In Electronic Communication Technologies, LLC v. SHOPPERSCHOICE.COM, LLC, [2019-2087] (July 1, 2020) the Federal Circuit vacated and remanded the district court’s denial of an award of defendant’s attorneys’ fees.
After its motion for judgment on the pleadings that the asserted claim of U.S. Patent No. 9,373,261 was not patent eligible, defendant filed a motion for an award of its attorneys fees. In “considering the totality of the circumstances,” the District Court determined the case was not exceptional, citing the Lanham Act, 15 U.S.C. § 1117), and denied the motion.
The Federal Circuit agreed with defendant that the district court abused its discretion in weighing relevant factors, and by applying the incorrect attorney fee statute. The Federal Circuit held that the District Court clearly erred by failing to address ECT’s manner of litigation and the broader context of ECT’s lawsuit against ShoppersChoice. The Federal Circuit pointed out that there was evidence that ECT sent standardized demand letters and filed repeat patent infringement actions to obtain low-value “license fees” and forcing settlements, and that ECT, under its former name Eclipse, filed lawsuits against at least 150 defendants, alleging infringement of claims in the ’261 patent and in other patents in the ’261 patent’s family. ECT’s demand for a low-value settlement—ranging from $15,000 to $30,000—and subsequent steps—such as failure to proceed in litigation past claim construction hearings—indicates the use of litigation to achieve a quick settlement with no intention of testing the strength of the patent or its allegations of infringement. The Federal Circuit also pointed to a prior California district court decision awarding attorneys fees against ECT, for its in terrorem enforcement tactics, and the fact that the principals of ECT where also associated with “one of the most prolific” non-practicing entity plaintiffs in the United States.
The Federal Circuit complained that there was no mention of the manner in which ECT litigated the case or its broader litigation conduct, saying “[s]Such conduct is a relevant consideration.” While a district court need not reveal its assessment of every consideration of § 285 motions, it must actually assess the totality of the circumstances, and by not addressing the adequate evidence of an abusive pattern of ECT’s litigation, the District Court failed to conduct an adequate inquiry and so abused its discretion. The Federal Circuit instructed that a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under § 285.
The Federal Circuit also said that the district court failed to sufficiently address the objective weakness of Claim 11.
The Federal Circuit vacated and remanded the case for the district court to consider, in a manner consistent with its opinion, ECT’s manner of litigation and the objective unreasonableness of ECT’s infringement claims, and further reference the correct attorneys’ fees provision (35 U.S.C. § 285), rather than the parallel statute for trademark cases (15 U.S.C. § 1117).