Attorney Fee Award: District Court Erred in Not Awarding Fees

In another successful appeal by Prof. Mark Lemley, the Federal Circuit has reversed on fees – finding that the E.D. Texas Court (Judge Gilstrap) erred by not awarding fees to the successful defendant Newegg.

AdjustaCam v. Newegg (Fed. Cir. 2017) [16-1882.Opinion.6-29-2017.1] [regarding U.S. Patent No. 5,855,343]

AdjustaCam dropped its infringement case against Newegg following an adverse claim construction and reexamination. The basic issue on claim construction involved the claimed camera “rotatably attached . . . about a first axis of rotation” as compared with Newegg’s ball-and-socket attachment.  Under the district court’s construction, clearly no infringement.

After the voluntary dismissal, all that remained wasthe extent that AdjustaCam owes in attorney fees (if any).  Under Section 285 of the Patent Act, fees may be awarded in exceptional cases. The district court initially rejected any fee award, but that decision was vacated by the Federal Circuit in 2015 following Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014).  Octane Fitness gave more discretion to district courts in awarding fees, but it also lowered the standards for proving an exceptional case (both eased the elements needed to be proven and the standard of proof required).  By the time remand came around, Judge Davis had retired and the case moved to Judge Gilstrap who again denied the fee award. Now, the appellate court has reversed Gilstrap’s decision – holding that a fee award is required.

The decision here is based upon two grounds:

(1) The remand required a re-evaluation of the evidence based upon the new totality-of-the-circumstance standard and lower-burden required by Octane Fitness.  Judge Gilstrap failed to conduct that review of the evidence and thus erred.

(2) In addition, the appellate panel found  “clearly erroneous findings about the substantive strength of AdjustaCam’s case [sufficient to] independently support reversal.”  Here, the appellate panel wrote that what began with a “weak infringement lawsuit . . . became baseless” after the claim construction order.  Based upon this claim construction, the appellate court found simply “AdjustaCam’s lawsuit was baseless.”

[Under the claim construction] there is no possible way for Newegg’s products to infringe the ’343 patent. No reasonable factfinder could conclude that Newegg’s products infringe; therefore, AdjustaCam’s litigation position was baseless. These are traits of an exceptional case. The district court’s contrary conclusion was based on “a clearly erroneous assessment of the evidence.” Highmark, 134 S. Ct. at 1748 n.2. Fees are warranted.

Note here that the claim construction and post-claim construction activity is an important aspect of the decision. Although not mentioned in the present decision, a difficult aspect of the case for the patentee is that it was not permitted to appeal the claim construction.  Rather, it did appeal the claim construction, but the Federal Circuit refused to hear that portion of the case since it was moot following the dismissal of the merits case.

In addition to the baselessness of the lawsuit, the Federal Circuit also found that the patentee litigated the case in an unreasonable manner as shown through “repeated use of after-the-fact declarations. . . .  [W]e recognize today, the totality of the circumstances demonstrates other dubious behavior that, when considered collectively, warrants fees under § 285.”

Finally, the court addressed the fact that the patentee’s strategy included a large number of low-dollar settlements (lower than the cost of litigation).  The appellate court began by noting that “there is no minimum damages requirement to file a patent infringement case” and a strategy that involves low damages against multiple defendants “does not necessarily make a case ‘exceptional.'”  However, practice further supports a fee award. “The irregularities in AdjustaCam’s damages model and the purported nuisance value of many of its settlements should have played a role in the evaluation of whether this is case exceptional.”

 

 

On remand, the district court will now determine the amount of attorney fees to award. Unanswered questions include whether (1) fee award should begin with the filing of the complaint (2) what level of fees is ‘reasonable,’ and (3) whether Lemley’s appellate costs can be included.

 

30 thoughts on “Attorney Fee Award: District Court Erred in Not Awarding Fees

  1. The opening of Dennis’s posting “In another successful appeal by Prof. Mark Lemley, the Federal Circuit has reversed on fees…” sounds a bit like genuflection.

    Lemley and Lemelson have both had big negative effects on the patents system and the incentive to invent and innovate.

  2. I don’t get it.

    There was a claim construction that was adverse to the plaintiff’s position, so it dropped the case. What’s exceptional about that?

    How is plaintiff’s behavior in OTHER cases relevant to the question of exceptional behavior in THIS case?

