Prevailing Defendant’s Exceptional Case Restitution Limited to “Reasonable Attorney Fees”

By Dennis Crouch

In Lumen View v. FindTheBest.com, the Federal Circuit has affirmed the the district court’s “exceptional case” finding under 35 U.S.C. §285, but has vacated the award as unjustifiably large. In particular, the district court erred by doubling the fee award as a mechanism designed to “deter baseless litigation.”

In the underlying lawsuit, Lumen sued FTB for infringing its U.S. Patent 8,069,073 covering a computer method for matching parties to a potential financial transaction based upon “multilateral analyses” of “preference data.”   On the pleadings, S.D.N.Y. Senior Judge Cote dismissed the case  writing that “[t]here is no inventive idea here. . . . Nothing in the ‘073 patent evinces an inventive idea beyond the idea of the patent holder to be the first to patent the computerization of a fundamental process that has occurred all through human history.”  In the fee award judgment, the district court noted that, the accused infringers clearly did not infringe even under the patentee’s proposed claim construction.  According to the district court “the most basic” investigation prior to filing the lawsuit would have made the non-infringement clear – and, in fact, the non infringement had been particularly explained in a pre-filing letter from the defendant.

In finding the case “exceptional”, the district court primarily focused on the baselessness of the patentee’s legal claim, but also on its conclusion that the patente was seeking a “nuisance settlement” via a “predatory strategy.”

On appeal, the Federal Circuit affirmed the exceptional case finding (no abuse of discretion” — noting that “[t]th allegations of infringement were ill-supported, particularly in light of the parties’ communications.”

The double award: Once a case is deemed “exceptional,” section 285 permits a district court judge to award “reasonable attorney fees” to the prevailing party.  “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”  Here, the defendant showed $148,592 in reasonable fees and the district court doubled that figure ($297,184) based upon its determination that the patentee needed more deterrence.

On appeal, the Federal Circuit first agreed that the award calculation is within the discretion of the district court judge.  However, most courts follow the approach of multiplying hours worked (if reasonable) by a reasonable hourly fee — with that calculation as the “lodestar”, a court then makes adjustments to ensure the award is reasonable.

Here, the district court followed that approach and then doubled the results for punishment/deterrence.  The appellate panel found that deterrence is not an appropriate justification for increasing a fee award under Section 285.

Although deterrence may be a consideration when determining whether to award attorney fees, it is not an appropriate consideration in determining the amount of a reasonable attorney fee, which is principally based on the lodestar method. Unlike sanctions that are explicitly tied to an amount that suffices to deter repetition of conduct, see Fed. R. Civ. P. 11(c)(4), § 285 only specifies “reasonable attorney fees” once an exceptional case is found. And the lodestar method, yielding a presumptively reasonable attorney fee amount.

As noted above, the lodestar approach is a preferred methodology for fee calculation, but district courts are not limited to that approach.  On remand, the district court has the potential maintaining its same fee award – but it would need to construct a new explanation of how the doubling would be a reasonable fee.

The Federal Circuit did not award fees or costs to either party.

 

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

19 thoughts on “Prevailing Defendant’s Exceptional Case Restitution Limited to “Reasonable Attorney Fees”

  1. In a just system, Lumen View would receive the corporate death penalty and the people running the business would be personally responsible for reimbursing the targets of this ignoble scam.

    But if all we have are some Rule 11 sanctions, then that will have to do.

    1. Having gone through the “Rule 11” sanction era, this is not a place that professional attorneys want to go through again. Once, every motion was accompanied with a Rule 11 sanction request. It was nasty and not very productive.

      1. Richard,

        Malcolm does not believe that that “scourge” was “real.”

        I think that this “all attorneys are 3v1L” field of rye thing he has is just a sign of his own mind.

  2. Interesting isn’t it how seeking to get paid for somebody else’s use of what you own is now subject to this kind of retribution? While it may be that the patentee erred in construing his/her/its patent to cover the defendant’s product, the idea that you should be castigated for demanding that you be paid and then seeking the court’s help when stonewalled is quite troubling.

