A magistrate judge determined that a prevailing party in a district court litigation could be entitled to an award of attorneys’ fees based solely on conduct during an inter partes review (IPR) proceeding.
Needless to say, a finding of exceptionality under 35 U.S.C. § 285 can have crippling consequences. Just ask Rembrandt Technologies, LP, which recently was slapped with an order to pay the prevailing defendants in a consolidated infringement action roughly $46 million in attorney fees and nearly $5 million in costs.
On April 7, 2016, Judge Barbara M. G. Lynn of the Northern District of Texas denied defendant Maxmind, Inc.’s Motion for Exceptional Case Determination and Attorneys’ Fees and Costs. In doing so, the court found that “Plaintiff’s litigation position was not frivolous or objectively unreasonable” because the “substantive law of Section 101 patent-eligibility has evolved since Plaintiff initiated this lawsuit.”
A district court in Delaware granted defendant Jack Henry & Associates’ motion for attorneys’ fees and ordered plaintiff Joao Bock Transaction Systems to pay $1 million in attorney’s fees under 35 U.S.C. § 285. The order came following the Federal Circuit’s affirmance of the district court’s order invalidating plaintiff’s online-transaction security patent as claiming only an abstract idea. In awarding the fees to Defendant, Judge Robinson stated that “[t]aking into account that patent cases are complex and patent litigation is an expensive proposition, nevertheless, the court will award attorney fees of $1,000,000 to account for the fact that plaintiff's ever changing litigation strategies (including its claim construction positions) created a tortuous path to resolution.”
On October 10, 2013, plaintiff MyMedicalRecords, Inc. (MMR) sued defendants claiming infringement of U.S. Patent Nos. 8,301,466 and 8,498,883. In its claim construction order, the court found claims 1-3 of the ’883 Patent indefinite. Despite that order, MMR would not stipulate to invalidity of the ’883 Patent claims, forcing defendants to file a motion for summary judgment of invalidity. In its opposition, MMR merely reargued its claim construction position. Defendants later moved for attorney fees under 35 U.S.C. § 285.
A Delaware court has denied defendant’s motion for attorneys’ fees under 35 U.S.C. § 285 following summary judgment of invalidity on all of the asserted claims. Plaintiff EON Corp. IP Holdings sued FLO TV and others on U.S. Patent No. 5,663,757 relating to a television program communication network. Following a Markman hearing, the court found eight computer -implemented, means-plus-function terms in the ’757 patent claims indefinite and later granted summary judgment of invalidity. FLO TV moved for a finding of an exceptional case and attorneys’ fees. Evaluating the motion under the Supreme Court’s recent Highmark decision, the court found that neither the substantive strength of EON’s position nor the manner in which it had litigated the case warranted a finding of an exceptional case. The court noted that, even though it eventually agreed with the defendants on indefiniteness, the decision was not an easy one, requiring a supplemental evidentiary hearing and supplemental briefing; nor was the court convinced by FLO TV's argument that EON should have either dropped the case or entered into a settlement earlier, given that any potential recovery from FLO TV would be dwarfed by the costs of litigation. The court noted that it had bifurcated liability and damages in the case, and FLO TV's arguments about potential recovery were merely speculative. Moreover, the court found that EON was allowed to pursue a de minimis infringement claim. “It cannot be the case that a plaintiff may be subjected to monetary sanctions for failing to drop a case against a defendant if the cost of litigation exceeds the potential recovery,” the court wrote. Given that there was no evidence in the record of a settlement offer from FLO TV, the court concluded that this was not a case where a party’s approach to settlement was so unreasonable as to justify finding of an exceptional case.
EON Corp. IP Holdings LLC v. FLO TV Inc., No. 110cv00812 (D. Del. May 27, 2014) [Andrews, J.]