Dennis Crouch
In a newly filed petition for certiorari, DISH Network has asked the Supreme Court to resolve two important questions about attorney fee awards in patent cases: whether district courts can (1) make plaintiff’s attorneys jointly liable for fee awards in exceptional cases and (2) award fees incurred during parallel Inter Partes Review (IPR) proceedings. DISH Network L.L.C. v. Dragon Intellectual Property, LLC, No. 24-726 (petition filed Jan. 8, 2025).
The case arose from Dragon’s 2013 patent infringement lawsuit against DISH and others over digital video recorder (DVR) technology. The district court ultimately found the case “exceptional” under 35 U.S.C. § 285 after a finding that Dragon pursued objectively baseless infringement claims. Dragon’s patent expressly disclaimed coverage of “continuous recording” devices during prosecution, yet Dragon sued DISH over DVRs that clearly operated by continuous recording, as shown in publicly available user manuals. In the parallel IPR, the USPTO had also found the claims invalid.
Holding the attorneys liable: Patent assertion entities are typically thinly capitalized. Often, their only asset is the patent being asserted, and that patent’s value is typically around $0 if the defendant is seeking prevailing party attorney fees.
The petition makes some bold claims: That 80% of patent lawsuits are filed by patent assertion entities that “weaponize the legal system, exploiting loopholes for attorneys to file baseless suits while shielding themselves from accountability.” On that point, the brief cites to a report by the anti-patent-assertion organization Unified Patents, but even that report this strong of a claim.
In its decision, the Federal circuit held that the statute’s silence regarding attorney liability meant Congress did not intend § 285 to reach attorneys. Writing for the majority, Chief Judge Moore contrasted § 285 with provisions like 28 U.S.C. § 1927 that explicitly authorize fees against counsel. Dragon Intellectual Property LLC v. DISH Network L.L.C., 101 F.4th 1366 (Fed. Cir. 2024).
DISH argues this narrow interpretation conflicts directly with Supreme Court precedent in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), which held that § 285 “imposes one and only one constraint on district courts’ discretion to award attorney’s fees in patent litigation: The power is reserved for ‘exceptional’ cases.” The petition contends the Federal Circuit improperly created additional unstated rigid limitations that Congress never enacted.
The petition also highlights a circuit split with the Fifth Circuit over identical fee-shifting language in the Lanham Act, 15 U.S.C. § 1117(a). In Alliance for Good Gov’t v. Coal. for Better Gov’t, 998 F.3d 661 (5th Cir. 2021), the Fifth Circuit held that neither statute “expressly limit[s] the persons who can be held liable for attorney’s fees.”
The most relevant Supreme Court case here may be Nelson v. Adams USA, Inc., 529 U.S. 460 (2000). In Nelson, the Supreme Court addressed a fundamental due process issue in patent litigation regarding the imposition of attorney fees on non-parties. The case arose after Adams USA prevailed in a patent infringement suit against Ohio Cellular Products Corporation (OCP) and was awarded attorney fees based on inequitable conduct. Fearing that OCP would be unable to pay, Adams moved to amend its pleading to add Donald Nelson, OCP’s president and sole shareholder, as a party and simultaneously sought to amend the judgment to make Nelson personally liable for the fee award. The timing of the complaint amendment is particularly noteworthy because it occurred after the judgment had already been entered against OCP. The district court allowed the amendment and the motion making Nelson liable for the $178,888.51 fee award, at the very moment he was added as a party.
The Supreme Court unanimously reversed, holding that the district court violated due process by denying Nelson an opportunity to defend against personal liability. Writing for the Court, Justice Ginsburg emphasized that Rule 15 of the Federal Rules of Civil Procedure requires that a newly added party must be given 10 days after service of the amended pleading to respond. The Court rejected arguments that Nelson’s close involvement with OCP (as its president, sole shareholder, and the person who had withheld prior art from the Patent Office) made the lack of process harmless. The Court explained that “judicial predictions about the outcome of hypothesized litigation cannot substitute for the actual opportunity to defend that due process affords every party against whom a claim is stated.” Importantly, the Court noted that its decision did not insulate Nelson from liability – he could still be held personally liable for the fees after being given a proper opportunity to defend against such liability on the merits. On this final point, the Court wrote that § 285 “surely does not insulate” Nelson from fee liability so long as he is provided with due process.
I wanted to present this discussion of Nelson — recognizing that Nelson was added as a party to the lawsuit — and contrast that with the petitioner’s statements about Nelson:
And in Nelson v. Adams USA, Inc., the Court condoned Section 285 liability against a third party—the plaintiff’s president and sole shareholder—subject to due process. 529 U.S. 460, 472 (2000) (noting its “decision surely does not insulate [the third-party] from liability”).
DISH brief (emphasis added by Crouch). DISH’s petition appears to mischaracterize the Supreme Court’s statement from Nelson in a way that could mislead the Court. While DISH suggests that Nelson “condoned Section 285 liability against a third party,” the critical context is that the company president in Nelson had actually been joined as a party to the lawsuit through an amendment to the pleadings. The Supreme Court’s statement was that its decision “surely does not insulate Nelson from liability” and the in a discussion about whether proper due process would allow the district court to simultaneously join Nelson as a party and impose liability on him, without giving him an opportunity to contest the fee award. By incorrectly labeling Nelson as a “third party” when discussing the Supreme Court’s holding, DISH’s petition implies that Nelson already resolved the question of non-party liability under Section 285. In reality, that issue was never before the Court in Nelson.
On the IPR fees issue, the Federal Circuit held that DISH could not recover fees incurred in the parallel IPR proceeding that invalidated Dragon’s patent, characterizing IPR as a “voluntary” procedure that DISH chose to pursue. DISH argues this creates an artificial distinction that undermines Congress’s intent in creating IPR as an efficient alternative to district court litigation over patent validity.
The petition emphasizes that IPR was not truly voluntary or separate – Dragon’s infringement suit triggered a one-year statutory bar under 35 U.S.C. § 315(b) for DISH to file an IPR petition or lose the right. District Judge Bencivengo, sitting by designation at the Federal Circuit, dissented from the IPR fees ruling. She emphasized that the IPR was a direct response to Dragon’s infringement claims and effectively substituted for validity litigation in district court after the case was stayed. The dissent viewed categorical preclusion of IPR fees as inconsistent with both § 285’s text and Congress’s intent in creating the IPR system.