Patent Docs: Damages

Damages

January 01, 2019

December 18, 2018

Spineology, Inc. v. Wright Medical Technology, Inc. (Fed. Cir. 2018)

The Supreme Court changed the calculus on what conduct satisfies the "exceptional case" criteria for awarding attorney's fees under 35 U.S.C. § 285 in its Octane Fitness, LLC v. ICON Health & Fitness Inc. and Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. decisions. Under this clarifying precedent, the standard for finding an exceptional case in patent law was based on judicial discretion: district courts should exercise this discretion considering the totality of the circumstances and "in light of the considerations' underlying the grant of that discretion." Since these decisions, prevailing parties have increasingly sought and district courts have increasingly granted motions for finding a case exceptional and awarded attorneys' fees and other sanctions on this basis. Last Friday, the Federal Circuit rendered an opinion, in Spineology, Inc. v. Wright Medical Technology, Inc. seeking to rein in the more vigorous assertions of the exceptional case doctrine under these Supreme Court precedents.

The case arose in litigation over Reissue Patent No. RE42,757, arising from U.S. Patent No. 6,383,188, and directed to an "expandable reamer" used, according to the opinion, in orthopedic surgical procedures. During claim construction, each party proposed a meaning for the claim term "body" as used in asserted claim 15:

15. An expandable reamer for use in bone and related tissue in a mammal comprising:
    an elongated hollow body having a proximal end and a distal end, sized and configured to engage bone and related tissue in the mammal;
    an elongated blade carrier having a proximal end and a distal end, the blade carrier disposed within the body;
    a set of blades pivotally attached proximate the distal end of the blade carriers; the set of blades having at least a first retracted position relative to the body, the body having a maximum cross-sectional diameter transverse to a longitudinal axis of the body that is substantially at least as large as a maximum cross-sectional diameter of the blades in the first retracted position, and a second fully expanded position having a diameter greater than the maximum cross-sectional diameter of the body; and
    an manually actuated activation mechanism that moves the set of blades from the first retracted position to the second fully expanded position and any expanded position therebetween.

The District Court did not adopt either party's proposed meaning in its claim construction order. Thereafter, the parties filed cross-motions for summary judgment on infringement and the District Court ruled in defendant Wright Technology's favor (a decision affirmed by the Federal Circuit in an earlier appeal). In granting Wright's motion, the District Court adopted Wright's definition of the term "body" in the claims. This decision prompted Wright to seek attorneys' fees, contending that the case was exceptional based on plaintiff's construction of the term "body," damages theories asserted (but never pursued because the case was decided on summary judgment) and "litigation conduct." The District Court did not grant the motion, holding that Spineology's claim construction and its damages theories were "not so meritless" as to warrant a finding that this was an exceptional case, and 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 affirmed, in an opinion by Judge Moore joined by Chief Judge Prost and Judge Dyk. In citing the standard of review, abuse of discretion, the Court acknowledged the high bar Wright was required to clear to convince an appellate court to overturn the decision below. With regard to Wright's first argument, that Spineology's proposed definition for the term "body" was so unreasonable as to be meritless and thus pursuing it after the District Court declined to adopt it, the opinion punctures it with three words: "[w]e are unpersuaded." The panel cites to SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015), for the principle that "[a] party's position . . . ultimately need not be correct for them not to 'stand[] out'," and states that "Wright cannot fairly criticize Spineology for 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."

Turning to Spineology's damages assertions, the panel notes that this ground is brought even though there was no trial and thus no "consideration of or rulings on damages." The bases for Wright's contentions were Spineology's expert report on damages, its "lost profits analysis offered by Spineology's expert" (which allegedly "improperly calculate[d] the sales Spineology would have made "but for" Wright's infringement"), and the expert's reasonable royalties analysis for "improperly relying on the entire market value rule ("EMVR") and employing a flawed royalty rate." Once again, the panel was not persuaded. First, the opinion notes that "[t]his court has affirmed lost profit awards based on a wide variety of reconstruction theories," citing Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1263–64 (Fed. Cir. 2013), and characterizes Spineology's damages arguments as "colorable" with regard to their expert's reliance on the EMVR, citing Interactive Pictures Corp. v. Infinite Pictures, Inc., 274 F.3d 1371, 1384–86 (Fed. Cir. 2001). While recognizing that these arguments might not have prevailed at trial, the opinion first states that "a strong or even correct litigating position is not the standard by which we assess exceptionality," citing Stone Basket Innovs., LLC v. Cook Med. LLC, 892 F.3d 1175, 1180 (Fed. Cir. 2018), and that the District Court stated that it would not have found Spineology's damages arguments to be "so meritless as to render the case exceptional" even if it had excluded their expert's testimony. "On this record," the Federal Circuit states, "where the district court never reached the parties' damages arguments, we are in no position to upend its determination that [the expert's] analysis was not meritless" (emphasis in opinion). The panel goes on to say that:

Wright asks this 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. This we will not do. We will not force the district court, on a motion for attorney fees, to conduct the trial it never had . . . and we—an appellate court—will certainly not conduct that trial in the first instance.

Then the opinion issues a pointed warning against this sort of appeal:

A district court need not, as Wright seems to urge, litigate to resolution every issue mooted by summary judgment to rule on a motion for attorney fees. And we need not, as Wright requests, get into the weeds on issues the district court never reached. . . . We see no error in the district court's determination that, on this record, the case was not exceptional, and we caution future litigants to tread carefully in their complaints about district courts not doing enough.

Finally, with regard to the litigation (mis)conduct basis for Wright's appeal, in addition to being unpersuaded the Federal Circuit takes its own admonition against "get[ting] into the weeds" by relying on the District Court's better understanding of the issues, saying that the District Court is in a better position to make these determinations (citing similar language in the Highmark case). The panel also rejected Wright's request to remand for further argument on the "totality of the circumstances," saying that it sees no evidence of abuse of discretion by the District Court, and that "[t]he district court 'had no obligation to write an opinion that reveals [its] assessment of every consideration,' and remand is unnecessary to obtain one," citing Univ. of Utah v. Max-Planck-Gesellschaft, 851 F.3d 1317, 1323 (Fed. Cir. 2017).

The opinion put the rhetorical cherry on top of its holding by awarding costs to Spineology. Whether this case remains an outlier or warning for trial counsel to take heed of the need to plead carefully regarding an award of attorneys' fees and determination of exceptional case status remains to be seen, but district courts will certainly appreciate the extent to which the prudent exercise of their discretion remains tantamount before the Federal Circuit on these questions.

Spineology, Inc. v. Wright Medical Technology, Inc. (Fed. Cir. 2018)
Panel: Chief Judge Prost and Circuit Judges Dyk and Moore
Opinion by Circuit Judge Moore

Posted at 11:59 PM in Damages, Federal Circuit | Permalink | Comments (0)

December 10, 2018

SAP America, Inc. v. InvestPic, LLC (N.D. Tex. 2018)

By Michael Borella --

We wrote about this case six months ago, regarding InvestPic's appeal to the Federal Circuit over having its patent invalided under 35 U.S.C. § 101 in the Northern District of Texas. InvestPic did not get the outcome it was looking for. Here, the case is back in the District Court to consider SAP's motion for recovery of attorney's fees. As we will see, InvestPic ended up not only with its patent invalidated, but also owing a large chunk of money to SAP.

SAP was originally granted attorney's fees in 2017, after the District Court ruled, on the pleadings, that InvestPic's U.S. Patent No. 6,349,291 was invalid under § 101. As noted above, InvestPic appealed and lost.

The 2017 Proceedings

In the 2017 ruling, the District Court wrote:

A district court may find that a patent case is exceptional and award attorney fees to a prevailing party. 35 U.S.C. § 285. A case is exceptional if it stands out from other cases with respect to the substantive strength of a party's litigating position considering both the governing law and the facts of the case or if the case stands out in the unreasonable manner in which the case was litigated.

Notably, district courts have discretion when determining whether a case is exceptional and are to consider the totality of the circumstances rather than any bright-line rule.

Regarding InvestPic's litigation position, the District Court observed that the patent was duly issued by the USPTO and therefore presumed valid. The District Court read into Judge Mayer's concurrence in the Ultramercial v. Hulu case to note that this presumption of validity might not apply to a patent that is challenged under § 101. But it went on to state that "a patent owner should be entitled to rely on the fact that the claims were reviewed and approved by the USPTO and should be allowed to attempt to enforce his or her patent whether this is done by demand for licensing or by enforcement of patent rights in a court." Thus, in the District Court's view, just because claims were found lacking under § 101 does not automatically make a case exceptional.

But in this case, "Investpic was specifically warned by the USPTO, in an opinion issued in connection with a post grant review, that it looked very unlikely that these claims were directed toward patentable subject matter and very likely that the claims were invalid." Despite the fact that the USPTO did not actually address the § 101 issue and only invited InvestPic to submit the patent for such a review, the District Court concluded that this "created a serious cloud on the . . . claims."

Thus, the District Court concluded that the USPTO's warning, in combination with InvestPic's not taking any action on it and continuing to assert the patent, resulted in a weak litigating position.

