Attorney Fees Awarded Following Consent Decree

Cartner v. Alamo Group (Fed. Cir. 2014)

Note – this decision by the Federal Circuit was released prior to the Supreme Court’s recent decisions in Octane Fitness and Highmark.

Cartner sued the road-maintenance equipment maker Alamo back in 2007 alleging infringement of his U.S. Patent No. 5,197,284. The patent covers a particular design for a hydraulic motor deceleration system. In 2010, Cartner gave-up its case and agreed to a consent decree of non-infringement. Apparently, however, the agreement between the parties said nothing about attorney fees – and Alamo subsequently asked the court to award its reasonable fees and costs under 35 U.S.C. § 285.

Section 285 gives district courts power to “award reasonable attorney fees to the prevailing party”, but only in “exceptional cases.” Although the Supreme Court recently decided two cases in this area, the fundamental law discussed above is unchanged. The change proffered by the Supreme Court is to shift power from the Federal Circuit to the District Courts who now can make the exceptional case determination and resulting fee award according to their own discretion.

Prevailing party?: You might ask – If there is a settlement, how can there be a prevailing party? Here, the problem is that there is not only a settlement, but a “consent decree” – i.e., a judgment on the merits (non-infringement) by the court that results in Cartner losing the case.

Here, the exceptional case finding came into place based upon a frivolous infringement argument made by the plaintiff — in particular, the district court found that the accused device was extremely close to the prior art design that had been cited and discussed in the patent application’s prosecution history.  In reviewing the decision, the Federal Circuit agreed:

The district court correctly concluded it was objectively unreasonable for Cartner to argue the Tiger mower could meet the “without a loss of fluid” limitation when that limitation was added to distinguish a system that was, in relevant part, the same as the Tiger mower.

The district court also found that the plaintiff had committed litigation misconduct by failing to be forthright in its interrogatory responses and by failing to affirmatively update those responses as the case developed. 

Holding: $350,000 attorney fee award stands.

Lessons:

  1. Moving forward, settlement agreements should include an agreement on fee shifting that can also be part of the consent decree.  Something like: “Each party waives the right to make a claim against the other for such costs, attorney fees or any other expenses associated with the matters being settled here.”
  2. Under the new regime of discretion-in-granting-attorney-fees, a losing party who has applied a hardball litigation strategy may be at risk.

3 thoughts on “Attorney Fees Awarded Following Consent Decree

  1. “Moving forward, settlement agreements should include an agreement on fee shifting that can also be part of the consent decree. ”

    How about moving backward! We learned how to avoid this trick in law school. It could be avoided by addressing it in the settlement/consent decree, or by dismissing with prejudice as agreed (without also entering into an unnecessary consent decree).

    Did the consent decree provide some benefit to the plaintiff?

  2. Dennis,

    I think this is something that any half-way decent attorney already knew. There’s nothing special here. Such language is almost always in dismissals, unless the defendant won’t agree.

    As an example, once a plaintiff realizes that it cannot prevail, it is fairly common to stipulate to non-infringement or enter into a consent judgment (or get to a final judgment through some other similar means, even if using a different name). Typically, this happens after the plaintiff loses at the Markman stage, although this case looks more complicated.

    I’m guessing, but don’t know for sure, that the defendant here wouldn’t have accepted a judgment that said each side pays its own attorney fees. Otherwise, this would have been a Rule 41 dismissal instead of final / consent judgment. If a plaintiff has no way of proving infringement (often after a Markman ruling) it can’t force the defendant to accept such a concession either. And the plaintiff can’t refuse to stipulate to non-infringement unless the defendant so agrees, because then the plaintiff is treading on Rule 11 and section 1927 grounds (not to mention section 285) if it no longer believes there is infringement.

    If you do some research, I think you’ll find some other cases along the same lines. Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314 (Fed. Cir. 2011), comes to mind. Although in many of the cases, after stipulating to non-infringement, the plaintiff takes something up on appeal (again, normally claim construction) that would result in the stipulation being ineffective if the district court is reversed.

  3. itigation misconduct by failing to be forthright in its interrogatory responses and by failing to affirmatively update those responses as the case developed.

    Legal advocacy, even on modern social media mechanisms, really should reflect this principal of intellectual honesty.

    While it is true that these modern mechanisms generally lack an enforcement mechanism, those of us that are actual attorneys should recognize the fact that we do not get to turn off our ethical duties even while choosing to post anonymously or pseudonymously when we are advocating and know that we are attempting to influence the law, the perceptions of the law, and attempts to change the law.

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