Monday, August 17, 2009

Go fish! It's not an exceptional case just because you won

Wedgetail sued Huddleston Deluxe for infringing its fishing lure patent. See U.S. Patent No. 6,857,220. Huddleston argued that it did not infringe, and that the patent is invalid. After the court entered its claim construction order, Wedgetail moved to dismiss its infringement claims with prejudice, as it decided "that it may be difficult to establish infringement under certain of the Court's constructions." Wedgetail also covenanted not to sue Huddleston for infringing the '220 Patent, and argued that, per Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1056 (Fed. Cir. 1995), the Court was divested of subject matter jurisdiction and could no longer hear Huddleston's counterclaims.

In response, Huddleston requested permission from the Court to brief its entitlement to and amount of attorney's fees. The next day, the Court entered its order, dismissing with prejudice Wedgetail's patent infringement claims as well as Huddleston's counterclaims. The Court further ordered that each party was to bear its own costs and attorney's fees.

Huddleston appealed, and argued to the Federal Circuit that it was entitled to fees, or at the very least, Huddleston should have been given an opportunity to present its motion for fees. The Federal Circuit explained the law:
35 U.S.C. § 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” This provision is an exception to the so-called “American Rule”:
Under the American Rule each party bears its own attorney fees and expenses. As an exception to that rule, courts have exercised their inherent equitable power to make whole a party injured by an egregious abuse of the judicial process. . . . Congress enacted Section 285 to codify in patent cases the “bad faith” equitable exception to the American Rule. . . . Recognizing the good faith/bad faith distinction, Congress expressly limited such awards to “exceptional cases.”
Sun-Tek Indus., Inc. v. Kennedy Sky Lites, Inc., 929 F.2d 676, 678 (Fed. Cir. 1991) (internal quotation marks and citations omitted). “The determination of whether a case is exceptional and, thus, eligible for an award of attorney fees under § 285 is a two-step process. First, the district court must determine whether a case is exceptional, a factual determination reviewed for clear error. After determining that a case is exceptional, the district court must determine whether attorney fees are appropriate, a determination that we review for an abuse of discretion. A district court abuses its discretion when its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.” Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc) (citations omitted).
“[T]he exceptional nature of the case must be established by clear and convincing evidence.” Cambridge Prods., Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050 (Fed. Cir. 1992). As this court has consistently found, however, only a limited universe of circumstances warrant a finding of exceptionality in a patent case: “inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement.” Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002); see also, e.g., Brasseler, U.S.A. I, L.P., v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001) (same); id. (“Exceptional cases are normally those involving bad faith litigation or those involving inequitable conduct by the patentee in procuring the patent.”); Hoffman-La Roche Inc. v. Invamed Inc., 213 F.3d 1359, 1365 (Fed. Cir. 2000) (“Among the types of conduct which can form a basis for finding a case exceptional are willful infringement, inequitable conduct before the P.T.O., misconduct during litigation, vexatious or unjustified litigation, and frivolous suit. Such conduct must be supported by clear and convincing evidence.” (quoting Beckman Instruments, Inc., v. LKB Produkter AB, 892 F.2d 1547, 1551 (Fed. Cir. 1989))); Multiform Desiccants, Inc. v. Medzam, Ltd., 133 F.3d 1473, 1481–82 (Fed. Cir. 1998) (“Findings of exceptional case have been based on a variety of factors; for example, willful or intentional infringement, inequitable conduct before the Patent and Trademark Office, vexatious or unjustified litigation, or other misfeasant behavior.”); Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1579 (Fed. Cir. 1996) (“Bad faith litigation, willful infringement, or inequitable conduct are among the circumstances which may make a case exceptional.”); Cambridge Prods., 962 F.2d at 1050–51 (“In the case of awards to prevailing accused infringers . . . ‘exceptional cases’ are normally those of bad faith litigation or those involving fraud or inequitable conduct by the patentee in procuring the patent.”); Bayer Aktiengesellschaft v. Duphar Int’l Research B.V., 738 F.2d 1237, 1242 (Fed. Cir. 1984) (“In awarding attorney fees to a prevailing accused infringer, such exceptional circumstances include, inter alia, inequitable conduct during prosecution of a patent, misconduct during litigation, vexatious or unjustified litigation, or a frivolous suit.”).
After briefly addressing Huddleston's failure to actually file a motion for attorney's fees within 14 days of entry of judgment, the Court determined that the record supported the trial court's decision to refuse fees; "because the district court's decision, although lacking explanation, is supported by the record, '[n]o useful purpose would be served by a remand to enable the district court to tell us in express terms what we already know from the record."


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