    On remand, the district court said it considered the whole case. So who is the CAFC to step in and overrule?

    [Reading the decision provides information that Dennis omitted from his write-up: the defendants who settled were originally defendants in this same pre-AIA suit, hence their relevance to the present decision. The plaintiff didn’t drop the case immediately after claim construction, but pursued it case through expert discovery, and only dismissed the case shortly before the deadline for summary judgment briefing. And on remand Judge Gilstrap, according to the CAFC, gave too much deference to the first judge’s findings. Too bad this information wasn’t included in the write-up.]

    1. Another thing that really ticked off the Federal Circuit was the fact that the patent owner referred to a supplemental infringement declaration filed two years after the initial fee determination without ever disclosing that fact to the Federal Circuit . While that “misconduct” was not part of the district court’s fee determination, it was a factor in the Federal Circuit’s decision that the patent owner’s conduct during trial was litigation misconduct. See footnote 2.

  3. Unless their claim construction was frivolous (may or may not have been; have yet to read the opinion), how does receiving an adverse claim construction result in a case being objectively baseless? Adverse claim constructions that terminate a patent suit happen all the time. Now any time a patentee loses a claim construction it is de facto a baseless case?

        1. Maybe (and even likely), but I am curious as to what exactly the professors following comment means:

          Although not mentioned in the present decision, a difficult aspect of the case for the patentee is that it was not permitted to appeal the claim construction. Rather, it did appeal the claim construction, but the Federal Circuit refused to hear that portion of the case since it was moot following the dismissal of the merits case.

  4. I “get” the larger picture here, and aside from Malcolm’s all-too-easily-foreseen jumping to conclusions***, the CAFC declares:

    the wholesale reliance on the previous judge’s factfinding was an abuse of discretion.

    While also reflecting that the replacement judge explicitly stated:

    After a careful review of the entirety of the record, as well as the parties’ arguments and additional briefing, the Court, in an exercise of its statutory grant of discretion, does not find that AdjustaCam’s infringement and validity arguments were so weak, or its litigation conduct so poor, as to make this case stand out from others.

    Not sure if the CAFC’s own “review” is proper here.

    For all its protests (i.e., Utah), the CAFC is doing exactly what it declares it would not do in Utah. The statement “in its entirety” does not mean “in the portion only prior to the remand.”

    It appears that shortcuts – either by the CAFC as in times past (eBay anyone…?) AND by district courts (no matter what was said in Utah) will allow a later appellate court higher up the food chain to achieve a (different) desired end.

    *** This is NOT a defense of AdjustaCam, its tactics, or any final decision on the merits. This is only the observation that lower courts will not be able to take shortcuts when they make decisions that flow against the ongoing “desired ends” of the upper judicial branch.

    It’s kind of like Orwell’s Animal Farm for “discretion.”

    1. News flash: self-serving statements from a district court (“Everything was taken into account”) will not insulate that court from a higher court’s finding that the district court’s discretion was abused.

        1. If you have a point to make, “anon”, just type it out in English. Otherwise you’re just another maximalist whiner floating in your sea of tears.

          And, yes, I’m laughing. Enjoy the sanctions. More coming your way soon. Maybe time to clean up the mailroom? LOL

      1. They had their day. Forcing Newegg to spend $350,000 in the hopes of getting them to settle despite an objectively baseless case (that cost Acacia $400 to file) is not a fair or just use of our American federal court system. Patents are limited privileges given in exchange for disclosing to the public your innovation and moving progress forward, not free license to inflict legal costs on others regardless of merit.

        It’s also worth nothing that it took two trips to the Federal Circuit and plenty more money and discounted rates (and years) to get this result. The vast majority of this type of behavior goes unpunished because most Ds don’t have the will or the money to burn (and it is a pyrrhic victory) to get to this result.

        1. Agreed that they did have their day in court

          My point is that the Attorneys Fee award predicated in part on WHO THEY ARE demonstrates that people like Acacia and others who own patents but do not have the means to make and sell goods in accordance with their patents are looked at undeserving of asserting their property rights.

  5. It looks like everybody’s favorite senile grandpa, Emperor Tanspray, wandered off of a plane looking for his white bicycle. Are we ready for the 25th amendment yet? Or do we still need to keep pretending because mindless white power smells so friggin awesome?