    1. Interesting isn’t it how seeking to get paid for somebody else’s use of what you own is now subject to this kind of retribution

      ROTFLMAO

      The software patent lovers never cease to amuse. Defending the lowest form of attorney that ever walked the earth? Par for the course.

      Keep up the great work, svg.

      1. Not to here defend “software” patents, and certainly not “business method” patents (which I refuse to even file) I believe the change from patent attorneys litigating patent infringement claims to “intellectual property” litigators was a mistake.

        Part of the problem is that many CAFC judges, with all due respect, are not even technically inclined. How many have actually filed and prosecuted a patent application?

        The give and take of patent prosecution requires a lot of skill earned from years of practice. To leave it to a junior associate invites the very quicksand in which we are now immersed.

        For example, in SF it is popular to install patios with natural irregular stone slabs. The skilled craftsman can arrange them like the stone wall builders of the past. But if a program was devised to photo each slab, and come up with one or more of the best arrangements, why shouldn’t that merit a patent?

        1. I believe the change from patent attorneys litigating patent infringement claims to “intellectual property” litigators was a mistake.

          For what it’s worth, Richard, I concur.

  3. The part about non-infringement is fair. The ridiculous nonsense from the judge about 101/103 borders on lawlessness from the judge. How about the judges apply the law 102/103/112?

    We have definitely moved into a post law society where the big corporations are controlling the government. (Funny the way the actors in this play don’t even see their parts.)

    1. What is so odd too is how each of these judges is a super skilled person in the art of the patent –or at least according to the judge. Let’s all not forget either that what the judges do is input information, process information, and output an opinion, which we all know is abstract and cannot possible be a real machine.

      1. NWPA: what the judges do is input information, process information, and output an opinion, which we all know is abstract

        It’s always good for a laugh when the truth leaks out.

        Of course, when a “genius” business major from Harvard puts the word “do it on a computer” in front of that abstraction, it’s, like, tooooooooootally not abstract anymore.

        1. That is the problem with this blog. It supports paid bloggers harassing anyone that isn’t in line with Google’s patent and trade secret agenda.

          (And the content of the paid blogger’s posts is little better than being spat during recess.)

          1. A few days away from the Decade mark for one certain blight…

            A decade of decadence – and the good professor absent of any real application of “rules” (whatever those are…)

          2. “[T]his blog…supports paid bloggers.” Really? How does one sign up to be a “paid” commentor? Paid to bs? I want that job.

    2. “The part about non-infringement is fair.”

      I was thinking this too. Conceivably an accusation of infringement can indeed be frivolous. But since validity is presumed, it would seem that by definition it can never be a frivolous contention (even for a patent that truly is invalid, and rightly judged so). I realize some judges have suggested that the POV should not apply to patents for which the caselaw has dramatically changed regarding their validity – but is really there any legal basis for that?

      1. The court cannot re-write the law and remove the presumption of validity.

        They cannot do this directly.
        They cannot do this effectively – that is, have their decisions such that effectively that presumption is removed (even if this merely “appears” to be the “feelings” of certain Supreme Court Justices in their off the cuff remarks during oral arguments).
        That is just NOT how the U.S. legal system works.
        Ned Heller posted a link awhile back to an article written by Judge O’Malley which criticized amici for wanting the court to do things that the court was not supposed to do – the very thing here concerning courts re-writing statutory law.

        For all the bluster coming from the anti’s, do you ever notice that the distinction between common law power and statutory law power nver seems to sink in with their advocacy?

        Supposedly, these are attorneys (at least some of them say they are attorneys), who KNOW that their ethical responsibility when advocating is limited, and that they cannot mis-characterize the law.

        Sure, they can advocate for changes in the law. And as long as they are clear that it is changes, then we get to the proper channels of changes, but sadly this “ecosystem” seems to “thrive” with not only improper channels, but much advocacy here wants to attempt to treat the desired changes as if those changes were already law.

  4. The really interesting part of this decision was it’s specific broad hint that on remand the D.C. judge could award sanctions under FRCP 11 instead.

  5. $148,592 – OUCH! And well deserved too.*

    * I am not making a generic statement about patent owners, but if the fact findings are true (even absent the nuisance suit issues, i.e., patently clear non-infringement position and still file? –> pun intended).

    Chances of recovery?

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