Federal Circuit Limits Defendant Attorneys’ Fees Awards for IPR Expenses

by Dennis Crouch

The Federal Circuit’s recent decision in Dragon Intellectual Property LLC v. DISH Network L.L.C. affirms the district court’s grant of attorneys’ fees to the successful defendants, while denying recovery of fees incurred solely in the IPR proceedings and from plaintiff’s counsel.  The case offers important legal conclusions for attorney fees in cases that involve both district court and IPR litigation.

The district court found the case exceptional under § 285 due to the substantive weakness of Dragon’s infringement position, including clear prosecution history disclaimer precluding infringement by the accused products. A key issue on appeal was whether § 285 allows recovery of fees incurred in parallel IPR proceedings. The majority held that when a defendant voluntarily pursues an invalidity challenge through IPR, the fees incurred solely in the IPR are not recoverable. The court distinguished the facts from its prior decision in PPG Industries v. Celanese Polymer, where the defendant’s participation in reissue proceedings was not optional because the plaintiff had initiated them.

The majority also held that § 285 does not permit prevailing defendants to recover fees from plaintiff’s counsel. The statute’s silence on counsel’s liability, in contrast to other statutes and rules explicitly allowing recovery from attorneys, indicated that Congress did not intend § 285 to extend liability to counsel.

However, Judge Bencivengo, sitting by designation at the Federal Circuit, dissented in part, arguing that in exceptional cases based on the complaint being objectively baseless from the start, district courts should have discretion to award defendants all reasonable fees, including those incurred in an IPR that resolved invalidity defenses asserted in response to the baseless complaint. The dissent viewed the IPR as a substitute for the stayed district court litigation on invalidity, rather than a truly parallel proceeding.

While 35 U.S.C. § 285 does not permit holding plaintiff’s counsel jointly and severally liable for attorneys’ fees, other statutes and rules may allow for the recovery of fees from attorneys in certain circumstances.  In this case the court specifically points to two examples:

1. 28 U.S.C. § 1927, which states that “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”
2. Federal Rule of Civil Procedure 11, which “expressly allows the court to impose monetary sanctions on attorneys and law firms, which can include ‘all of the reasonable attorney’s fees and other expenses’ incurred as a result of sanctionable conduct.”

The court notes that these statutes and rules “explicitly allow parties to recover costs and fees from counsel” and are “more appropriate vehicles to recover fees from counsel” compared to § 285, which is silent on the issue of counsel’s liability for fee awards.