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Federal Circuit Reverses Punitive Exceptional Case Fee Award as Improperly Enhanced

On January 22, 2016, the Federal Circuit issued its opinion in Lumen View Technology LLC v. (Dkt. No. 15-1275), in which it vacated and remanded the lower court’s award of enhanced attorney fees under 35 U.S.C. § 285. Although the Federal Circuit affirmed the district court’s finding that case was exceptional under § 285, it also held that the lower court failed to give adequate support for its enhancement of the lodestar fee amount and remanded for recalculation of the award.  

By way of background, the complaint filed in the Southern District of New York alleged infringement of one patent that claimed a method of facilitating bilateral and multilateral decision-making. The defendant operates a specialized search website with a comparison feature that does not use a bilateral or multilateral preference matching process, but instead uses preference data from only one party. In its opposition to the defendant’s motion for judgment on the pleadings, the plaintiff conceded that the asserted claims required the use of preference data from multiple parties. The district court ruled that the asserted claims were directed to an abstract idea and were therefore invalid under 35 U.S.C. § 101, and later granted the defendant’s motion for attorney fees under § 285. 

The Federal Circuit held that the court was justified in deeming the case exceptional under § 285 because even “the most basic” presuit investigation by the plaintiff would have shown that the accused functionality only required preference data from one party, whereas the claimed invention required data from multiple parties. Accordingly, the judge reasonably found that the suit had been filed for the purpose of extracting a nuisance settlement, and that the plaintiff had a “predatory strategy” of baseless litigation.

Yet the Federal Circuit reversed the trial court’s enhancement by a multiplier of two of the lodestar fee amount proffered by the defendant. As factors supporting the enhanced award, the court again cited plaintiff’s “predatory strategy” and frivolous claims. The Federal Circuit explained that adjusting the lodestar amount upward is generally permitted only where the performance of the prevailing party’s attorney is not reflected in the lodestar calculation, and other considerations that are unrelated to counsel’s performance — like deterrence cited by the lower court here — are not an acceptable basis for enhancing fees. 

The Federal Circuit instructed the trial court on remand both to recalculate the fee award and to determine “whether there may be other issues open for consideration relating to attorney conduct,” including whether the court “wishes to utilize Rule 11.” Attendees of oral argument were likely unsurprised at this, as the panel interrupted the plaintiff’s attorney during his opening sentence to ask a series of pointed questions regarding accusations made in briefing, including allegations of personal bias by the judge and unethical conduct by opposing counsel. Rebuked by the panel, counsel for the plaintiff was forced to concede that there was little, if any, evidence in the record to support such allegations.

Patent litigators should heed three lessons from this case. First, the question whether to award § 285 exceptional case attorney fees can properly be informed by a desire to deter future bad conduct, but that same desire is not an appropriate consideration in determining the amount of such an award. Second, § 285 is no stand-in for rules governing attorney conduct during litigation, such as Rule 11. Third, if you intend to cast aspersions against opposing counsel and the trial judge before the Federal Circuit, the record had better support your allegations.

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James Wodarski is a Mintz trial attorney who concentrates his practice on intellectual property litigation. Jim represents clients in federal district and appellate courts. He handles disputes involving smartphones, core processor circuits, digital imaging software, and other technologies.
Andrew H. DeVoogd is a patent litigator and trial attorney whose practice encompasses a wide range of technologies. He represents major technology companies in International Trade Commission investigations, and shares his insights on Mintz's IP Viewpoints.