Converting Voluntary Dismissals: Federal Circuit Holds Sanctions Can Create Prevailing Party Status Under § 285

by Dennis Crouch

The Federal Circuit's decision in Future Link Systems, LLC v. Realtek Semiconductor Corporation, No. 2023-1056 (Fed. Cir. Sept. 9, 2025), provides important clarification on when a defendant becomes a "prevailing party" and thus eligible for attorney fees under 35 U.S.C. § 285 and costs under Federal Rule of Civil Procedure 54(d)(1).  Although the case had been voluntarily dismissed by the patentee without prejudice, Judge Albright had subsequently converted the status to with prejudice as a sanction for filing objectively baseless patent infringement suits. That conversion was sufficient judicial imprimatur to leave the defendant as prevailing party.

The Tea: The district court's sanctions decision appears to have been influenced by the discovery that the patentee Future Link had entered into a licensing agreement with MediaTek (a Realtek competitor) in 2019 that provided a litigation bounty: an extra $1 million if Future Link sued Realtek or forced it to pay a license fee by a set date.  See the U.S. Department of Justice’s Statement of Interest and Realtek’s publicly filed complaint here (PDF), which quotes the bounty terms, and a court-hosted copy of the allegations here.  The DOJ filing (under President Biden) highlighted allegations that the bounty fueled a series of PAE suits aimed at raising a rival’s costs rather than resolving genuine patent disputes.