Regarding the manner in which InvestPic litigated the patent, the District Court took a dim view toward the owners of InvestPic using a front company to engage with SAP salespeople and to learn about the allegedly infringing products. Notably, "[the owners] held themselves out to be only employees of Regulus and failed to disclose their relationship with InvestPic and their interest in the outcome of this lawsuit." This, according to the District Court, amounted to conducting "self help discovery under a pretense," and also rose to the level of unreasonable litigation conduct.

Accordingly, the District Court granted SAP's motion for attorney's fees.

The 2018 Proceedings

This proceeding, however, was put on hold by the Federal Circuit appeal. Now back in the District Court, an order granting much of what SAP requested was issued on December 4, 2018.

SAP requested a total of $939,306.61, which did not include any time from attorneys and staff that worked less than 10 hours on the case. But this amount included time that SAP's attorney spent on a petition for covered business method review which was never filed. The District Court declined to award fees for the petition.

Also, the District Court found that the rates charged by SAP's attorneys ("$745.00 – $1,175.00 per hour for partners to $405.00 – $650.00 per hour for associates") were excessive. In particular, the majority of the partner's rates were above the 90th percentile for Texas, and the District Court found no evidence to justify the rates being so high. Accordingly, the District Court reduced all partner rates by 35% and all associate rates by 15%. Based on these adjustments, the total amount actually awarded was $679,420.46.

Analysis

Focusing just on the patent-eligibility issues for the moment, here we have a successful attempt to obtain attorney's fees based on a supposedly weak litigating position under § 101. Sure, InvestPic's owners engaged in shady practices. That may have been enough to award attorney's fees alone.

But the District Court's reliance on a USPTO warning (not an actual USPTO decision or rejection, but just a warning) may be extreme. Since Alice v. CLS Bank, just about any patent involving software or a business method can have its validity challenged under § 101. Further, the USPTO is not a final or a consistent arbiter of what is or is not patent-eligible. If anything, the USPTO applies the law in a markedly erratic fashion, with much discretion granted to the personal opinions of primary examiners and PTAB judges. Thus, relying on an unofficial or provisional observation of the USPTO to find a case exceptional is a rather unusual step.

To further drive home this point, not even the federal courts have been able to crack the § 101 egg. It is well-known that multiple federal judges have commented on the record that Alice was hard to apply in practice. Judge Wu of the United States District Court for the Central District of California criticized Alice for setting forth an "I know it when I see it" test. Judge Pfaelzer, a colleague of Judge Wu, wrote that the Supreme Court's patent-eligibility cases "often confuse more than they clarify [and] appear to contradict each other on important issues." More recently, the Federal Circuit's Judge Plager, wrote that the post-Alice §101 inquiry "renders it near impossible to know with any certainty whether the invention is or is not patent eligible." And these are just a few examples of judicial confusion. There are more.

Just a few months ago, the Federal Circuit ruled 2-1 that § 101 jurisprudence was too murky to be used as the basis of an attorney's fees award. While the facts between that case and this one differ, the law does not.

Posted at 11:59 PM in Damages, District Court, Patentable Subject Matter | Permalink | Comments (5)

September 30, 2018

Gust, Inc. v. AlphaCap Ventures, LLC (Fed. Cir. 2018)

By Michael Borella --

Almost two years ago, we covered a dispute in the Southern District of New York (which began in the Eastern District of Texas) involving plaintiff AlphaCap, a non-practicing entity that aggressively asserted its patents against a number of targets, including Gust. In short, when Gust didn't quickly settle, AlphaCap offered to dismiss its claims. But Gust wanted AlphaCap to pay its attorneys' fees or assign AlphaCap the patents. After some back-and-forth between the parties, the District Court dismissed the case but awarded Gust attorneys' fees under 35 U.S.C. § 285. Gutride Safier LLP, attorneys for AlphaCap, were held jointly and severally liable for these fees and costs under 28 U.S.C. § 1927.

Notably, the District Court stated that the case was "exceptional" under § 285 because the Supreme Court's Alice Corp. v. CLS Bank Int'l opinion "gave AlphaCap clear notice that the AlphaCap Patents could not survive scrutiny under 35 U.S.C. § 101." The basis of this conclusion was that "the claims were directed to crowdfunding, a fundamental economic concept and way of organizing human activity, and that this was an abstract idea." The District Court further held that "the claims did not include an inventive concept sufficient to render the abstract ideas patent eligible under Alice."

Regarding § 1927, the District Court found Gutride to have acted unreasonably and in bad faith during the dispute, because it was unwilling to recommend settlement "despite knowing that Alice doomed the claims and stating that the case was 'not worth litigating'."

Gutride brought this appeal to the Federal Circuit solely on the issue of its liability for the attorneys' fees. Judge Linn wrote the opinion of the Court and was joined by Judge Hughes. Judge Wallach dissented.

The Majority Opinion

28 U.S.C. § 1927 states:

Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct.

Applying the law of the Second Circuit, a successful motion under § 1927 requires that: (i) the case was "entirely without color", and (ii) was "brought in bad faith—that is, motivated by improper purposes such as harassment or delay." These determinations require a court to "provide a high degree of specificity in the factual findings."

Addressing the first prong, the Gutride referenced the "unsettled state of the law following the decision in Alice" as evidence that its case had color. Gust responded by contending that "the § 101 law post-Alice was settled, because all cases dealing with abstract ideas in patents cited the two-step Alice framework," and that "the claims here were not even questionably patent eligible."

The Federal Circuit agreed with Gutride, noting that there was a "relative paucity of § 101 cases that were decided by this court between Alice and AlphaCap's complaint in Texas." Indeed, several of the Federal Circuit's own cases from this time period "recognized the uncertainty in the application of Alice." The Court further observed that "[w]hen the applicable law is unsettled, attorneys may not be sanctioned merely for making reasonable arguments for interpreting the law." Instead, "it is particularly important to allow attorneys the latitude necessary to challenge and thus solidify the legal rules without the chill of direct economic sanctions." Also, according to the Court, Gutride made a colorable argument that the claims met the requirements of § 101 due to being analogous to DDR Holdings, LLC v. Hotels.com L.P., while Gust's analogy between the claims and those found ineligible in another Southern District of New York case was unpersuasive. Finally, the Court strongly disagreed with Gust that the mere existence of the two-step Alice framework implied that § 101 law was settled, and found the District Court's patent-eligibility analysis to be conclusory.

When applying the second prong, the District Court concluded that Gutride's actions constituted bad faith based on three grounds: (i) "Gutride knew that AlphaCap's patents were not patent eligible after Alice, and initiated the litigation anyway to extract a nuisance settlement"; (ii) Gutride's opposition to transferring the case to the Southern District of New York; and (iii) "Gutride's failure to end the case through settlement, dismissal, or a covenant not to sue."

Regarding Gutride's alleged knowledge that the patents were not eligible, the District Court put a fair amount of weight on Gutride's statement that "the case is 'not worth litigating'." But the Federal Circuit viewed this statement as a negotiating position, noting that "[i]n the context of advocating for settlement with the opposing party to settle, this is an inoffensive assertion that the calculus favors settlement, not an admission that the patents were invalid."

With respect to the nuisance settlement, the Federal Circuit was more sympathetic. It acknowledged that "AlphaCap bears relatively little risk and cost in filing its infringement actions, as compared with the relatively high costs incurred by defendants to defend the lawsuit." Thus, by "encouraging quick settlements at values far below the cost of defending an infringement action on the merits, AlphaCap was able to obtain not insignificant revenues without having to test the merits of its position." Nonetheless, the Court found that "Rule 11, with its procedural safeguards, already addresses attorneys' complicity in the filing of frivolous and improper litigation" and that "§ 1927 only applies to actions that result in unreasonable and vexatious multiplication of proceedings." Consequently, the Court ruled with Gutride on this issue.

The Court also sided with Gutride regarding its resistance to the transfer. Driving this conclusion was the fact that the Eastern District of Texas was a proper venue, that Gust had agreed to venue discovery, and because "at least some third-party users were found to reside in the Eastern District of Texas." Supporting these points, the Court observed that "an attorney need not bring a case in the most convenient forum, but only a proper forum."

Finally, the Court also agreed with Gutride that failure to settle is not evidence of bad faith. Notably, "[t]he decision to settle or grant a covenant not to sue is wholly committed to clients, not their attorneys." Thus, Gutride could not be held liable for its client's decision.

For these reasons, the Court sided with Gutride and reversed the award of fees under § 1927.

Judge Wallach's Dissent

Writing in dissent, Judge Wallach faulted the majority for reversing the District Court. A significant part of Judge Wallach's beef was based on the § 101 issues. He disagreed that the law regarding patent-eligibility was unsettled, stating it was that "the framework with which we have consistently assessed patent eligibility under § 101 since its rendering."

Attacking the claims, Judge Wallach found them "directed to data organization and use of customizable profiles to facilitate patronage," which in his view were clearly abstract ideas. While the majority found that § 101 jurisprudence as a whole was evolving, Judge Wallach stated that no claims similar to AlphaCap's were determined eligible by the Federal Circuit during the litigation. In his words:

The Asserted Claims merely recite a series of steps for storing and organizing investment data that could all be performed by humans without a computer, and Gutride's attempt to assert otherwise was frivolous given that the abstract idea here is not meaningfully different from the ideas found to be abstract in other cases before the Supreme Court and our court involving methods of organizing human activity.