  6. Meanwhile:

    Synopsys, Inc. v. Mentor Graphics Corp.
    16-1288 Petition for cert

    Issues: (1) Whether the inquiry under 35 U.S.C. § 101 requires courts to ignore the specification, as the United States Court of Appeals for the Federal Circuit held, or whether courts should ascertain the true scope of the claims in light of the specification and intrinsic record in determining whether they are drawn to a patent-ineligible concept; and (2) whether an otherwise revolutionary technological breakthrough is not an “inventive concept” under the second step of Alice Corporation Pty. Ltd. v. CLS Bank International merely because the court believed the breakthrough could theoretically be implemented without a computer.

    LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL

    1. Whether the inquiry under 35 U.S.C. § 101 requires courts to ignore the specification

      Note that nobody anywhere suggested that “101 requires courts to ignore the specification” so what we have here is an attorney telling a l i e to the Supreme Court.

      Of course, when you’re a patent maximalist and you have nothing else to rely on but your own regurgitated kool-aid, life can be tough. I suppose that would be the excuse of the habitual short stick holders who filed this eminently chuckle-worthy petition.

    2. I’d actually like to see that second question taken up, actually. With the “revolutionary” part, of course – that’s a pretty high bar.

      The claim at issue:

      1. A method for converting a hardware independent user description of a logic circuit, that includes flow control statements including an IF statement and a GOTO statement, and directive statements that define levels of logic signals, into logic circuit hardware components comprising:
      converting the flow control statements and directive statements in the user description for a logic signal Q into an assignment condition AL(Q) for an asynchronous load function AL( ) and an assignment condition AD(Q) for an asynchronous data function AD( ); and
      generating a level sensitive latch when both said assignment condition AL(Q) and said assignment condition AD(Q) are nonconstant;
      wherein said assignment condition AD(Q) is a signal on a data input line of said flow through latch;
      said assignment condition AL(Q) is a signal on a latch gate line of said flow through latch; and
      an output signal of said flow through latch is said logic signal Q.

      I can’t speak for the novelty/obviousness of this claim, but in my mind it is clearly directed to a technical invention. The PTO and the Federal Circuit keep pushing this “pencil-and-paper” test, but I’m not sure that we’ve got clear direction from the Supreme Court on that. I don’t care whether this particular claim goes down, I’d just like to see a little more meat put on that “mentally or with pencil-and-paper” skeleton.

      1. DanH,

        You comment reminds me of the request (still open) for the good professor or another academic to explore the patent doctrine of Mental Steps from an historical background.

        Of course, this might prompt Malcolm to suggest “that I do this myself” – to which I have previously (and in multiple instances) reminded him that having such a lesson from someone else would better prompt him to accept the lesson.

        Bottom line though is that the Mental Steps doctrine is attempting to be zombified in order to continue an attack against machine systems which happen to include the machine component known as software.

      2. “[G]enerating a level sensitive latch” is hardly abstract. I have no idea how this could have not passed 101. It seems to be the same kind of claim that we found in Diehr.

        1. That was my initial reaction as well. However the opinion explains pretty well that these claims are to translating code to circuit diagrams, and that the code, the circuits, and the concept of translating the code to circuit diagrams were all known. The claim is effectively to a somewhat particular way of translating the code to circuits. It’s “McRO, but without a computer”, and it looks like the “without a computer” sunk the patent. The Inventors admitted to having performed the translation in their heads for simple cases.

  7. Great result. Congrats to Newegg and Lemley for taking it to the patentee here. Another kick in the kneecaps for the banana republic of East Texas. Oh well. It was nice while it lasted.

    1. banana republic of East Texas?

      They are Federal Judges, so MM would have us disrespect the judiciary.

      Also the notion that “the wholesale reliance on the previous judge’s factfinding was an abuse of discretion” seems to urge litigants to stray into dangerous territory.

      Dissing a Federal Judge from an anonymous Internet platform is one thing. Doing in his courtroom is something else altogether.

      1. They are Federal Judges, so MM would have us disrespect the judiciary.L”

        I side with Malcolm – at least to the notion that certain judiciary more than deserves disrespect.

        Dissing a Federal Judge from an anonymous Internet platform is one thing. Doing in his courtroom is something else altogether.

        Absolutely true. What is your point?

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