In re: Personalweb Technologies LLC, [2021-1858, 2021-1859, 2021-1860] (November 3, 2023) the Federal Circuit affirmed a $5,187,203.99 award of attorneys’ fees against Personalweb.

In 2018, PersonalWeb asserted the True Name patents against eighty-five Amazon customers (the “customer cases”) across the country for their use of Amazon S3.  After summary judgment was granted against PersonalWeb on two different patents, the district court granted defendant’s motion for attorneys’ fees and costs under 35 U.S.C. § 285, determining that the case was exceptional.  Specifically, the district court found that:

• PersonalWeb’s infringement claims related to the first product were objectively baseless and not reasonable when brought because they were barred due to a final judgment entered in the Texas Action.
• PersonalWeb frequently changed its infringement positions to overcome the hurdle of the day;
• PersonalWeb unnecessarily prolonged this litigation after claim construction foreclosed its infringement theories;
• PersonalWeb’s conduct and positions regarding the customer cases were unreasonable; and
• PersonalWeb submitted declarations that it should have known were not accurate.

“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. To determine whether a case is exceptional under § 285, courts consider “the totality of the circumstances.”  An exceptional case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

The Federal Circuit said that the district court lived with this case and its counsel for years. It thoroughly reviewed the totality of the circumstances to find that this case both lacked “substantive strength” and was litigated in an “unreasonable manner.”  The Court saw no clear error in law or fact by the district court in arriving at these conclusions.

The district court took steps to be fair. For early motion practice, such as the motion to stay and motion for preliminary injunction, the district court recognized the efficiency of these tactics, stating Amazon “would have undoubtedly incurred even more legal fees in actively defending the menagerie of customer cases.” The Federal Circuit noted that the district court reduced Amazon’s requested fees by 25% to account for “otherwise necessary activities” after explaining PersonalWeb’s “abandoned infringement theories serially dominated the case, leading to unnecessary work across multiple categories of litigation.”

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).

In Munchkin, Inc. v. Luv N’ Care, Ltd., [2019-1454] (June 8 2020), the Federal Circuit vacated the award of attorneys fees under 35 U.S.C. § 285 and 15 U.S.C. § 1117(a) after Munchin’s dismissal of its patent claims after losing an IPR, and its voluntary dismissal of its non-patent claims.

The Federal Circuit said it generally gives great deference to a district court’s exceptional-case determination, a district court nonetheless must provide a concise but clear explanation of its reasons for the fee award. However when the bases of an attorney’s fee motion rest on issues that had not been meaningfully considered by the district court, a fuller explanation of the court’s assessment of a litigant’s position may well be needed when a district court focuses on a freshly considered issue than one that has already been fully litigated.

The Federal Circuit said that none of these issues was fully adjudicated before the court on the merits, and given the limited arguments Luv N’ Care made in support of its fee motion, it held that the district court abused its discretion in granting the motion and reversed the exceptional-case determination.

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In Amneal Pharmaceuticals LLC v. Almirall, LLC [2020-1106] (June 4, 2020), the Federal Circuit denied Almirall’s motion for attorneys fees and costs after Amneal dismissed its appeal from an adverse ruling in an IPR, including fees for conducting the IPR.

The Federal Circuit said that generally, our legal system adheres to the “American Rule” under which “each party in a lawsuit ordinarily shall bear its own attorney’s fees.” However, Section 285 changes this.

The Federal Circuit said that regardless of whether it can award fees for work on appeal from a decision in an IPR, Section 285 does not authorize this court to award fees for work that was done before the agency on appeal from an IPR. 

In Dragon Intellectual Property v. Dish Network, [2019-1280, 2019-1284] (April 21, 2020), the Federal Circuit vacated and remanded the denial of attorney’s fees under § 285 because the district court erred in holding that Appellants are not prevailing parties.