He also found additional elements lacking an inventive concept under Alice, as they were all involving conventional and generic terms. Thus, with respect to § 101 as a whole, Judge Wallach concluded that "[t]he Patents-in-Suit clearly do not fall in that interstitial area where doubt may reasonably exist." Judge Wallach was silent regarding the fact that he and the majority coming to two different conclusions when applying Alice to the claims suggests that the law surrounding § 101 is still unsettled.

Determining that the District Court did not abuse its discretion in finding that AlphaCap's case lacked a colorable basis, Judge Wallach moved on to bad faith.

Particularly, he found no flaw in the District Court's assessment of Gutride being "motivated by improper purposes such as harassment or delay." He did not address the majority's position that Rule 11 controlled, and instead found "we must holistically consider Gutride's entire course of conduct in order to determine if it acted in bad faith by delaying dismissal of its suit, when it had knowledge of the suit's frivolous nature." Further, he found that the "not worth litigating" statement occurred early enough in the case that Gutride could have pushed to settle the dispute much earlier. Judge Wallach saw this as a "bad faith attempt to multiply the proceedings."

Turning to venue, Judge Wallach pointed to evidence that Gutride claimed that Gust had ties to the Eastern District of Texas, could not establish that said ties existed, and only after discovery was able to show that Gust had some users in the district. This, apparently, was enough for Gutride to fail the bad faith sniff test.

Consequently, Judge Wallach would have affirmed the District Court.

Analysis

Regarding overly-aggressive litigation and the venue issue, Gutride may have indeed pushed the envelope. On whether its conduct rises to the level of bad faith, the majority was probably correct to err on the side of caution. Judge Wallach, on the other hand, gave more deference to the District Court.

But the majority was clearly correct to conclude that § 101 jurisprudence was too murky during the time of the litigation (early 2015 – late 2016) to conclude that AlphaCap's case was without color.

In 2015, the Federal Circuit found no claims patent-eligible under § 101. But this does not imply that all business method and software claims involving data manipulation were categorically ineligible -- it merely suggests that the Court did not hear a case with claims that passed the test. Also, not long prior to this time frame, there were multiple federal judges commenting on the record that Alice was hard to apply in practice. Judge Wu of the U.S. District Court for the Central District of California criticized Alice for setting forth an "I know it when I see it" test. Judge Pfaelzer, a colleague of Judge Wu, wrote that the Supreme Court's patent-eligibility cases "often confuse more than they clarify [and] appear to contradict each other on important issues."

More recently, Judge Wallach's Federal Circuit colleague, Judge Plager, wrote that the post-Alice §101 inquiry "renders it near impossible to know with any certainty whether the invention is or is not patent eligible." And these are just a few examples of judicial confusion. There are more. The law was not settled during the case, and is even less settled now.

Thus, it is hard to agree with Judge Wallach. Moreover, with a § 101 challenge being routinely raised against any asserted software or business method patent, the impact of penalizing plaintiffs and their attorneys for exercising such a patent would be to shut off nearly all software or business method litigation.

That is not to say that bad actors should not be punished. But contending that § 101 is settled law to do so is absurd. The only thing settled about patent-eligibility in the last four years is that it is unsettled.

Gust, Inc. v. AlphaCap Ventures, LLC (Fed. Cir. 2018)
Panel: Circuit Judges Wallach, Linn, and Hughes
Opinion by Circuit Judge Linn; dissenting opinion by Circuit Judge Wallach

Posted at 11:59 PM in Damages, Federal Circuit, Patentable Subject Matter | Permalink | Comments (2)

July 29, 2018

NantKwest, Inc. v. Iancu (Fed. Cir. 2018) (en banc)

En Banc Federal Circuit Finds § 145 Appellants Generally Will Not Be Liable for Patent Office's Attorneys' Fee

By Kevin E. Noonan & Josh Rich --

The Federal Circuit handed down its en banc decision on Friday regarding the question of whether under 35 U.S.C. § 145 an applicant must pay attorneys' fees as part of the "expenses" the statute mandates, in NantKwest, Inc. v. Iancu (Fed. Cir. 2018) (en banc). Generally, under the "American Rule," parties in U.S. litigation are responsible for their own fees regardless of the outcome of the case. In NantKwest, Inc. v. Iancu, the U.S. Patent Office sought to turn that rule on its head for appeal from adverse patent decisions, wherein the Patent Office would recover its attorneys' fees -- along with all other expenses -- regardless of whether the applicant won or lost the case. The District Court rejected the Patent Office's argument, and a divided panel of the Federal Circuit reversed the District Court's decision and ordered payment of the Patent Office's fees. The Federal Circuit chose to review the panel's decision sua sponte. The en banc Federal Circuit affirmed the District Court's decision, over a spirited dissent, holding that the Office was not entitled to its attorneys' fees in appeals under § 145.

There are two ways to appeal an adverse Patent Trial and Appeal Board decision arising out of patent prosecution (§ 145 appeals are not available for reexamination, post-grant and inter partes review, or derivation proceedings). First, under 35 U.S.C. § 141(a), a dissatisfied applicant can pursue an appeal to the Federal Circuit as a routine appeal of an agency decision under the Administrative Procedure Act. In such an appeal, the review is confined to the record before the Patent Office. Second, under 35 U.S.C. § 145, the applicant can bring a civil action in the U.S. District Court for the Eastern District of Virginia. In such an action, the parties can conduct full discovery and introduce new evidence, including oral evidence, that was not presented to the Patent Office in prosecution. The § 145 action is resolved by the same methods generally used in other district court cases, including motion practice and trial on the merits.

One downside of appealing under § 145 has always been financial: the statute provides that "[a]ll the expenses of the proceedings shall be paid by the applicant." Ever since the predecessor to the current statute was enacted in 1839, the Patent Office had required a § 145 appellant to pay expenses including travel expenses, expert fees, and document reproduction costs, but not attorneys' fees. That changed with the NantKwest case, where the Patent Office -- for the first time in over 170 years -- demanded that NantKwest pay the Patent Office's attorneys' fees incurred in the § 145 action, win or lose.

The majority and dissent reached opposite conclusions based on two major distinctions. First, the majority placed the emphasis on the statutory language "expenses," not "all"; the dissent focused on "all" rather than "expenses." The majority also considered the language somewhat vague, not "specific and explicit," whereas the dissent considered it so clear as to not need further consideration as to clarity. Surprisingly, however, neither the majority nor the dissent placed much emphasis on the Patent Office's 170 years of conduct under the statute, which would seem to be the clearest indication of what it believed the statute to mean at the time of enactment and many years thereafter.

The en banc majority started its attorneys' fees analysis with the American Rule as a "bedrock principle" of American jurisprudence: that each party pays its own attorneys' fees, win or lose. The American Rule is rooted in fair access to the legal system for the poor, as well as the difficulty of litigating the reasonableness of fees. That is, the American Rule -- unlike the presumption in England -- chooses to value allowing less wealthy litigants to contest a case over demanding that a prevailing party avoid any loss whatsoever from litigation.

The American Rule does not apply in all cases, however; Congress has, from time to time, chosen to establish a presumption in certain cases that a prevailing litigant will recover attorneys' fees. No magic words are required for fee-shifting, but for a law to do so, according to the Supreme Court, Congress's intent must be "specific and explicit"; see, Runyon v. McCrary, 427 U.S. 160, 185 (1976).

The majority first considered whether the presumption of the American Rule applied under § 145. The Patent Office argued that it should not, because it relates only to cases in which fees are shifted from a losing party to a prevailing party. The Patent Office relied heavily on a Fourth Circuit case, Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015), in which language from the Lanham Act nearly identical to § 145 was held not to require consideration of the American Rule in compelling an appellant's payment of the Patent and Trademark Office's attorneys' fees in trademark cases. The majority chose to reject the Shammas holding, finding that it "cannot be squared with the Supreme Court's line of non-prevailing party precedent applying the American Rule." The Patent Office also relied on Sebelius v. Cloer, 569 U.S. 369 (2013), which interpreted a statute that allows prevailing "Vaccine Court" petitioners to recover reasonable attorneys' fees, but also permits a discretionary award of fees for unsuccessful petitions "brought in good faith [with] a reasonable basis for the claim." The majority did not dispute or reject the Supreme Court's Sebelius holding, but found that the underlying statute was a straightforward instance of a specific and explicit intent by Congress to overcome the presumptive American Rule. As a result, the majority found no reason to avoid the presumption of the American Rule in determining whether § 145 required an applicant to pay the Patent Office's attorneys' fees.

