Source: https://www.mintz.com/insights-center/viewpoints/2231/2017-06-pumping-exceptional-cases-under-octane-fitness-standard
Timestamp: 2019-04-26 00:04:29+00:00

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A flurry of activity from various courts this past week on “exceptional cases” under Section 285 of the Patent Act provided notable guidance for practitioners and patent owners, with a particular emphasis on the motivation and conduct of the litigants. We provide a short synopsis of these cases.
By way of context, in 2014, the Supreme Court in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), instructed courts to apply a totality of the circumstances test when evaluating whether a case is “exceptional” under 35 U.S.C. § 285. If a case is found to be exceptional within the meaning of the statute, monetary sanctions and fee-shifting may be imposed. This totality of the circumstances analysis was a substantial departure from the previous Federal Circuit tests, which were uniformly viewed as more rigid. Some of the factors the Supreme Court suggested district courts could consider included “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Our previous discussion of exceptional cases under Section 285 can be found here.
Writing for the unanimous Federal Circuit panel, Judge Newman dismissed each of these points and reversed the lower court’s decision as an abuse of discretion. As to the plaintiff’s pre-filing investigation, the Federal Circuit found no evidence that the examined Swiss products were different than the accused Belgian products. Moreover, the plaintiff survived summary judgment motions and a Daubert challenge on these products. According to the Federal Circuit, this demonstrated that the plaintiff’s claims were objectively reasonable.
Although the plaintiff had filed “over fifty other lawsuits” in the same district on the same patent, the court rejected the defendant’s assertion that the plaintiff did not intend to test the merits of its claim and was merely seeking to obtain nuisance-value settlements.
The Federal Circuit reversed the lower court for several reasons.
Second, the district court improperly relied on affidavits from both the plaintiff’s counsel and its founder in an attempt to show reasonable pre-suit investigation, which purported to establish that the plaintiff had a “good faith” belief the patent was valid, failed to provide any analysis of how the patent was valid in view of the defendant’s Rule 11 allegation. The Federal Circuit found these affidavits to be “conclusory and unsupported” and thus entitled to no evidentiary value, and ultimately the plaintiff was “willfully ignorant” of the asserted prior art.
Third, the district court “misjudged” plaintiff’s conduct in other litigations. The district court had improperly relied on the same affidavits from plaintiff’s counsel and its founder in attempting to demonstrate reasonable conduct. The Federal Circuit, finding no other evidence in the record to show any reasonable conduct by the plaintiff and found plaintiff’s litigation conduct, including its pattern of filing suits, to be vexatious. The court reversed and remanded for a calculation of attorneys’ fees.
Rothschild Connected Devices Innovations LLC v. Guardian Prot. Servs. LLC, No. 16-2521 (Fed. Cir. June 5, 2017).
The District of Delaware also weighed in with an opinion regarding section 285 on June First. In SRI International v. Cisco, the court found that the defendant’s conduct during litigation, along with the jury’s finding of willful infringement, warranted a conclusion of exceptionality under Section 285. The jury determined the defendant Cisco infringed the patents-in-suit, awarded damages in excess of $23 million, and made a finding of willful infringement. The plaintiff SRI then moved for attorneys’ fees under Section 285.
The defendant maintained its reliance on 19 invalidity theories until the eve of trial but at trial only presented a single defense of anticipation and a single claim of invalidity under § 112.
The single prior art reference the defendant advanced at trial had twice been considered by the PTO and by the district court in a prior litigation.
For these reasons, and because the jury found willful infringement, the court found the case exceptional and awarded attorneys’ fees and costs of approximately $8 million.
The case is: SRI Int'l, Inc. v. Cisco Sys., No. 13-1534 (D. Del. June 1, 2017).
Finally, on June 7, 2017, Judge Manuel Real in the Central District of California awarded over $700,000 in attorneys’ fees under Section 285 after a multi-year dispute on the issue. The district court originally found the case was exceptional in August 2015 after a parallel reexamination proceeding canceled all of the claims in the patent-at-issue and judgment was entered against the plaintiff. The court granted an award of the full amount of attorneys’ fees requested, which was later reversed and remanded by the Federal Circuit.
The claim construction positions taken by the plaintiff during the parallel reexamination proceeding were “objectively weak.” In particular, the court found plaintiff’s positions were “plainly contradicted” on the face of the patent.
The plaintiff also attempted to use a privileged email chain inadvertently sent from defendant’s counsel to plaintiff’s counsel. Plaintiff did not notify defendant of the inadvertent production when it occurred. Instead, plaintiff used it as evidence in opposition to defendant’s motion for attorneys’ fees, which is when defendant first learned of the inadvertent production.
The case is: Large Audience Display Systems, LLC v. Tennman Productions, LLC, et. al., No. 2-11-cv-03398 (C.D. Cal. June 2, 2017).
General guidance may be difficult to derive from these cases, as Section 285 analysis is necessarily fact-intensive and case-specific. However, it is clear that, in applying Octane Fitness, courts are properly scrutinizing the entire factual record. Notably, this includes looking beyond the party’s conduct in the immediate litigation. Parties looking to recover attorneys’ fees under Section 285 should look for any facts that make the case “unusual” enough as to warrant fee-shifting. On the other hand, patent holders should ensure that their litigation conduct in all matters is above-board.

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