Munchkin, Inc. v. Luv N’ Care, Ltd. (Fed. Cir. 2020)
This lawsuit centers on Munchkin’s U.S. Patent 8,739,993 covers a “spillproof drinking container” as well as associated trademark and unfair competition claims. Munchkin sued and LNC responded with an inter partes review petition. The PTAB cancelled the claims; the Federal Circuited affirmed without opinion (R.36); and Munchkin then dismissed its patent claims in the district court. By that point, Munchkin had also dropped all of its non-patent claims (dismissed with prejudice).
After Munchkin’s voluntary dismissal, the defendant then asked for attorney fees under 35 U.S.C. § 285 (Patent Act) and 15 U.S.C. § 1117(a) (Lanham Act). Both provisions indicate that attorney fees can be awarded to the prevailing party in “exceptional cases.” Although a district court is given discretion in determining whether a case is “exceptional,” a threshold still exists.
The judge sided with LNC — finding all of the claims “substantively weak” and noting that Munchkin should have known of the weakness. The court then awarded $1.1 million in attorney fees.
On appeal, the Federal Circuit has reversed — holding that the moving party (LNC) had failed to meet its burden of presentation since it “presented nothing to justify” an exceptional case finding.
Here, the trademark and unfair competition claims were voluntarily dismissed by the plaintiff without any substantial analysis of the issues by the court. That situation can still lend itself to a fee award. However, the Federal Circuit here ruled that those underlying issues of merit or misbehavior must be “meaningfully considered by the district court.”
LNC failed to make the detailed, fact-based analysis of Munchkin’s litigating positions to establish they were wholly lacking in merit. The district court’s opinion granting a fee award likewise lacked adequate support.
Slip Op.
The appellate panel showed its approach with the patent claim. Although the patent was found invalid, for exceptional case analysis we begin with an assumption that the patentee had a reasonable basis for believing its patent was valid. The prevailing party has the burden of then showing that the position was unreasonable.
The relevant question for purposes of assessing the strength of Munchkin’s validity position is not whether its proposed construction is correct; rather the relevant question is whether it is reasonable.
In other words, a prevailing defendant does not receive attorney fees simply for winning the case or by proving the patent invalid. Fee awards require a second step of proving the patentee’s case was also unreasonable. “That Munchkin’s patent was ultimately held unpatentable does not alone translate to finding its defense of the patent unreasonable.”
No fees.
This decision basically says that if the district court thinks patent-holder’s argument is reasonable by issuing a favorable claim construction, then attorneys’ fees are off the table unless the district court itself can articulate how, in light of its favorable claim construction ruling, the plaintiff’s position is unreasonable such that the case is therefore “exceptional.” Have you known any judges to admit to making an unreasonable ruling?
Given that certain district court judges often issue highly unreasonable Markmans, I find the Circuit Courts decision here to be an abandonment of its oversight obligation.
NWPA: “It may not happen during the recession depending on how long it lasts. My predictions are that the layoff will happen, but that it may be during the next two years. Might even go out to three years as there may be some buffering in hopes of a rebound.”
link to patentlyo.com
“The longest economic expansion in American history is officially over. The National Bureau of Economic Research declared Monday that the recession began in February.”
link to cnn.com
Patent Examiner RIF by February 2023? Time will tell.
How are the intake numbers for the patent office?
Plus, the words you yourself repeat here give an easy “out” (“depending on how long it lasts”) – have you seen the “V” fall and rise of the stock market?
Ben,
1. The record recovery of the stock market is either highly irrational or indicative of an expected economic recovery.
2. The PTO has an ample backlog to work on if filings decrease.
3. In the great depression of the 1930’s patent application filings did not decrease nearly as much as the economy.
But, all that said, there are significant patent owner cost-cutting opportunities in not paying patent maintenance fees on some of the huge number of patents issued in recent years that could greatly impact PTO income.