The majority thus started with the presumption of the American Rule and considered whether § 145's requirement that the applicant pay "all of the expenses of the proceedings" showed a specific and explicit intent to overcome the American Rule. In doing so, it viewed the key question as whether attorneys' fees would be considered "expenses" in the context of § 145, which meant an investigation of the meaning of the term in 1839. While one dictionary definition would support a meaning that would include attorneys' fees, the majority found that most contemporaneous dictionary definitions would not. Similarly, other statutes' use of "expenses" generally did not include attorneys' fees. In some cases, the statutes identified expenses and attorneys' fees as different categories, some others explicitly included attorneys' fees in expenses. And where the Patent Act discusses fee awards (specifically, § 285), it does so explicitly, with language quite different from the more general term "expenses" used in § 145. Furthermore, judicial decisions (both from the mid-1800s and more recently) in relation to expenses and attorneys' fees have viewed the two as separate categories. Finally, the majority considered that the Patent Office's interpretation would require a prevailing appellant to pay the losing Patent Office's attorneys' fees. Such an anomalous departure from the presumption of the American Rule would require extraordinary clarity in the statute; the majority did not find it. Thus, the majority did not find the specific and explicit intent to overcome the American Rule and refused to award the Patent Office its attorneys' fees as part of "all of the expenses of the proceedings" in a § 145 case.

Having reached a conclusion based on its analysis of the statutory language, judicial decisions, and contemporaneous interpretation, the majority dealt with additional policy and legal arguments raised by the Patent Office and dissent. It discussed the Patent Office's citations to Supreme Court cases, finding the language did not support the Patent Office's arguments when read in context. It then dealt with the dissent's citation of the legislative history of the 1870 amendment to § 145's predecessor. First, honoring the legacy of Justice Scalia, the majority questioned whether legislative history should even be considered. But even so, it found that the legislative history was opaque in changing the statutory language from "costs" capped at $25 to uncapped "expenses." Certainly, the majority agreed, that was intended to broaden the recoverable amounts, but it provided no guidance as to whether attorneys' fees was intended to be one of the recoverable categories. The majority also rejected the dissent's reliance on the Patent Office's 1836 budgetary provisions (which included salaries of employees as one of the "expenses of the Patent Office") as being such a different context as to be uninformative. Finally, it rejected the dissent's suggestion that § 145 actions would be scourge on the patent system as a whole if the Patent Office were required to pay its own attorneys' fees. There are only a handful of § 145 actions per year -- if that many -- and the Patent Office's attorneys' fees can be spread over hundreds of thousands of applications. As the majority calculated it, the attorneys' fees from § 145 actions adds up to less than $2 per application, scarcely a disabling imposition.

Thus, having rejected the Patent Office's arguments, the majority found that the general American Rule should apply and parties to § 145 actions should pay their own attorneys' fees. It demanded specific and explicit evidence of a Congressional intent to deviate from the American Rule and found none, either in the statutory language or other evidence. While the Fourth Circuit came to the opposite conclusion in the Shammas case (in the trademark context), the Federal Circuit concluded that Shammas's interpretation of the governing law (both statutory language and case law) was wrong. There was insufficient evidence to overcome the American Rule and a dissatisfied applicant's payment of "all of the expenses of the proceedings" in a § 145 action does not require it to pay the Patent Office's attorneys' fees.

The dissent

Chief Judge Prost's dissent (joined by Judges Dyk, Reyna, and Hughes) makes the more straightforward (if not better) argument. Its straightforwardness comes from the plain language of the statute, that an applicant who avails herself of the provisions of § 145 must pay "all expenses of the proceedings." Expenses according to the dissent would include attorneys' fees (despite the long history to the contrary), and use of the word "all" further supports this construction of the statute. The Fourth Circuit employed a similar construction to 15 U.S.C. § 1071(b)(3) (having language regarding expenses "almost identical" to the language of § 145) in Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015), and another reason put forth in the dissent was the perceived (unnecessary) circuit split that the majority's decision raises.

The dissenting opinion notes that a disappointed applicant has two options for appeal: direct appeal to the Federal Circuit and recourse to the district court at issue in this appeal. "Litigation in district court is expensive and time-consuming, much more so than direct appeals to this court limited to the administrative record," the opinion reminds us (although in view of the difference between the resources of the Federal government and most applicants this seems not particularly relevant to the statutory construction issue before the Court). Citing Hyatt v. Kappos, 625 F.3d 1320, 1337 (Fed. Cir. 2010) (en banc), aff'd and remanded, 566 U.S. 431 (2012), the opinion emphasizes that an applicant must pay "all expenses of the proceedings" and this responsibility attaches "regardless of the outcome," i.e., whether the district court rules for or against the applicant. The dissent then points out PTO outlays in this case, for expert witnesses (which payments are not at issue) and agency attorneys (which are) and that the Office did not employ outside counsel. The significance (insofar as there is any) of this arrangement was that the "expenses" for using these lawyers stemmed from "the time they devoted to this case was not available for other work," citing Wis. v. Hotline Indus., Inc., 236 F.3d 363, 365 (7th Cir. 2000), as precedent for these considerations. As evidence of the PTO's frugality and absence of overreach, the dissent noted that "the PTO is not seeking reimbursement for its lawyers' time at market rate" but rather for "personnel expenses it actually incurred in these proceedings."

Regarding how the term "expenses" should be construed, the dissent looks at the meaning of the term when the Patent Act of 1836 was enacted (and the district court option first became available to applicants), specifically:

[T]he applicant shall pay into the Treasury of the United States, or into the Patent Office, or into any of the deposit banks to the credit of the Treasury . . . the sum of thirty dollars . . . . And the moneys received into the Treasury under this act shall constitute a fund for the payment of the salaries of the officers and clerks herein provided for, and all other expenses of the Patent Office, and to be called the patent fund. Patent Act of 1836, ch. 357, § 9, 5 Stat. 117, 121 (emphasis added).

While acknowledging that "expenses of the Patent Office" and "expenses of the proceedings" is not exactly the same language, the dissent relied upon this language to establish that Congress (perhaps) in 1836 'understood salaries to be within the scope of 'expenses.'" But the dissent relies less on this citation and more on the "plain meaning" of the term, citing Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 566 (2012), for the rubric that plain meaning should be used when Congress has not defined a term with particularity. Again harkening back to the 1830's, the dissent quotes Webster's original American Dictionary of the English Language as including "employment and compensation" to fall with the scope of "expense" and states that the dictionary definitions cited by the majority actually support its definition of "expenses" to include personnel expenditures and out-of-pocket attorneys' fees. In addition, the dissent cites Taniguchi (albeit not a Section 145 case or even a patent case) for including attorneys' fees as "expenses." And the dissent criticizes the majority's reliance on other statutes on the grounds that these statutes were enacted after (and in most cases significantly after) the 1836 Patent Act and the Supreme Court's practice of using contemporaneous statutes in these instances, citing W. Va. Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 88 (1991).

Next, the dissent distinguishes the majority's argument that other sections of the Patent Act (specifically, § 285) expressly recite attorneys' fees as meaning that failure to do so in § 145 is meaningful for statutory construction here. The dissent notes its opinion that "Congress intended a broader compensation scheme under § 145 than under § 285" by comparing "[a]ll the expenses of the proceedings" with "reasonable attorneys' fees," saying that "Congress can certainly employ a broad word over other narrower alternatives if it so chooses." Additionally, the "overhead" aspect of agency attorneys' compensation from which the fees at issue here were calculated is persuasive to the dissenting judges that such fees should be considered expenses. The difference in the "setting" of the two sections (district court litigation versus agency proceedings) are significant to the dissent because "§ 145 proceedings are, 'in fact and necessarily, a part of the application for the patent'" for the dissenters, citing Gandy v. Marble, 122 U.S. 432, 439 (1887). In this reading of the statute, expenses under §145 "are a direct counterpart to the application fees that are designed to reimburse the PTO's examination expense[s]," for which there is little argument that they are the responsibility of an applicant.

Once having established that for Chief Judge Prost and her brethren the term "expense" should include agency attorneys' fees, the dissent then considers the use of "all" as emphasizing that the term should be construed broadly (see similar arguments by Chief Justice Burger in Diamond v. Chakrabarty and Justice Scalia in Merck v. Integra). In Chief Judge Prost's view, the majority's construction would "leave[] little work for 'all' to do" because "simply saying 'the expenses' would seem to do just as well." According to Chief Judge Prost, "Congress used the word 'all' to broadly and comprehensively capture anything fairly regarded as an 'expense,' resolving any lingering doubt in favor of inclusion [of the PTO's attorneys; fees as part of the Office's "expenses"]."

Finally, the dissenting opinion sites the legislative history (from the 1836, 1839, and 1870 Patent Acts), justifying this analysis by Supreme Court practice in assessing fee shifting in the context of the American Rule; see Ruckelshaus v. Sierra Club, 463 U.S. 680, 686–91 (1983), and Summit Valley Indus., Inc. v. Local 112, United Bhd. of Carpenters & Joiners of Am., 456 U.S. 717, 723–24 (1982). According to the dissent, review of this record shows that "Congress intended all of the expenses associated with § 145 proceedings to be borne by the applicants who elect them—not by taxpayers or other PTO users whose fees fund the agency's operations. Section 145 proceedings are an optional extension of the application process." Further:

An applicant's choice to proceed under § 145 diverts the agency's resources from the PTO's principal mission of examining patent and trademark applications at the agency. The purpose of § 145's expense-reimbursement provision is to ensure that these expenses fall on the applicants who elect the more expensive district court proceedings over the standard appeal route [emphasis added].

