Inc. v. Plas tic Recovery Techs. Corp. , 459 F.3d 1311, 1322 (Fed. Cir. 2006) (upholding denial of fees despite no st atement of reasons, because “the record as a whole in this case adequat ely supports the denial of attorney fees”); Carroll Touch, Inc. v. Electro Mech. Sys., Inc. , 15 F.3d 1573, 1584 (Fed. Cir. 1993) (upholding denial of fees despite no statement of reasons, because record “provide[s] a sufficient basis upon which we c an review the exercise of the trial court’s discretion”). Instead, we have held only that a statement of the district court’s reasoning is generally necessary to enable review when an attorney fees motion is granted, see, e.g. , Innovation Tech., Inc. v. Splash! Med. Devices, LLC , 528 F.3d 1348, 1350–51 (Fed. Cir. 2008); Stephens v. Tech Int’l, Inc. , 393 F.3d 1269, 1276 (Fed. Cir. 2004) (reversing award of fees because a “district court must provide reasoning for its determination that a case is exceptional for us to provide meaningful review”), or when attorney fees are

2009-1045 5denied despite the presence of one or mo re of the circumstances listed above, see, e.g. , Superior Fireplace Co. v. Majestic Prods. Co. , 270 F.3d 1358, 1377 (Fed. Cir. 2002) (remanding unexplained deni al of fees where record reflected “serious and open questions” as to whether plaintiff “eve r had a good faith belief in its claim”); Tate Access Floors, Inc. v. Maxcess Techs., Inc. , 222 F.3d 958, 972 (Fed. Cir. 2000) (“While a finding of willful infringement does not mandate that dam ages be increased or that attorneys fees be awarded, after an express findi ng of willful infringement, a trial court should provide reasons for not increasing a damages award or for not finding a case exceptional for the purpose of awarding attorneys fees.” (internal quotation marks and citations omitted)); U.S. Envtl. Prods. Inc. v. Westall , 911 F.2d 713, 718 (Fed. Cir. 1990) (“Under . . . circumstances . . . where the court did find misconduct in determining substantive issues, we conclude that we require the benefit of the court’s analysis . . . in order to review the court’s ruling.”). As discussed below, Huddleston directs us to nothing in the record here that could compel a finding of exceptionality or would otherwise suggest a need for the district court to provide its reasoning. Accordingly, the lack of detailed analysis by the district cour t in this case does not warrant reversal. Huddleston argues that the di strict court committed reversible error by failing to entertain a motion for attorney fees pursuant to § 285. We disagree. As this court stated in IPXL Holdings, L.L.C. v. Amazon.com, Inc. , “[n]o provision in section 285 exempts requests for attorney fees thereunder from compliance with Rule 54(d)(2)(B).” 430 F.3d 1377, 1386 (Fed. Cir. 2005). Rule 54(d )(2)(B), in turn, states: Unless otherwise provided by statute or order of the court, the motion [for attorney fees] must be filed no late r than 14 days after entry of judgment; must specify the judgment and the statute, rule, or other grounds entitling

2009-1045 6the moving party to the award; and mu st state the amount or provide a fair estimate of the amount sought. Fed. R. Civ. P. 54(d)(2)(B). Despite these requirements, Huddleston did not file a motion for attorney fees with the district court, but instead merely requested that the district court set a briefing sc hedule for such a motion. Nor did Huddleston state, even in its opposition papers, the amo unt of attorney fees sought. Accordingly, Huddleston’s claim would appear to fail procedurally. See IPXL Holdings , 430 F.3d at 1386 (reversing award of attorney fees where motion for fees was not timely filed with the district court). Huddleston insists, however, that the filing of a separate motion for attorney fees with the district court would have been futile in light of t he district court’s order. It thus urges this court to treat the di strict court’s order either as a prejudicial deprivation of Huddleston’s right to file a motion or as an erroneous determination that fees are not owed. Because there is substantial overl ap among the facts relevant to each of these arguments, we consid er them together. The Supreme Court has summarized the doctrine of harmless error in the following manner: In ordinary civil appeals, . . . the appellant will point to rulings by the trial judge that the appellant claims are erroneous, . . . . Often the circumstances of the case will make clear to the appella te judge that the ruling, if erroneous, was harmful and noth ing further need be said. But, if not, then the party seeking reversal normally must explain why the erroneous ruling caused harm. Shinseki v. Sanders , 129 S.Ct. 1696, 1706 (2009). The burden similarly rests on the appellant to prove that the dist rict court clearly erred in failing to find a case exceptional or abused its discretion in failing to award attorney fees. See Carroll Touch , 15 F.3d at 1584.

2009-1045 7Here, Huddleston seeks attorney fees af ter Wedgetail voluntarily dismissed its claim with prejudice and granted a covenant not to sue. The record on appeal presents neither any apparent misconduct nor any judicial findings of misconduct on Wedgetail’s part. To the contrary, the reco rd reflects that Wedgetail immediately sought dismissal of its infringement claims upon de termining that it could not prevail under the district court’s claim construction. Huddleston, m eanwhile, has not provided this court with any reason to believe that it might successfully obtain an attorney fee award if it were afforded the opportunity to present evidence to the district cour t on remand. To the district court, Huddleston merely stated: “H uddleston believes this is one of those exceptional and rare cases.” And to this court, Huddleston has offered a vague assertion that Wedgetail’s pre–claim construction infringement contentions were deficient. But it has provided no s upport whatsoever for its claims. Simply put, Huddleston has failed to demons trate either that the district court clearly erred in failing to find this case ex ceptional or that Hu ddleston was harmed by the district court’s failure to entertain a motion for attorney fees. A remand is, therefore, unwarranted. See Consol. Aluminum Corp. v. Foseco Int’l Ltd. , 910 F.2d 804, 814 (Fed. Cir. 1990) (“A remand, with its accompanyin g expenditure of additional judicial resources in a case thought to be completed, is a step not lightly taken and one that should be limited to cases in which further action must be taken by the district court or in which the appellate court has no way open to it to affirm or reverse the district court's action under review. Though fi ndings on ‘excepti onal case’ and reas ons underlying the discretionary action on fees ar e helpful to an appellate c ourt, remand should not be a matter of rote in every case in which findi ngs and reason are not expressly set forth. An

2009-1045 82009-1045 9 appellate court need not close its eyes to the record where . . . there is a way clearly open to affirm the district court’s action.”); see also Carroll Touch , 15 F.3d at 1584 (“There is no evidence of record that [the plaintiff] pursued it s patent infringement claim without a reasonable belief in its merits. [The prevailing defendant] has thus not shown that the court’s implicit findi ng that this was not an except ional case under section 285 was clearly erroneous or that the court abus ed its discretion in denying its motion for attorney fees.”). CONCLUSION Accordingly, because the district court’s decision, although lacki ng explanation, is supported by the record, “[n]o useful purpose would be se rved by a remand to enable the district court to tell us in express terms what we alre ady know from the record.” Consol. Aluminum , 910 F.2d at 815. We thus affirm the district court’s decision. AFFIRMED COSTS No costs.