Sure, this is a testable hypothesis. Now the clock is running during which we can determine the hypothesis’ truth or falsity. For whatever little my prediction is worth, I predict that there will NOT be a reduction in the size of the examiner corps over that time horizon.
Greg, with such a large staff of PTO examiners, and a pension system, I would think that quite a bit of attrition could occur just by not doing new hires?
And if that happens, then Night Writer’s hypothesis will have been confirmed.
No it will not.
NWPA “My predictions are that the layoff will happen.”
Despite his efforts to avoid specificity, this indicates involuntary separation. Perhaps if you want to be extremely generous you could include the PTO making separation offers. But simply managing the workforce through not hiring new people to make up for attrition? That should not qualify.
Whoops, failure to close tag.
Rethinking my original posting, I guess in some circumstances “Reduction in Force” includes attrition. However, I do not think this is how the term is usually used in federal employment contexts.
For example:
“Most people do not like to think or talk about a reduction in force (RIF) and they certainly do not want to do a RIF.” “Most people would rather talk about the “A word” — attrition. For many years that has been the preferred way to shrink the workforce. Attrition is less harsh, it does not force people out of their jobs, and presents fewer opportunities for favoritism or other bad things. So why would we ever consider RIF when we have the allegedly painless magic of attrition?”
link to federalnewsnetwork.com
Attrition won’t count. If it is only attrition, then my prediction will be wrong. I never tried to include attrition as being part of the prediction.
Thank you for clarifying that.
Can you also clarify what constitutes “depending on how long it lasts“…?
The confluence of an election year, a pandemic, and societal pressures may make for a very untypical recession. We have already seen a huge “V” in stock market valuations (as the leading drop of that “V” is often a factor in setting when a recession has started, its climb back up cannot be dismissed).
anon,
It is really weird and it is hard to compare this recession to other recessions and the amount of stimulus money that is pouring in makes it very unpredictable.
I can tell you that a couple of corporate clients have said that patent budgets for this quarter ending in June have not be affected, but that we should expect large budget decreases next quarter.
But I am at a loss to know if this is going to be a typical recession or not or how important it is for the corporations to make their numbers for Wall Street.
It definitely is something I’ve never seen before and the stimulus has given a lot of money to corporations so it may be that they don’t cut back as they have been given so much money and Wall Street is giving them a pass on the earning numbers. Part of it is that the patent budget was being cut to just get to the numbers, but some corporations are missing by like 40% so they may think it not worth the effort.
Big picture is that I am not really sure if the patent budgets are going to get cut in response to this recession as it is so different than other recessions.
Thanks Night Writer.
What are the chances that the likes of Ben (and even Paul and Greg) will take the additional circumstances into account or instead try to denigrate your prior position?
By the way, this all is merely Act 1.
There will be a second wave this fall, and the corporate effects will not be only limited to fiscal year 2020.
>>Big picture is that I am not really sure if the patent budgets are going to get cut in response to this recession as it is so different than other recessions.
Are you withdrawing the prediction, or are you laying groundwork for why you weren’t really wrong if you turn out to be wrong?
Ben,
See my post immediately before yours at 8:59 am today.
And if there are reductions, will Ben be so quick in quoting me or will this be another time when his memory fails? Time will tell.
I’ve never known you to be embarrassed about tooting your own horn, but I’ll try to make an effort to remember.
That you would attempt to spin this into some type of NW ‘toot his own horn’ says more about you than you realize.
No Ben, that comment was entirely about you.
Dir. Iancu provides this: link to judiciary.house.gov
I found this particularly interesting (in the second to last paragraph – emphasis added):
“Specifically, Congress could make available user fees and surcharges previously collected by the USPTO (between 190 and 2011).”
It appears that Dir. Iancu wants back ALL of those prior diversions that Congress robbed from innovators as a ‘free stash’ windfall.
That’s some pretty serious reparations that would definitely alter Night Writer’s past pronouncements.
lol – that was meant to read as: between 1990 and 2011.
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