Regarding the role of the American Rule in the dissenting opinion, Chief Judge Prost reviewed the Fourth Circuit's Shammas decision contrary to the majority here. The American Rule does not apply, either under Shammas or, in the dissent's view, here because expenses are assessed against an applicant regardless of whether the application prevails or does not. And the dissent states that these judges disagree with the majority even if the American Rule was held to apply.

The dissent concludes with a discussion of various policy considerations, including applicant "choice" between appeal to the Federal Circuit and district court (neglecting to consider the procedural necessities that may influence an applicant's choice); that any "special solicitude" extended by the majority over the financial burden on "small businesses and individual inventors" is "entirely speculative," citing Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2169 (2015) (quoting Lamie v. United States Tr., 540 U.S. 526, 538 (2004)), for the principle that "'[the Supreme Court's] unwillingness to soften the import of Congress'[s] chosen words even if [the Court] believe[s] the words lead to a harsh outcome is longstanding.'" Concern over such costs is also lessened by the cost of experts and other expenses not at issue here that can themselves be considerable, according to the dissent. Acknowledging these costs implicates who should pay them, which is an easy choice for the dissent:

[W]hile it may be true that the PTO's personnel expenses in some cases might amount to a significant sum for applicants who choose to proceed down the optional § 145 route, those expenses have to be paid by someone. As the PTO observes, at Congress's direction, the PTO now must operate entirely as a user-funded agency. All applicants pay a number of fees throughout the patent-examination process to cover the PTO's expenses of operation. Thus, in asking this court to exclude personnel expenses from "[a]ll the expenses of the proceedings," NantKwest asks this court to require other PTO applicants to pay the PTO's personnel expenses incurred in response to its §145 complaint, rather than NantKwest itself. This contravenes Congress's intent [references to PTO brief omitted].

That the Office has never demanded applicants to pay attorneys' fees is another aspect of this case having no weight to the dissenting judges. "Given how dramatically the patent and litigation landscapes have changed since the provision was first enacted, it is hardly surprising that the PTO would have felt compelled in recent years to change its strategy," based in part on applicants purportedly using §145 proceedings more frequently and their costs becoming greater in recent years.

These questions of policy, while outside the scope of the question before the Court or the Court's purview in making these judgments, are in the dissent's view relevant as evincing Congress's choices in enacting § 145 to require an applicant to pay "all expenses of the proceedings" including the PTO's attorneys' fees.

NantKwest, Inc. v. Iancu (Fed. Cir. 2018) (en banc)
Panel: Chief Judge Prost and Circuit Judges Newman, Lourie, Dyk, Moore, O'Malley, Reyna, Wallach, Taranto, Hughes, and Stoll; Circuit Judge Chen did not participate.
Opinion by Circuit Judge Stoll, joined by Circuit Judges Newman, Lourie, Moore, O'Malley, Wallach, and Taranto; dissenting opinion by Chief Judge Prost, joined by Circuit Judges Dyk, Reyna, and Hughes

Posted at 11:01 PM in Damages, Federal Circuit | Permalink | Comments (10)

July 16, 2018

Akeso Health Sciences, LLC v. Designs for Health, Inc. (C.D. Cal. 2018)

Plaintiffs Litigation Position on Defendant's Equitable Estoppel Defense Not Objectively Unreasonable

By Donald Zuhn --

Last month, in Akeso Health Sciences, LLC v. Designs for Health, Inc., District Judge S. James Otero of the U.S. District Court for the Central District of California denied a Motion for Exceptional Case Determination and Award of Attorneys' Fees filed by Defendant Designs for Health, Inc. ("DFH"). In its Motion, DFH argued that the case should be deemed "exceptional" within the meaning of 35 U.S.C. § 285, and that DFH should therefore be awarded attorneys' fees.

Akeso had filed suit against DFH for infringement of U.S. Patent No. 6,500,450, which relates to a dietary supplement for the treatment of migraine headache, asserting that DFH's manufacture and sale of the migraine treatment product Migranol indirectly infringed the asserted claims due to various instructions and implications on the label. DFH had responded to the Akeso's complaint by filing a motion for summary judgment, asserting that Akeso should be equitably estopped from asserting the '450 patent due to Akeso's ten-year delay in filing suit. The District Court granted DFH's motion for summary judgment, finding that equitable estoppel barred Akeso's suit. In particular, the Court found that the adversarial stance of a cease-and-desist letter to DFH, followed by the significant length of delay in enforcement, qualified as misleading conduct for the purpose of an equitable estoppel analysis (see "Akeso Health Sciences, LLC v. Designs for Health, Inc. (C.D. Cal. 2018)," June 18, 2018).

Following the Court's grant of summary judgment in favor or DFH, DFH filed its Motion for Exceptional Case Determination and Award of Attorneys' Fees, Akeso then filed an opposition to DFH's Motion, and DFH filed a reply to Akeso's opposition. The District Court noted that in DFH's Motion, DFH asserted that the case should be deemed "exceptional" for three reasons. First, DFH Defendant argued that Akeso failed to conduct a reasonable pre-suit investigation, as evidenced by Akeso's failure to consider or conduct discovery into DFH's affirmative defense of equitable estoppel, and that Akeso's litigation position that equitable estoppel would not apply was not objectively unreasonable. Second, DFH argued that Akeso's filing of nine separate actions for patent infringement within two years of the expiration of the '450 patent demonstrated subjective bad faith and oppressive litigation tactics. Third, DFH argued that Akeso used artificially inflated calculations of "lost profits" damages to coerce DFH into a quick settlement, despite having no basis for these calculations.

With respect to DFH's first argument, the District Court noted that in SCA Hygiene Prod. Aktiebolag v. First Quality Baby Prod., LLC, 137 S. Ct. 954 (2017), the Supreme Court extended its holding in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014) -- where the Court held that the doctrine of laches cannot be used to bar a suit for copyright infringement that was properly brought within the Copyright Act's three-year statute of limitations -- to actions for patent infringement, several months after the present suit was filed. As in Petrella, the Supreme Court in SCA indicated that the doctrine of equitable estoppel was still available to provide protection against the more problematic practices of unscrupulous patentees.

According to DFH, Akeso unreasonably relied on the Supreme Court's dicta in Petrella for the proposition that equitable estoppel only applies when a patent owner "engages in intentionally misleading representations" despite consistent Federal Circuit precedent that held that a period of silence in some circumstances can qualify as misleading conduct. However, the District Court determined that:

While Defendant's reliance on Petrella may have been misplaced, its position that the conduct described in this instance does not qualify as misleading was not objectively unreasonable. While several Federal Circuit cases have addressed the issue, there is no clear holding on when silence, without affirmative misrepresentations, can be sufficiently misleading as to provide a basis for equitable estoppel. In reaching its decision, the Court had to analyze several Federal Circuit decisions on the question and analogize the facts at issue to these cases. Reasonable minds could have differed on the outcome.

Regarding DFH's second argument that Akeso's filing of multiple infringement actions demonstrated subjective bad faith and oppressive litigation tactics, the District Court determined that neither Akeso's filing of nine separate actions nor its filing suit in California despite the fact that DFH's headquarters and state of incorporation are both located on the East Coast "necessarily demonstrate bad faith." In particular, the Court stated that:

A patent owner is entitled to enforcement of his patent whether the patent is twenty or two years away from expiry. Absent conduct that would warrant equitable estoppel, which, as noted above, Plaintiff reasonably could have believed did not apply, a patent owner may choose to monetize his intellectual property at any time that he believes in his best interest. Defendant has not adequately demonstrated that any of the nine lawsuits filed by Defendant were objectively baseless. . . .

The Court added that "[f]iling a lawsuit in a forum where venue was appropriate under the law at the time of filing does not indicate bad faith."

Finally, as to DFH's third argument that Akeso relied on artificially inflated damages calculations, the District Court explained that "plaintiffs generally have an incentive to overestimate the amount of damages they are entitled to if judgment is awarded in their favor," adding that "the amount of damages awarded to a plaintiff is almost always less than the requested amount, if not drastically so." The Court also noted that DFH "has not pointed to any case that was found exceptional on the basis of an inflated damages calculation alone."

Finding that DFH failed to meet its burden of proving that the case was "exceptional" within the meaning of § 285, the District Court denied DFH's Motion for Exceptional Case Determination and Award of Attorneys' Fees.

Akeso Health Sciences, LLC v. Designs for Health, Inc. (C.D. Cal. 2018)
Order Denying Defendants' Motion for Exceptional Case Determination and Award of Attorneys' Fees by District Judge Otero

Posted at 11:08 PM in Damages, District Court | Permalink | Comments (0)

July 12, 2018

Cellspin Soft, Inc. v. Fitbit, Inc. (N.D. Cal. 2018)

By Michael Borella --

Background

Cellspin sued Fitbit and thirteen other defendants in the Northern District of California alleging infringement of U.S. Patent Nos. 8,738,794, 8,892,752, 9,749,847, and 9,258,698. The defendants filed a motion to dismiss, alleging invalidity of the patents under 35 U.S.C. § 101.

