Facebook is Prevailing Party Even Though Case Dismissed as Moot

by Dennis Crouch

B.E. Tech, LLC v. Facebook, Inc. (Fed. Cir. 2019)

In 2012 B.E. Sued Facebook for infringing the claims of its U.S. Patent 6,628,314. In 2013, the district court stayed the litigation pending inter partes review.  The IPR proceedings ended in 2015 with a finding that the claims were unpatentable and the Federal Circuit affirmed that decision on appeal in 2016.

Back at the district court, Facebook requested judgment on the pleadings in its favor and with prejudice while B.E. argued that the case should be dismissed for as moot rather than decided on the merits. The district court agreed with the patentee — once the claims were cancelled the lawsuit was moot and had to be dismissed for lack of jurisdiction.

Costs to Prevailing Party: Under the Rules of Civil Procedure, “costs” are generally awarded to the prevailing party.

 Unless a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party.

Fed. R. Civ. P. 54(d)(1).  The district court awarded $4,424 in costs to Facebook as the prevailing party.

On appeal B.E. argued that there is no prevailing party when a case is dismissed as moot. The Federal Circuit has rejected that argument:

We agree with Facebook that it is the prevailing party.

Here, it is clear that FB “rebuffed” the patentee’s claims and effectively prevailed in the lawsuit.  However, the patentee has an important Supreme Court case on its side:  Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598 (2001).   In Buckhannon, the Supreme Court explained:

Numerous federal statutes allow courts to award attorney’s fees and costs to the “prevailing party.” The question presented here is whether this term includes a party that has failed to secure a judgment on the merits or a court-ordered consent decree, but has nonetheless achieved the desired result because the lawsuit brought about a voluntary change in the defendant’s conduct. We hold that it does not. . . . [Rather, a] “prevailing party” is one who has been awarded some relief by a court.

Although Buckhannon strongly favor’s the patentee in this case, it is not the only Supreme Court case on the topic — and conflicts fairly directly with the Supreme Court’s later decision in CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642 (2016).  In CRST, the plaintiff’s employment discrimination case was dismissed because the plaintiff (EEOC) had failed to meet presuit obligations of fully investigating claims and attempting to resolve the claims.  In its decision, the Supreme Court held that the defendant could be deemed a “prevailing party” since the defendant “fulfilled its primary objective” of rebuffing the plaintiff’s case. A “defendant may prevail even if the court’s final judgment rejects the plaintiff’s claim for a nonmerits reason.”

Here, the Federal Circuit extended CRST — holding that Facebook is clearly the prevailing party here even though the case was dismissal for mootness:

As the district court held, Facebook obtained the outcome it sought via the mootness dismissal; it rebuffed B.E.’s attempt to alter the parties’ legal relationship in an infringement suit. This is true even though the mootness decision was made possible by a winning a battle on the merits before the PTO.

Here, the Federal Circuit does not appear to be holding that there will always be a prevailing party when a case is dismissed as moot.  Rather, B.E. v. Facebook is a special case involving the parallel inter partes review proceedings.  What the court recognized effectively is that IPR proceedings are now part and parcel of the infringement litigation process and should be treated as such.  This is one further step toward attuning the system so that the various tribunals are all playing by the same rules.

17 thoughts on “Facebook is Prevailing Party Even Though Case Dismissed as Moot

  1. 5

    The term “voluntary” in a “voluntary change in… conduct” carries a lot the load in Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598 (2001).

    In Buckhannon the defendant State of West Virginia changed the law to remove a performance requirement that the suit was brought over. That mooted the suit.

    Here, the plaintiff lost their patent in a parallel and contested IPR. They didn’t voluntarily dismiss the suit, they lost their patent and consequently couldn’t maintain the suit even if they wanted to. The defendants even obtained a stay of the suit so that the IPR could be held. It’s much, much closer to the CRST situation of attacking and defeating a claim through a “nonmerits reason.”

    1. 5.1

      Excellent point DRJ.

  2. 4

    My 3rd thought:

    Might B.E. own — or in the future acquire (related to the ‘314 patent?) — one or more patents which they’ll want to assert against FB and/or other alleged infringers . . . and not want FB or other adversaries to use this, “look — they (already) lost / paid costs in this case” against them?

  3. 3

    I wonder if there is some other reason, not apparent here, that B.E. wanted to prevent facebook from being declared the “prevailing party.”

    1. 3.1

      Re: “I wonder if there is some other reason, not apparent here, that B.E. wanted to prevent facebook from being declared the “prevailing party.”’
      A mere guess? Is there a database of patent litigation “win-loss” records for law firms that potential clients can peruse?

      1. 3.1.1

        Hmmm — that’s a darker comment than first appears on the surface, as you would have counsel acting for their own benefit first and at the expense of the client (as we both know, this is an ethical no-no).

        1. 3.1.1.1

          Not if the firm paid for this appeal.

          1. 3.1.1.1.1

            Even if the firm paid for the appeal (have you EVER seen such?), the client remains the client and in charge. To avoid ethical concerns — even IF the firm paid for the client — the firm likely would have informed written consent as to whose benefit the (paid) continued action really was for. Mere payment alone is NO ‘out.’

            1. 3.1.1.1.1.1

              That’s true, but the client might not care. If you told the client, we will do this for free, the client might consent. I don’t see the downside for Facebook to consent. If they win, great, if they lose, the firm paid for it.

              And we once had a similar situation for a client. They had given us many billings, but for some reason were reluctant to take an appeal on a particular issue we thought was important to them. So we agreed to work for free, they just had to pay the printing and other out-of-pocket costs. We ended up with a great opinion from the Second Circuit that benefited not only the client but our firm.

              1. 3.1.1.1.1.1.1

                BL,

                Your reply is an excellent example, as you went that extra “ethical” mile (and the control point comes from the client).

                My point was simply “but we paid for it” just might not cut it.

                The client as client is the one with the authority to provide informed consent (with “informed” including why a firm would be willing to do something for free). One cannot presume that “gratis” means “don’t have to inform” or even worse “client does not control.”

                A client indeed may not care. On the other hand, a client may indeed care and not want a firm to do something (even for “gratis,” even if the firm is wiling to pay the client).

    2. 3.2

      “I wonder if there is some other reason, not apparent here, that B.E. wanted to prevent facebook from being declared the ‘prevailing party.'”

      That was my 2nd thought.

  4. 2

    They appealed an award of $4424?

    1. 2.1

      ? Me too, MeToo. How could they appeal to the Fed. Cir. for substantially less than $4,424?

    2. 2.2

      LMAO it’s worse. The final sentence is “Costs to Facebook” so there will be additional costs associated with the appeal.

    3. 2.3

      “They appealed an award of $4424?”

      That was my 1st thought.

  5. 1

    While evidently not an issue here, standing remains a substantial difference as to “all playing by the same rules.”

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