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.
- 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.”
- Under the new regime of discretion-in-granting-attorney-fees, a losing party who has applied a hardball litigation strategy may be at risk.