As an example of one of the asserted claims, claim 1 of the '794 patent recites:

1. A method for acquiring and transferring data from a Bluetooth enabled data capture device to one or more web services via a Bluetooth enabled mobile device, the method comprising:
    providing a software module on the Bluetooth enabled data capture device;
    providing a software module on the Bluetooth enabled mobile device;
    establishing a paired connection between the Bluetooth enabled data capture device and the Bluetooth enabled mobile device;
    acquiring new data in the Bluetooth enabled data capture device, wherein new data is data acquired after the paired connection is established;
    detecting and signaling the new data for transfer to the Bluetooth enabled mobile device, wherein detecting and signaling the new data for transfer comprises:
        determining the existence of new data for transfer, by the software module on the Bluetooth enabled data capture device; and
        sending a data signal to the Bluetooth enabled mobile device, corresponding to existence of new data, by the software module on the Bluetooth enabled data capture device automatically, over the established paired Bluetooth connection, wherein the software module on the Bluetooth enabled mobile device listens for the data signal sent from the Bluetooth enabled data capture device, wherein if permitted by the software module on the Bluetooth enabled data capture device, the data signal sent to the Bluetooth enabled mobile device comprises a data signal and one or more portions of the new data;
    transferring the new data from the Bluetooth enabled data capture device to the Bluetooth enabled mobile device automatically over the paired Bluetooth connection by the software module on the Bluetooth enabled data capture device;
    receiving, at the Bluetooth enabled mobile device, the new data from the Bluetooth enabled data capture device;
    applying, using the software module on the Bluetooth enabled mobile device, a user identifier to the new data for each destination web service, wherein each user identifier uniquely identifies a particular user of the web service;
    transferring the new data received by the Bluetooth enabled mobile device along with a user identifier to the one or more web services, using the software module on the Bluetooth enabled mobile device;
    receiving, at the one or more web services, the new data and user identifier from the Bluetooth enabled mobile device, wherein the one or more web services receive the transferred new data corresponding to a user identifier; and
    making available, at the one or more web services, the new data received from the Bluetooth enabled mobile device for public or private consumption over the internet, wherein one or more portions of the new data correspond to a particular user identifier.

In summary, this claim relates to an application on a Bluetooth enabled mobile device assisting a Bluetooth enabled data capture device (e.g., a digital camera or wireless fitness tracker) to publish data received from the latter on one or more web sites. According to the '794 patent, doing so overcomes difficulties associated with manual transfer of files from the capture device to the communication device, as well as uploading and publishing such files.

In Alice Corp. v. CLS Bank Int'l, the Supreme Court set forth a two-part test to determine whether claims are directed to patent-eligible subject matter under § 101. One must first decide whether the claim at hand is directed to a judicially-excluded law of nature, a natural phenomenon, or an abstract idea. If so, then one must further decide whether any element or combination of elements in the claim is sufficient to ensure that the claim amounts to significantly more than the judicial exclusion. But generic computer implementation of an otherwise abstract process does not qualify as "significantly more," nor will elements that are well-understood, routine, and conventional lift the claim over the § 101 hurdle.

Patent Eligibility Dispute

In briefings, the defendants argued that:

Cellspin's claims were (i) directed to the abstract concept of acquiring data using a "data capture device," transferring data over a connection to a mobile device, and publishing the data to a website and (ii) recite only generic computer technology to carry out the abstract idea, technology which the specification describes as "pervasive [and] flexible," such as a "ubiquitous mobile phone," "fairly widespread" personal digital assistants, and "general purpose computers and computing devices."

In its opposing brief, Cellspin countered that the claims were not abstract because they "described specific improvements comprising, acquiring, transferring, and publishing new-data on the Internet, including, a purported improvement in battery consumption, an elimination of the need for bulky hardware, and a purported improvement in the order or timing of the Bluetooth or wireless pairing." Invoking Berkheimer v. HP, Cellspin also argued that "factual disputes exist regarding whether the claimed features are well-understood, routine, and conventional." In addition, Cellspin filed an amended complaint "which contained the arguments regarding improvements that plaintiff had asserted in its opposition."

The Court applied the Alice test. In doing so, it rejected Cellpsin's part one argument because "plaintiff fails to identify these alleged specific improvements or otherwise explain how these improvements result in enhanced 'computer capabilities' rather than a process that qualifies as an abstract idea for which computers are invoked merely as a tool." The Court was similarly unconvinced by Cellspin's part two position, writing "the asserted claims merely provide a generic environment in which to carry out the abstract ideas of acquiring, transferring, and publishing data, [and] fail to supply an inventive concept sufficient to transform the underlying abstract idea into patentable subject matter." (In fairness, the reasoning behind the actual decision was far less conclusory than the Court summarized here.)

Thus, the Court entered a judgment in favor of the defendants and invalidated the patents.

Attorney's Fees

Afterward, six of the defendants filed motions for attorney's fees on the grounds that Cellspin's litigation activities were exceptional under 35 U.S.C. § 285.

Regarding this motion, the Court reviewed the standard for determining whether a case is exceptional enough to award attorney's fees to the prevailing party. Particularly, such a 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." The moving party must show exceptionality by a preponderance of evidence and the ultimate determination is in the discretion of the Court after taking into account the totality of circumstances.

Here, the Court relied on the Federal Circuit's Inventor Holdings, LLC v. Bed Bath & Beyond, Inc. decision, which held that "a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award." The Court stated that "[a]s in Inventor Holdings, the claims at issue here are manifestly directed to an abstract idea and the only components disclosed in the specification for implementing the asserted method claims are unambiguously . . . conventional."

The Court also stated that "Cellspin filed its complaint in the face of significant post-Alice precedent" and "chose to file more than a dozen lawsuits asserting four ineligible patents and, in so filing, ignored substantial precedent dismissing analogous data manipulation patent claims."

Further, the Court took issue with Cellspin's "aggressive" litigation conduct, because it did not agree to stay discovery pending resolution of the § 101 motion, as well as filing its amended complaint only three days prior to the hearing on this motion. While the Court admitted that this conduct "may not amount to bad faith litigation, it does contribute to the totality of the circumstances weighing in favor of a fee award."

Moreover, the Court rejected Cellspin's asserted reliance on an issued patent's presumption of validity. Particularly, the Court cited to Ultramercial, Inc. v. Hulu to support its position that even though "issued patents are presumed valid, they are not presumed eligible under Section 101."

Finally, the Court reprimanded Cellspin because it did not "analyze its patents critically" and "chose to file and pursue aggressively fourteen lawsuits simultaneously."

For these reasons, the Court awarded a total of $563,000 of attorney's fees to the defendants.

Analysis

Where to start . . . . There are two distinct issues here, whether the claims are indeed ineligible under § 101, as well as whether that alone or in combination with other factors rise to the level of exceptionality under § 285. But even if the Court's § 101 determination was correct, it's granting of attorney's fees is highly questionable.

Given the extreme lack of clarity regarding how § 101 is to be applied, it seems unreasonable to contend that Cellspin could somehow determine ahead of time whether its claims would ultimately be invalidated. For instance, very broad and vague claims in Thales Visionix Inc. v. U.S. and Finjan, Inc. v. Blue Coat Systems, Inc. were found to meet the requirements of § 101. Nobody has access to a patent-eligibility crystal ball, including Cellpsin.

Also, the Court appears to have misapplied Inventor Holdings. In that case, attorney's fees were justified because the action was filed prior to Alice and the plaintiff did not reassess the strength of its position given that Alice was a significant shift in § 101. Here, the suit was filed after Alice, but before Berkheimer and Aatrix Software, Inc. v. Green Shades Software, Inc. If anything, these two cases are very pro-plaintiff with respect to § 101. Therefore, Cellspin's case arguably strengthened as this proceeding continued.

Additionally, to the extent that the Court relied on the concurrence in Ultramercial to conclude that patents are not presumed eligible, that is plain wrong. 35 U.S.C. § 282 clearly sets forth that patents are presumed valid, and no Supreme Court or Federal Circuit case (including Ultramercial) establishes binding precedent otherwise. The fee award may be reversible on this basis alone.

Speaking of which, Cellspin has appealed the § 101 determination to the Federal Circuit. It would not be surprising if they add the § 285 issue to their appeal. Stay tuned, as this one is far from over.

Cellspin Soft, Inc. v. Fitbit, Inc. (N.D. Cal. 2018)
Order Granting in Part Motion for Attorney's Fees by District Judge Yvonne Gonzalez Rogers

Posted at 11:15 PM in Damages, District Court, Patentable Subject Matter | Permalink | Comments (6)

June 24, 2018

WesternGeco LLC v. ION Geophysical Corp. (2018)

By Kevin E. Noonan and George "Trey" Lyons, III --

On Friday, the Supreme Court reversed the judgment of the Federal Circuit in WesternGeco LLC v. ION Geophysical Corp. Justice Thomas (joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Alito, Sotomayor, and Kagan) held that, based on the "focus" of 35 U.S.C. § 284 of the Patent Act (the general damages provision) when read in light of domestic infringement under 35 U.S.C. § 271(f)(2) (barring exportation of components specifically adapted for a patented invention), a patent owner could recover lost foreign profits. The decision overruled the Federal Circuit's general practice of interpreting damages under § 271(f)(2) in the same fashion as § 271(a) (the general infringement provision, which does not allow patent owners to recover lost foreign profits).

