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Patent Attorneys’ Fee Hurdle Lower, Federal Circuit Rulings Show

Sept. 9, 2020, 9:09 AM

Obtaining attorneys’ fees in patent cases is a lot easier than it used to be, as several recent Federal Circuit decisions show.

The default rule in American litigation is that parties pay their own way, but fees can be awarded in “exceptional” patent cases. Meeting that standard used to apply only in cases involving material misconduct, or an objectively baseless complaint brought in bad faith.

The Supreme Court lowered that bar in a 2014 decision, which empowered trial courts to make the loser pay the winner’s fees in any patent case that “stands out from others.”

Since then, “the pendulum has swung significantly as it relates to attorneys’ fees, making them much more obtainable,” patent attorney Mark Stallion of Greensfelder, Hemker, & Gale PC in St. Louis said.

The trial court can take much more into consideration, putting serial patent suit filers and other bad actors on notice.

The fee analysis can include “actions that have taken place outside the scope of the four corners of the specific litigation before the district court,” patent litigator Ahmed J. Davis of Fish & Richardson in Washington said.

Just don’t try to sweep in expenses incurred trying to invalidate patents at the Patent Trial and Appeal Board, he said. The U.S. Court of Appeals for the Federal Circuit has been pretty adamant that they don’t count as fees “in court” under the Patent Act.

Here are six recent Federal Circuit decisions to know when seeking or fighting attorneys’ fees:

1. Blackbird v. Health in Motion

In December, the Federal Circuit upheld a $360,000 award of attorneys’ fees to the defendant in Blackbird Tech LLC v. Health in Motion LLC. The lower court found that patent licensing company Blackbird didn’t do enough homework before alleging infringement of an exercise equipment patent.

The Federal Circuit agreed that a better pre-suit investigation would have revealed the weaknesses of Blackbird’s case. It also noted that Blackbird had made a series of decreasing settlement offers and had filed over 100 infringement lawsuits against other companies.

“You can view it as an invitation to defendants in patent cases, if they believe there are significant flaws in the patent holder’s case, to raise those early and to put the patent holder on notice that the defendant will be seeking fees,” intellectual property lawyer Rob Maier of Baker Botts LLP in New York said in an email.

In light of Blackbird and other recent decisions, “patents defendants are looking to at least threaten to seek fees—if not actually seek fees—more than they would have 10 or 20 years ago,” he said.

Davis added that the fees in the case were awarded even after Blackbird dismissed its suit and agreed not to sue again over the patent. That “really sends a message to nonpracticing entities and their counsel that you cannot escape or diminish an attorneys’ fees exceptionality finding simply by depriving the court of jurisdiction,” he said.

2. Keith Manufacturing v. Butterfield

In April, the Federal Circuit reversed a lower court’s denial of attorneys’ fees in Keith Manufacturing Co. v. Butterfield, a case over a trailer unloading mechanism patent.

The parties reached a settlement and voluntarily dismissed the suit without leave to refile. That created enough of a final judgment to justify a fee award, the Federal Circuit said.

“Finality doesn’t necessarily have to be on the merits,” Stallion said. There just needs to be “some finality by the court that changes the legal relationship of the parties.”

3. O.F. Mossberg v. Timney Triggers

A week after Keith, the Federal Circuit affirmed denial of attorneys’ fees in seemingly similar circumstances in O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC. The patent owner dismissed with leave to refile its infringement suit over a rifle trigger system patent, after the PTAB invalidated the patent.

The different outcome hinged on the fact that leave to refile meant the decision wasn’t a final judgment.

A voluntary dismissal without a court order doesn’t change the legal relationship between the parties, the Federal Circuit held.

Keith and Mossberg serve as a reminder to parties to think during settlement negotiations about how to keep attorneys’ fees in play, Stallion said.

3. Dragon IP v. Dish Network

In Dragon Intellectual Prop. LLC v. Dish Network LLC, the Federal Circuit gave Dish & Sirius XM Radio a new chance to argue they deserve fees in a suit about an audiovisual recording device patent.

The parties stipulated to noninfringement after claim construction, but the trial court later vacated its judgment because the PTAB had invalidated the relevant parts of the patent.

The Federal Circuit held that even this procedural victory could make the case exceptional for the purpose of awarding fees.

The decision means defendants don’t have to choose between seeking PTAB invalidation and defending infringement claims in court to preserve their right to fees, Alex Moss, staff attorney at the Electronic Frontier Foundation in San Francisco, said in an email when the decision was issued in April.

“Defendants should not have to make that choice—they should be encouraged to defend against meritless accusations by advancing both non-infringement and invalidity arguments,” she said.

5. Munchkin v. Luv n’ Care

In June, the Federal Circuit overturned a $1.1 million attorneys’ fee award in a spillproof cup patent case, Munchkin Inc. v. Luv n’ Care Ltd.

The trial court didn’t adequately explain why the patent owner’s position was unreasonable after it won a favorable claim construction from the court, the Federal Circuit held.

The decision suggests that parties in that situation might try to seek reconsideration “to get the district court to flesh out its opinion so they don’t suffer that result at the Federal Circuit,” Davis said.

6. Electronic Communication v. ShoppersChoice

The Federal Circuit in July held that a fee request shouldn’t have been denied in Electronic Communication Technologies LLC v. ShoppersChoice.com LLC, in a suit over a patented system for communicating with delivery drivers.

The trial court should have considered the patent owner’s history of frivolous litigation, including sending boilerplate demand letters, and suing at least 150 other defendants seeking quick settlements, the Federal Circuit ruled.

The court is saying “prior behavior does matter and the courts can look at it,” Stallion said. That can rein in bad behavior on both sides of the ledger—both defendants who try to stiff-arm little guy plaintiffs and plaintiffs who sue everybody to just build a war chest, he said.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

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