Dragon Intellectual Property, LLC separately sued DISH, SXM and eight other defendants, alleging infringement of claims of U.S. Patent No. 5,930,444. DISH filed a petition seeking inter partes review of the ’444 patent, which the Board instituted and subsequently granted SXM’s request for joinder. The district court stayed proceedings as to DISH and SXM pending the resolution of the IPR, but proceeded with claim construction as to the other eight defendants.

Following claim construction in the district court, Dragon, DISH, SXM, and the other eight defendants stipulated to noninfringement, the district court entered judgment of noninfringement in favor of all defendants, including DISH and SXM, based on the district court’s claim construction order and the parties’ stipulation. DISH and SXM then moved for attorneys’ fees under 35 U.S.C. § 285 and 28 U.S.C. § 1927, but before the motions were resolved, Dragon appealed both the district court’s judgment of noninfringement and the Board’s final written decision that the claims were invalid. In a prior decision, the Federal Circuit affirmed the IPR, and dismissed the appeal of non-infringement as moot. On remand, Dragon moved to vacate the finding of non-infringement as moot, which the district court granted, while retaining jurisdiction over the motion for attorneys fees.

The district court agreed that DISH and SXM “achieve[d] a victory” over Dragon but held that neither DISH nor SXM is a prevailing party because they were not granted “actual relief on the merits.” The district court added that “success in a different forum is not a basis for attorneys’ fees” in the district court.

The Federal Circuit said that it has held that a defendant can be deemed a prevailing party even if the case is dismissed on procedural grounds rather than on the merits. Consistent with its decision in B.E. Technology, the Federal Circuit held that DISH and SXM are prevailing parties. Accordingly, it vacated and remanded the district court’s order denying Appellants’ motions for attorneys’ fees under 35 U.S.C. § 285.

The Federal Circuit declined appellants’ invitation to determine whether attorneys’ fees under 35 U.S.C. § 285 could include fees from the IPR. The Federal Circuit remarked “we see no basis in the Patent Act for awarding fees under § 285 for work incurred in inter partes review proceedings that the Appellants voluntarily undertook,” but remanded for the district court’s initial determination.

In Keith Manufacturing Co. v. Butterfield, [2019-1136] (April 7, 2020), the Federal Circuit reversed the district court’s decision not to award attorneys fees Butterfield after dismissal of the action brought by Keith.

Keith Manufacturing Co. brought this lawsuit against Larry D. Butterfield in the United States District Court for the District of Oregon. Eighteen months after the litigation began, the parties filed a stipulation to dismiss all claims with prejudice under Rule 41(a)(1)(A)(ii) of the Fed-eral Rules of Civil Procedure. Shortly after, Butterfield filed a motion for attorney’s fees under Rule 54 of the Federal Rules of Civil Procedure. The district court reasoned that a voluntary dismissal with prejudice is not a “judgment” as required by Rule 54(d).

Rule 54 requires that a claim for attorney’s fees “must be made by motion unless the substantive law requires those fees to be proved at trial as an element of damages.” Fed. R. Civ. P. 54(d)(2)(A). Rule 54 motions must: “(i) be filed no later than 14 days after the entry of judgment; and specify the judgment and the statute, rule, or other grounds entitling the movant to the award.” Fed. R. Civ. P. 54(d)(2)(B)(i)–(ii). “‘Judgment’ as used in these rules includes a decree and any order from which an appeal lies.” Fed. R. Civ. P. 54(a).

The issue before the district court and on appeal was whether the stipulated dismissal with prejudice constitutes a judgment for the purposes of Rule 54. The Federal Circuit said that although Rule 54(d) “posits a relationship between a judgment and its appealability, this relationship exists for the prudential purpose of minimizing piecemeal appellate litigation, not because a shared technical construction mandates the relationship.

The Federal Circuit reasoned that treating a voluntary stipulation with prejudice as a judgment for purposes of attorney’s fees under Rule 54 will not invite parties to engage in piecemeal appellate litigation. The joint stipulation means that, except under rare circumstances, there will not be an appeal on the merits; only the attorney’s fees issue remains. Second, where the case is not a class action, it will not undermine class action procedure. And because both parties can move for attorney’s fees, permitting a Rule 54(d) motion for attorney’s fees after a stipulated dismissal will not affect the overall balance of litigation.