Background

The case arose over patent owner WesternGeco LLC's four patents relating to positioning systems for marine seismic streamer technology deployed behind ships to create three-dimensional maps of the ocean floor to facilitate natural resource exploration and management. See U.S. Patent No. 7,293,520; 7,162,967; 7,080,607; and 6,691,038. WesternGeco uses the technology to perform services for oil and gas companies based on these three-dimensional maps both domestically and abroad, but does not sell or license this technology.

In 2007, ION Geophysical Corp. began selling a competing system by manufacturing the system components in the U.S. and shipping them to companies to assemble abroad. Once assembled, ION's competing system performed services indistinguishable from WesternGeco's and thus was able to successfully compete with WesternGeco in foreign markets.

In 2009, WesternGeco sued ION in the Southern District of Texas for infringing all four patents under §§ 271(f)(1) and (f)(2). At trial, WesternGeco proved that it had lost at least ten specific survey contracts due to ION's infringement. After a three and a half week trial, the jury returned a verdict in favor of WesternGeco, finding that ION had infringed all four patents under §§ 271(f)(1) and (2) and awarded $93.4 million in lost profits based on the foreign contracts and a reasonable royalty of $12.5 million for the patented article. ION's post-trial motion to set aside the $93.4 million in foreign lost profits portion of the verdict led to the instant appeal, where ION argued that WesternGeco could not recover damages for lost profits because § 271(f) does not apply extraterritorially.

The District Court denied the motion but the U.S. Court of Appeals for the Federal Circuit reversed the award of lost-profits damages, citing its previous precedent in Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711 F. 3d 1348 (Fed. Cir. 2013), barring the recovery of lost foreign profits under § 271(a). Specifically, the majority of the appellate panel (Judges Dyk and Hughes) reasoned that § 271(f) should be interpreted similarly to how the Court had interpreted § 271(a), as both were "designed" to put patent infringers "in a similar position" under § 284. Judge Wallach dissented, noting that the majority's view was unduly rigid for the foreign impact of domestic infringement under § 271(f), as it barred the District Court from "considering foreign lost profits even when those lost profits bear a sufficient relationship to domestic infringement," which "encourages market inefficiency[] and threatens to deprive plaintiffs of deserved compensation in appropriate cases."[1] WesternGeco successfully petitioned for certiorari.

Judge Wallach's criticism of the rigidity with which the Federal Circuit applied this rule, when read in context of what § 271(f)(2) was crafted to address (end-around foreign assembly and infringement of U.S.-exported components), was pervasive in the cert. petition and the proceedings before the Court. Of particular impact was the focusing of domestic infringement under § 271(f)(2) that led to domestic harm to U.S. patent owners in foreign markets. An important analogy that focused the Court's attention at oral argument (and one that may well have carried the day), was given by Zachary Tripp, Assistant to the U.S. Solicitor General, in which he argued that a hypothetical French tourist left unable to work in France due to injuries sustained while visiting the U.S. would still be able to recover damages under U.S. tort law—even though the lost wages would occur in France.[2]

The Majority

In line with this reasoning, as well as Judge Wallach's criticisms of the rigidity of the Federal Circuit's analysis of § 271(f)(2), the Supreme Court reversed the Federal Circuit's decision below. In its decision, despite the "presumption against extraterritoriality" in the enforcement of federal statutes, the majority exercised its discretion to bypass the first prong of RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090, 2101 (2016) ("whether the presumption against extraterritoriality has been rebutted"), and found under the second prong ("whether the case involves a domestic application of the statute"), that foreign lost profits due to domestic acts of infringement under § 271(f)(2) should not be categorically barred.

Specifically, the majority reiterated the facts presented and that "the focus of § 284, in a case involving infringement under § 271(f)(2), is on the act of exporting components from the United States." WesternGeco, at 7 (emphasis added). In this context, because the infringing act happens domestically, any lost profits (foreign or otherwise) based on that domestic infringement were merely a domestic application of § 284. Id. at 7-8 ("domestic infringement [under § 271(f)(2)] is 'the objec[t] of the statute's solicitude' in this context . . . [and t]he conduct in this case that is relevant to that focus clearly occurred in the United States . . . [t]hus, the lost-profits damages . . . were a domestic application of § 284").

Furthermore, in the majority's view, to receive adequate compensation for such domestic acts of infringement under § 284, patent owners such as WesternGeco can and should recover damages that "'plac[e] [the patent owner] in as good a position as he would have been in' if the patent had not been infringed"—i.e., "the difference between [its] pecuniary condition after the infringement, and what [its] condition would have been if the infringement had not occurred." Id. at 9. Thus, because WesternGeco demonstrated the loss of at least ten specific foreign contracts based on ION's domestic act of supplying the components that infringed WesternGeco's patents, the Court held that the foreign lost-profits damages that were awarded to WesternGeco were permissible—as a domestic application of § 284 vis-à-vis § 271(f)(2). Id. at 9-10.

The majority, however, emphasized the narrowness of the holding by expressly declining to address the permissibility of such damages due to extraterritorial inducement (i.e., the intersection of § 284 and § 271(f)(1)) and/or "the extent to which other doctrines, such as proximate cause, could limit or preclude damages in [this or other] cases." See, e.g., id. at 3 n.1, 7 n.2, and 9 n.3.

The Dissent

None of the current Supreme Court Justices can fairly be said to be particularly pro-patent; indeed, it seems that the Justices are more comfortable with the pervasive effect of antitrust principles, particularly academic ones, and their application to patent law analysis (see, e.g., FTC v. Actavis). Justice Gorsuch, the newest Justice, evinced the same penchant for construing patent law within the narrow confines of its antitrust boundaries in his dissent to Justice Thomas's majority opinion in WesternGeco LLC v. Ion Geophysical Corp., in his reasoning, his diction, and his partner in dissent, Justice Breyer (who authored, among other decisions, Actavis and Mayo Collaborative Services v. Prometheus Laboratories, Inc.).

The dissent is just slightly shorter than the majority opinion (albeit not by much), and in it Justices Gorsuch and Breyer take issue with the majority's decision permitting a patentee to be sued for damages for the use abroad of a patented article infringed under the provisions of 35 U.S.C. § 271(f)(2). His language evokes the classic concerns about the effect of patents on competition, writing, inter alia, that "[a] U. S. patent provides a lawful monopoly" in the U.S. only, and that WesternGeco "assumes it could have charged monopoly rents abroad" based on its U.S. patent. "Permitting damages of this sort would effectively allow U. S. patent owners to use American courts to extend their monopolies to foreign markets," he warns, and this "would invite other countries to use their own patent laws and courts to assert control over our economy" (a legitimate worry if this is indeed the impact of the majority's decision). Justice Gorsuch believes the majority erred, despite the Congressional intent that § 271(f) impose patent infringement liability for acts occurring abroad that have the statutory predicate basis in activities occurring within the U.S.

As in the majority opinion, the dissent looks to other provisions of the patent statute for support for Justice Gorsuch's position. And of course the Justice finds such support, because but for the § 271(f) exception, the Patent Act is replete with limitations against extraterritorial extension of U.S. law, both implicit and explicit. The real issue between the majority and the dissent is whether the damages accruing from Ion Geographic's infringement find a patent law remedy. The majority believes that the predicate infringement under § 271(f)(2) entitles WesternGeco to those ancillary damages; Justices Gorsuch and Breyer do not.

The Justice points out that the Court has decided against permitting extraterritorial extensions of U.S. patent law before, all occurring before passage of § 271(f). These include Brown v. Duchesne, 19 How. 183 (1857) (infringement happening on board a ship on the high seas), despite unavailing argument to the contrary by the Solicitor General ("I am unpersuaded," Justice Gorsuch writes, in a footnote); Birdsall v. Coolidge, 93 U. S. 64 (1876); and Yale Lock Mfg. Co. v. Sargent, 117 U. S. 536 (1886) ("the leading case on lost profits damages"). Justice Gorsuch also rejects the argument that § 271(f)(2) provides an exception; the Justice thinks that the statute merely "modifies the circumstances when the law will treat an invention as having been made within the United States" but does not broaden the scope of activities for which a patentee can seek compensation in damages. The dissent characterizes as a "bedrock rule that foreign uses of an invention (even an invention made in this country) do not infringe a U. S. patent" (emphasis in the dissent) and that § 271(f)(2) does not (and cannot) change that.

In further support of his argument, Justice Gorsuch then sets forth a "parade of horribles" that he envisions could arise in the wake of the majority's decision. These include instances where there could be "greater recovery when a defendant exports a component of an invention in violation of §271(f)(2) [in the Justice's example, a chip for use in a cell phone] than when a defendant exports the entire invention in violation of §271(a)." Calling it "some springboard" for potential liability, Justice Gorsuch posits that "supplying a single infringing product from the United States would make ION responsible for any foreseeable harm its customers cause by using the product to compete against WesternGeco worldwide, even though WesternGeco's U. S. patent doesn't protect it from such competition," as evidenced the disparity between the damages the jury awarded here for lost profits ($93.4 million) and royalties ($12.5 million). Warming to the topic, Justice Gorsuch speculates regarding a situation where a patented prototype chip is made in the U.S. and all further activities occur abroad:

Under the terms of the Patent Act, the developer commits an act of infringement by creating the prototype here, but the additional chips it makes and sells outside the United States do not qualify as infringement. Under WesternGeco's approach, however, the patent owner could recover any profits it lost to that foreign competition—or even three times as much, see §284— effectively giving the patent owner a monopoly over foreign markets through its U. S. patent.

