By Jason Rantanen
Old Reliable Wholesale, Inc. v. Cornell Corporation (Fed. Cir. 2011) Download 10-1247
Panel: Newman, Mayer (author), and Bryson
For the second time this year the Federal Circuit has issued a precedential decision reversing an award of attorneys' fees entered against a patentee. Perhaps most noteworthy is the extent to which the judges on the court appear to be in agreement on the relevant standard and its application: although the panel compositions for Old Reliable and iLor v. Google do not overlap, the two opinions contain remarkably similar language and employ analogous analyses to reverse the exceptional case findings, suggesting a strong meeting of the minds on this issue.
In 2006, Old Reliable filed an infringement action against Cornell, contending that one of Cornell's insulated roofing products (VT-1) infringed Patent No. 5,069,950. Following depositions of the named inventor and Old Reliable's expert, the district court granted summary judgment of anticipation and obviousness based on based on a prior Cornell product (VT-2) and a third party product (the Air-Flo). The Federal Circuit affirmed the invalidity judgment in December 2009 via a Rule 36 summary disposition.
Meanwhile, Cornell had moved for an exceptional case determination and requested an award of its attorneys' fees. In February 2010, the district court granted Cornell's motion, although it limited its fee award to only the portion of the litigation following the September 2007 deposition of the named inventor, at which he admitted that the VT-2 "did the same thing as his invention." The district court concluded that Old Reliable's decision to continue the suit following this deposition was "improper and unjustified," warranting a finding of exceptional case. Old Reliable appealed.
Litigation Not "Objectively Baseless"
On appeal, the Federal Circuit drew heavily on its recent pronouncements in iLor v. Google, focusing its scrutiny on the "objectively baseless" element of the meritless case inquiry. As in iLor, the CAFC began its analysis by looking to Brooks Furniture: "Absent misconduct in conduct of the litigation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Slip Op. at 8, quoting Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). This second element, the court noted, involves a purely objective inquiry. "Unless an argument or claim asserted in the course of litigation is “so unreasonable that no reasonable litigant could believe it would succeed,” it cannot be deemed objectively baseless for purposes of awarding attorney fees under section 285." Slip Op. at 8, quoting iLor, 2011 U.S. App. LEXIS 516, at *12 (Fed. Cir. 2011).
The CAFC concluded that this "exacting standard" was not met in this case. The inventor's testimony failed to establish anticipation, which requires that all of the claim elements and their limitations be shown in a single prior art reference. Nor were Old Reliable's arguments distinguishing the VT-1 from the VT-2 "objectively meritless." "There was nothing frivolous or inherently implausible about Old Reliable’s [noninfringement assertion]." Slip. Op. at 12. Similarly non-frivolous was Old Reliable's argument that the third party product did not anticipate.
Effect of PTO Proceedings
On June 15, 2010 – after the CAFC's affirmance of the invalidity finding – the PTO issued a notice of intent to issue an ex parte reexamination certificate confirming the patentability of the '950 patent over references including the VT-2 and Air-Flo. Although this notice was withdrawn shortly thereafter (citing the CAFC affirmance), the panel nonetheless took judicial notice of the reexamination certificate and concluded that "the fact that the PTO confirmed the validity of the ’950 patent on reexamination provides probative evidence on the issue of whether Old Reliable had a reasonable basis for its assertion that its patent was not anticipated." Slip. Op. at 19.
Comment: The court's emerging doctrine of exceptional case determinations envisions a threshold "objective" requirement that must be met, regardless of whether the underlying theory is one of willful infringement or meritless suit. In the context of willful infringement, the infringer must have acted "despite an objectively high likelihood that its actions constituted infringement of a valid patent;" in the context of an exceptional case determination the conduct must be "objectively baseless." Subjective considerations of bad faith play no role in this determination. An actor may have a completely wrongful intent, but if the conduct itself does not meet the objective threshold that intent just doesn't matter. Given the extraordinarily high hurdle required to satisfy the objective standard – "Unless an argument or claim asserted in the course of litigation is 'so unreasonable that no reasonable litigant could believe it would succeed,' it cannot be deemed objectively baseless for purposes of awarding attorney fees under section 285" (Slip Op. at 8 (emphasis added) – one would expect such findings to be rare indeed.
Update: Scott Daniels of the blog Reexamination Alert has a discussion of the implications for reexamination.