The Federal Circuit vacated the district court’s denial of attorneys fees, and remanded for further proceedings.

In Intellectual Ventures I LLC v. Trend Micro Inc., [2019-1122] (December 19, 2019), the Federal Circuit vacated and remanded a finding of excptionality under 35 USC 285, because it was unclear whether the
district court applied the proper legal standard.

During cross-examination at trial, Intellectual Ventures’s expert
changed his opinion about the meaning of the term “characteristic.” Following the completion of trial in the Symantec action, Trend Micro moved for clarification of the district court’s claim constructions in light of the expert’s changed opinion. During the hearing on Trend Micro’s motion, Intellectual Ventures’s counsel maintained that the expert had not changed his opinion, despite the expert’s clear trial testimony to the contrary. The
district court granted Trend Micro’s motion for clarification. The district court also granted leave for Symantec and Trend Micro to file motions
for judgment as a matter of law that the asserted patent claims were invalid under 35 U.S.C. § 101.

Trend Micro moved for attorney fees under § 285, requesting that the court declare the case exceptional due to the circumstances surrounding Intellectual Ventures’s expert’s changed opinion. The district court granted Trend Micro’s motion, concluding that Intellectual Ventures’s conduct was exceptional solely with respect to this collection of circumstances regarding its expert’s changed testimony, and awarded $444,051.14 in attorneys’ fees. . However, the Federal Circuit found that the case overall was not exceptional, concluding that it would be wrong to say that Intellectual Ventures’s case was objectively unreasonable.

Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. An exceptional case “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is ‘exceptional’
in the case-by-case exercise of their discretion, considering the totality of the circumstances.

Applying an abuse of discretion standard, the Federal Circuit said it was not clear that the district court applied the proper legal standard when it considered whether the case was exceptional under §285. The Federal Circuit said that instead of determining whether the case was exceptional,
it appears that the district court may have focused on whether one discrete portion of the case stood out from other cases, from all the other portions of this case, in terms of either the substantive strength of a position was advocating or the manner with which Intellectual Ventures was litigating.

The Federal Circuit said that Section 285 gives the district court discretion to depart from the American Rule and award attorney fees “in exceptional cases.” Accordingly, under the statute, the district court in this case should
have determined whether the circumstances surrounding the expert’s changed opinion were such that, when considered as part of the totality of circumstances in the case, the case stands out as exceptional.

The Federal Circuit rejected Intellectual Venture’s argument that a case cannot be found exceptional based on a single, isolated act, holding that a district court has discretion, in an appropriate case, to find a case exceptional based on a single, isolated act. Whether the conduct is a single, isolated act or otherwise, the relevant question for the district court is the same. The district court must determine whether the conduct, isolated or otherwise, is such that when considered as part of and along with the totality of circumstances, the case is exceptional, i.e., the case stands out among others with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated. However in all cases there must be a finding of an exceptional case—not a finding of an exceptional portion of a case—to support an award of
partial fees.

In Blackbird Tech LLC v. Health in Motion LLC, [2018-2393] (December 16, 2019), the Federal Circuit affirmed the award of $363,243.80 attorney fees and expenses when Blackbird after nineteen months of litigation, voluntarily dismissed its suit with prejudice and executed a covenant not to sue.

An exceptional case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. There is no precise rule or formula for making these determinations; instead, district courts may determine whether a case is exceptional in the case-by-case exercise of their discretion, considering the totality of the circumstances.

Considering the totality of the circumstances, the District Court found that Blackbird’s case against Appellees is exceptional within the meaning of §285 because it stands out from others with respect to both the substantive strength of Blackbird’s litigation position and the unreasonable manner in which the case was litigated by Blackbird.

