Opinion ID: 208638
Heading Depth: 2
Heading Rank: 5

Heading: Attorney Fees and Sanction

Text: Medtronic challenges the district court's imposition of $425,375 in attorney fees under 35 U.S.C. § 285 and a further $10 million sanction under the court's inherent authority, based on what the court perceived to be Medtronic's litigation misconduct. Where a district court finds a case exceptional under 35 U.S.C. § 285, this court reviews the underlying factual findings for clear error and legal conclusions without deference. Once the district court has found a case to be exceptional, we review any award of attorney fees for an abuse of discretion. Frazier v. Roessel Cine Photo Tech, Inc., 417 F.3d 1230, 1234 (Fed.Cir.2005) (citing Rambus Inc. v. Infineon Tech. Ag, 318 F.3d 1081, 1088 (Fed.Cir.2003)). A court's exercise of its inherent powers is reviewed for an abuse of discretion. Pickholtz v. Rainbow Tech., Inc., 284 F.3d 1365, 1376 (Fed.Cir. 2002). The district court found that Medtronic fail[ed] to accept the claim construction governing this case and that its infringement defense appeared to have been wholly based on an attempt to obscure, evade, or minimize the Federal Circuit's construction of the patent-in-suit. Sanctions Order, 534 F.Supp.2d at 225. Specifically, in the prior appeal, we construed the term pressed against the hollow spherically-shaped portion to be literally met whenever the screw head presses against all or any part of that portion including the edge. DePuy I, 469 F.3d at 1015. At trial, Medtronic did not dispute that the accused Vertex® model literally meets this limitation, given that the screw head presses against ... the edge of the conically-shaped portion. Instead, Medtronic attempted to invoke the so-called reverse doctrine of equivalents as an infringement defense against this particular claim limitation, arguing that a screw head presses against a conically-shaped portion in a substantially different way than it does against a spherically-shaped portionvia an interference fit rather than a mating fit. J.A. 5334-35. We have explained that [t]he reverse doctrine of equivalents is an equitable doctrine designed `to prevent unwarranted extension of the claims beyond a fair scope of the patentee's invention.' Roche Palo Alto LLC v. Apotex, Inc., 531 F.3d 1372, 1377 (Fed.Cir.2008) (quoting Scripps Clinic & Research Found. v. Genentech, Inc., 927 F.2d 1565, 1581 (Fed.Cir.1991)). According to the Supreme Court: [W]here a device is so far changed in principle from a patented article that it performs the same or similar function in a substantially different way, but nevertheless falls within the literal words of the claim, the [reverse] doctrine of equivalents may be used to restrict the claim and defeat the patentee's action for infringement. Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 608-09, 70 S.Ct. 854, 94 L.Ed. 1097 (1950) (emphasis added). Because the reverse doctrine of equivalents requires a fundamental change in the basic principle by which the device operates, the doctrine is rarely invoked and virtually never sustained. See Roche, 531 F.3d at 1378 ([T]his court has never affirmed a finding of non-infringement under the reverse doctrine of equivalents.); Leesona Corp. v. United States, 208 Ct.Cl. 871, 530 F.2d 896, 906 (1976) (predecessor court finding no infringement despite the fact that the accused structure, in a very loose sense, could be said to fall within the literal words of the claim (emphasis added)). In this case, the district court faulted Medtronic and its experts for arguing that the pressed against limitation of the patented device operates using mating surfaces between the screw head and the receiver member, which ... renders it substantially different from the accused products (which have non-mating surfaces that lock the screw by means of an interference fit). Sanctions Order, 534 F.Supp.2d at 225-26. In the district court's view, Medtronic's argument flouted the governing claim construction as set forth by the Federal Circuit and threatened to mislead and confuse the jury. Id. at 226, 227. The basis for the district court's conclusion that Medtronic's argument flouted the governing claim construction is revealed in a separate post-trial order, issued several weeks before the sanctions order. In the earlier order, the district court stated that the [reverse] doctrine [of equivalents] (which requires literal infringement) does not apply to the accused Vertex devices themselves because they do not literally infringe the '678 patent, emphasizing the fact that the case had been remanded by the Federal Circuit for a determination of infringement under the doctrine of equivalents only. Feb. 6 Order, 533 F.Supp.2d at 245-46 ([T]he reverse doctrine of equivalents was simply inapplicable in this case and served only to confuse the jury.). However, the district court's understanding of the circumstances in which the reverse doctrine of equivalents may be asserted is incorrect. The reverse doctrine of equivalents, like the doctrine of equivalents, is applied to individual limitations of a claim. See Warner-Jenkinson, 520 U.S. at 29, 117 S.Ct. 1040 ([T]he doctrine of equivalents must be applied to individual elements of the claim, not to the invention as a whole.); Leesona, 530 F.2d at 906 (applying reverse doctrine of equivalents to porous self-sustaining metal layer limitation). Thus, the fact that DePuy argued the spherically-shaped portion limitation under a doctrine of equivalents theory of infringement did not prevent Medtronic from raising the reverse doctrine of equivalents against the literal scope of a different limitation, namely, the pressed against limitation. As for the argument that the reverse doctrine of equivalents threatened to mislead and confuse the jury, the unusual nature of the reverse doctrine of equivalents is not itself a reason to sanction a party for invoking it. The Supreme Court has recognized it to be a viable defense, even if it is rarely asserted. Apart from Medtronic's mere assertion of the reverse doctrine of equivalents, there was no finding in this case that Medtronic litigated the defense in bad faith. Although the district court ultimately concluded that the underlying substance of Medtronic's defense lacks merit, Sanctions Order, 534 F.Supp.2d at 226, there is no indication, much less a finding, that Medtronic's arguments were baseless, frivolous, or intended primarily to mislead the jury. Although the defense ultimately failed, Medtronic should not have been sanctioned for merely raising it, absent a finding of vexatious or unjustified litigation, frivolous suit, or other type of bad faith. Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., 549 F.3d 1381, 1387 (Fed.Cir.2008); see Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547, 1552 (Fed.Cir.1989) (stating that a purpose of 35 U.S.C. § 285 is to prevent `gross injustice' when the accused infringer has litigated in bad faith). Because the district court's exceptionality finding was based on Medtronic's mere assertion of the reverse doctrine of equivalents, rather than the way in which Medtronic litigated it, the finding of exceptionality in this case was erroneous. The district court's imposition of $425,375 in attorney fees is, therefore, reversed. We also reverse the court's sua sponte imposition under its inherent authority of a $10 million sanction, which was premised on the same alleged misconduct and cannot be sustained.