by Dennis Crouch
Attorney fee awards have been on a hot-streak since the Supreme Court’s 2014 Octane Fitness decision lowering the standard for proving an “exceptional case” under 35 U.S.C. Section 285.
Under the statute, a district court judge is empowered to award “reasonable attorney fees to the prevailing party” to a patent infringement lawsuit, but only in “exceptional cases.” Id. In Octane Fitness, the Supreme Court gave the lower court fairly wide latitude in deciding exceptional case judgment and the award of fees. In particular, courts are given authority to consider the totality-of-the-circumstances when determining whether a fee award is appropriate. In the parallel case of Highmark, the court held that those lower-court determinations should be given deference on appeal.
The current patent litigation between Gaymar Indus and Cincinnati Sub-Zero began when the patentee (Gaymar) filed its lawsuit alleging infringement of its Patent No. 6,517,510. CSZ’s response was to file an inter partes reexamination petition that eventually led to a judgment that the asserted claims were not patentable and thus cancelled. That outcome effectively ended the (stayed) litigation as well.
However, when the triumphant defendant asked for attorney fees, the district court (through its magistrate judge) refused. Supporting its no-fee judgment, the lower court first noted that the case was not objectively baseless and thus would have failed under the old standard. In addition, the court found that the defendant also had unclean-hands based upon its own litigation misconduct.
On appeal, the Federal Circuit has vacated that no-fee determination — finding that the district court abused its discretion and committed clear error by finding litigation misconduct by the defendant CSZ. To reach its conclusion, the appellate panel walked through the four examples of litigation misconduct cited by the district court and showed how they were either not misconduct or else not-that-bad. The court concludes as follows:
Without question, CSZ’s arguments . . . could be properly characterized as overstatements. But none of the cited examples amounts to misrepresentation or litigation misconduct. In addressing potential litigation misconduct in analogous contexts, other circuits have concluded that isolated overstatements do not rise to the level of sanctionable litigation misconduct under Federal Rule of Civil Procedure 11. . . .
[The examples cited by the district court—whether considered in isolation or in the aggregate—amount to sloppy argument, at worst. While such sloppiness on the part of litigants is unfortunately all too common, it does not amount to misrepresentation or misconduct. In view of the serious consequences of a finding of misconduct, it is important that the district court be particularly careful not to characterize bad lawyering as misconduct.
With this new guidance, the district court will likely again be asked to consider whether the facts justify an award of fees.
= = = = =
The opinion here was authored by Judge Dyk and joined by Chief Judge Prost and Judge Bryson.(Read the decision: Gaymar v. CSZ)
= = = = =
Although the opinion here favors the accused infringer, its precedential value is more generally party neutral. Rather than favoring one side over the other, the decision here basically acts to keep a high threshold for what counts as litigation misconduct. The decision here is also somewhat parallel to that in Biax v. Nvidia where Judge Dyk vacated an attorney-fee award after finding that the defendant did have a reasonable basis for its infringement content and that the district court misinterpreted an expert’s deposition.