Source: https://www.ipwatchdog.com/2018/10/05/federal-circuit-gutride-safier-llp-not-liable-attorneys-fees/id=102047/
Timestamp: 2019-04-22 04:03:11+00:00

Document:
A claim is entirely without color when it lacks any legal or factual basis. Because of the relative paucity of § 101 cases between Alice and AlphaCap’s complaint, the law was unsettled. The Federal Circuit noted that when the applicable law is unsettled, attorneys may not be sanctioned merely for making reasonable arguments for interpreting the law. Further, the court found that Gutride presented a colorable argument that the claims were analogous to those in DDR Holdings, LLC v. Hotels.com L.P., and therefore patent eligible under § 101.
Regarding the second prong, bad faith, the district found bad faith based on the following: (1) Gutride knew that AlphaCap’s patents were not patent eligible after Alicebut initiated the litigation anyway to extract a nuisance settlement; (2) Gutride litigated in the Eastern District of Texas and frivolously opposed transfer to the more convenient Southern District of New York; and (3) Gutride failed to end the case through settlement, dismissal, or a covenant not to sue.
Accordingly, the Federal Circuit reversed the district court’s award of fees under § 1927 against Gutride.
Judge Wallach wrote against the majority, finding the Alice framework to provide sufficient basis that the claims at issue were patent ineligible. More specifically, he found the claims “directed to data organization and use of customizable profiles to facilitate patronage,” which he determined to be abstract ideas. Further, in his view, the claims lacked additional elements to rise to an inventive concept. Therefore, he found Gutride’s lawsuit based on infringement of the asserted claims, entirely without color.
Regarding bad faith, Judge Wallach examined Gutride’sentire course of conduct to determine bad faith. He found that Gutride elected not to settle early in the lawsuit and only made a showing of proper venue in the Eastern District of Texas after discovery.
It may be difficult to establish attorneys acted “unreasonably and vexatiously” under 28 U.S.C. § 1927, thus exposing them to liability for fees and costs, if the dispositive issue in the lawsuit involves an area of unsettled law. Further, under § 1927, attorneys do not necessarily act in bad faith simply because they either do not settle a case or bring the case in a less convenient, but still proper, forum.

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