The Federal Circuit noted that the District Court found that Blackbird’s litigation position was “meritless” and “frivolous, determining that when challenged on the merits, Blackbird raised flawed claim construction and infringement contentions, and ultimately did not prevail on the merits because Blackbird dismissed its claims with prejudice, and submitted a covenant not to sue on the eve of trial. The Federal Circuit noted that even accepting Blackbird’s proposed construction, the accused device does not include a housing that meets the requirements of independent claim 1.

The Federal Circuit rejected Blackbird’s argument that the district court merely found its position “flawed” and not objectively baseless. The Federal Circuit also rejected Blackbird’s argument that neither Health in Motion nor the district court gave adequate notice of the purported weakness of its position. The Federal Circuit said that the district court was not obliged to advise Blackbird of the weaknesses in its litigation position, and further that the exercise of even a modicum of due diligence by Blackbird, as part of a pre-suit investigation, would have revealed the weaknesses in its litigation position.

The Federal Circuit also agreed that the case stands out with respect to the manner in which Blackbird litigated. The district court found that the case was exceptional because Blackbird litigated in an unreasonable manner. including making nuisance value settlement offers, unreasonable delays in producing documents, and finally, filing a notice of dismissal, covenant not to sue, and motion to dismiss without first notifying Health in Motion’s counsel, on the same day pretrial submissions were due and shortly before its motion for summary judgment was to be decided. The Federal Circuit further found that the district court did not abuse its discretion by considering the need to deter future abusive litigation, noting that Blackbird has filed over one hundred patent infringement lawsuits, and none have been decided, on the merits, in favor of Blackbird.

Finally, the Federal Circuit rejected Blackbird’s complaint about the amount of the award. Specifically the Federal Circuit rejected the argument that defendants should not have spent so much on the defense of such a small claim. The Federal Circuit added that the record supports the conclusion that Blackbird’s misconduct so severely affected every stage of the litigation that a full award of attorney fees was proper.

In Spineology Inc. v. Wright Medical Technology, Inc., [2018-1276] (December 14, 2018), the Federal Circuit affirmed the denial of Wright Medical Technology, Inc.’s motion for attorney fees under 35 U.S.C. § 285, finding no abuse of discretion.

The district court issued a claim construction order in, acknowledging that the parties disputed construction of the term “body,” but it declined to
adopt either party’s construction. Wright and Spineology then filed cross-motions for summary judgment on infringement.  Recognizing the alleged infringement depended on how “body” was construed, the district court
construed “body” consistent with Wright’s noninfringement position and granted Wright’s motion.  Wright then moved for attorney fees, arguing Spineology’s proposed construction of “body,” its damages theories, and its litigation conduct rendered this case “exceptional” under § 285. The district court denied the motion, determining that, while ultimately the court rejected Spineology’s proposed construction, it was not so meritless as to render the case exceptional.  It similarly determined the arguments
made by Spineology to support its damages theory were not so meritless as to render the case exceptional.  The district court concluded that n]othing about this case stands out from others with respect to the substantive strength of Spineology’s litigating position or the manner in which
the case was litigated.

The Federal Circuit agreed with the district court that, while Spineology’s proposed construction of “body” was ultimately rejected at summary judgment, the attempt was not so meritless as to render the case exceptional.  The Federal Circuit stressed that a party’s position ultimately need not be correct for them not to standout.   The Federal Circuit noted that Wright was hardly in a position to complain about Spineology’s continuing to pursue a construction not adopted by the district court in the claim construction order, since the district court declined to adopt Wright’s proposed construction as well.

Even though the case was resolved in summary judgment, Wright complained about Spineology’s damages theory,.  While conceding that perhaps Spineology’s damages theories would not have prevailed, the Federal Circuit said “a strong or even correct litigating position is not the standard by which we assess exceptionality.”

The Federal Circuit noted that Wright was asking the court to basically decide the damages issues mooted by summary judgment in order to determine whether it ought to obtain attorney fees for the entire litigation. The Federal Circuit refused to do so — it will not force the district court, on a motion for attorney fees, to conduct the trial it never had, and the Federal Circuit declined to conduct the trial in the first instance.

The bottom line is exceptional  does not mean “wrong” — otherwise every case would be exceptional.