This (over)application is an invitation for foreign patentees to act reciprocally against U.S. industries, creating infringement liability enforced by foreign courts that will harm the U.S. economy.

There is certainly some validity in Justice Gorsuch's apprehension of how the inferior courts might improperly expand the majority's opinion beyond its scope. That has certainly been the case regarding the Court's recent decisions on other provisions of the statute (see Ariosa Diagnostics, Inc. v. Sequenom, Inc., for example). But in many ways this case is an outlier, wherein infringement of the claimed device gave the infringer the ability to compete with the patentee for services rather than for sales of the infringing article. And this distinction may make all the difference in whether Justice Gorsuch's apprehensions come to pass.

Conclusion

For the time being, one practical consequence of this decision is that U.S. patent owners may now recover foreign lost profits tied to domestic acts of infringement under § 271(f)(2).

WesternGeco LLC v. ION Geophysical Corp. (2018)
Opinion by Justice Thomas, joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Alito, Sotomayor, and Kagan; dissenting opinion by Justice Gorsuch, joined by Justice Breyer

[1] WesternGeco L.L.C. v. ION Geophysical Corp., 837 F.3d 1358, 1369 (Fed. Cir. 2016) (Wallach, J. dissenting), cert. granted sub nom, WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 734 (2018), and rev'd sub nom, WesternGeco LLC v. ION Geophysical Corp., No. 16-1011, 2018 WL 3073503 (U.S. June 22, 2018).

[2] For further analysis on this point, see, e.g., Dennis Crouch, WesternGeco v. Ion Geophysical: Foreign Damages and a French Tourist, PatentlyO (April 17, 2018).

Posted at 10:14 PM in Damages, Supreme Court | Permalink | Comments (2)

January 01, 2018

December 26, 2017

My Health, Inc. v. ALR Technologies, Inc. (E.D. Tex. 2017)

Damned if you do . . .

By Kevin E. Noonan --

Great cases like hard cases make bad law. For great cases are called great, not by reason of their importance . . . but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment.

Northern Securities Co. v. U.S. (1904) (Holmes, Jr., J., dissenting)

It is a reality not needing emphasis or reiteration that the extent of subject matter eligibility in patent law has been in turmoil following the U.S. Supreme Court's decisions in Bilski v. Kappos, Mayo Collaborative Servs. v. Prometheus Labs, AMP v. Myriad Genetics, and Alice Corp. v. CLS Bank Int'l. During this same timeframe, the Court arguably relaxed the standards for district courts to award attorney's fees under 35 U.S.C. § 285 in Octane Fitness v. ICON Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. Consequences of the confluence of these two branches of patent law jurisprudence befell plaintiff (and in one magistrate judge's eyes, patent troll) My Health, Inc., who awarded a total of $371,862.95 to defendants ALR Technologies, Inc.; InTouch Technologies, Inc.; MyNetDiary, Inc.; and McKesson Technologies, Inc. in My Health, Inc. v. ALR Technologies, Inc.

These consolidated cases arose as part of a patent assertion campaign by My Health, extending from 2012 to these cases, which were filed in May 2016 involving U.S. Patent No. 6,612,985; claim 1 is representative:

A method for tracking compliance with treatment guidelines, the method comprising: determining a current assessment of one or more diagnosed conditions in a patient based on data about each of the diagnosed conditions from the patient who is at a remote location and on one or more assessment guidelines for each of the diagnosed conditions; updating an existing treatment plan for each of the diagnosed conditions based on the existing treatment plan, the current assessment, and on one or more treatment guidelines for each of the diagnosed conditions to generate an updated treatment plan for each of the diagnosed conditions; reviewing the updated treatment plan for each of the diagnosed conditions; determining if one or more changes are needed to the reviewed treatment plan for each of the diagnosed conditions; changing the reviewed treatment plan if the one or more changes are determined to be needed; providing the patient with the reviewed treatment plan for each of the diagnosed conditions; and generating and providing compliance data based on the updated treatment plan and the reviewed treatment plan for each of the diagnosed conditions.

This patent is assigned on its face to the University of Rochester and later assigned to My Health. Ten months after the complaints were filed, the district court held the asserted claims to be invalid for failure to satisfy patent eligibility requirement of 35 U.S. § 101. The court granted the defendants' motions to dismiss and entered judgment, and prompted by "[t]his outcome, in addition to My Health's extensive litigation campaign, the manner in which My Health litigated the cases, and the weakness of My Health's § 101 position, prompted the prevailing defendants to move for their attorneys' fees under 35 U.S.C. § 285," according to Magistrate Judge Payne.

The magistrate judge's Memorandum and Order sets forth a history of My Heath's patent assertion history, which started in April 2012. According to the magistrate judge, this began a series of 31 lawsuits filed in the Eastern District of Texas (as well as 11 declaratory judgment cases filed in other judicial districts) where there was never a finding on the merits and what settled for anywhere from $240,000 to $30-50,000 (with the higher settlement amounts occurring in the earlier-filed litigations which settled prior to the Supreme Court's Alice decision; $50,000 was the median settlement amount). In all cases until these latest ones, the parties settled and no court ruled on validity or infringement of the '985 patent claims. In additions, five inter partes review (IPR) petitions were filed; none of these IPRs came to Final Written Decision after the parties settled each of them.

In addition to this history, the magistrate judge's recitation of the facts include tales of a pattern of behavior wherein My Health contacted certain defendants directly threatening suit, despite these defendants being represented by counsel (and in many instances inquiring about settlement), in the face of these defendants refusing to confer without defendant's counsel being present. One example was in this litigation, wherein MyNewDiary's counsel informed My Health (by e-mail):

Please direct any future correspondence regarding this matter to me and to me alone. I wish there to be no misunderstandings. My client will not be entering into any licensing agreements with PLA, for the reasons I have previously explained. I wish this to be very clear. Should you contact me or my client(s) with any further unlawful extortion requests, I will seek sanctions against you . . . . I hope I have made myself imminently clear.

According to the Memorandum, "[t]he request was ignored."

Finally with respect to My Health's "bad actions," counsel apparently made false representations to the Federal Circuit regarding defendants' acquiescence to My Health's voluntary dismissal of its appeal of the District Court's invalidity determination under § 101 (as well as an agreement that the parties bear their own costs), and manipulated the docket in an unrelated case to avoid a hearing on defendants' motion for attorney's fees.

Based on this record, the Magistrate Judge granted defendants' motion for fees in varying amounts depending on the extent of each defendant's claim. According to the Magistrate:

My Health's cases are exceptional for a number of reasons. The first is the weakness of My Health's post-Alice patent-eligibility position. Patient treatment and monitoring methods such as those claimed by the '985 patent had been declared ineligible long before My Health filed its 2016 lawsuits. . . . As the [District] Court recognized in evaluating defendants' § 101 motion, "[s]uch claims have universally been found to be unpatentable under Alice." By the time My Health filed its 2016 lawsuits, guidance from the Federal Circuit regarding claims in this category had mounted to a level that would give any litigant a reasonably clear view of § 101's boundaries. . . . There were of course gray areas, but by the time My Health's 2016 lawsuits were filed, it should have been clear that the '985 patent claims were "manifestly directed to an abstract idea."

Importantly, the Magistrate asserted that "[t]he weakness in My Health's § 101 position is by itself a sufficient basis for finding the cases exceptional," which places within a court's discretion not only the objective baselessness of whether duly granted claims deserve the presumption of validity but also the subjective bad faith with which an infringement claim is brought, based solely on the court's invalidity determination. Citing Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., the Magistrate justified this decision by saying it is "necessary to deter wasteful litigation in the future." No. 2016-2442, 2017 WL 6062460, at *4 (Fed. Cir. Dec. 8, 2017). And the Magistrate stated that it was My Health's responsibility to "reassess its case in view of new controlling law," specifically the Supreme Court's Alice decision (despite the difficulties attendant upon determining how the Court's patent eligibility jurisprudence should be applied).

In addition, the Magistrate's opinion makes it clear that My Health's conduct in asserting its patents was a factor in its decision to award attorney's fees. The Order cites My Health's extensive litigation campaign and avoidance of the case reaching the merits in the "31 lawsuits, 11 declaratory judgment actions, and 5 IPRs." While stating that "[t]o be sure, a volume litigant does not automatically expose himself to attorneys' fees simply because he files a lot of lawsuits, "the number of lawsuits filed by My Health, many of which settled right on the cusp of a merits determination (most for similar amounts), supports the conclusion that My Health was filing lawsuits 'for the sole purpose of forcing settlements, with no intention of testing the merits of [the] claims,'" wrote the Magistrate, citing SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1350 (Fed. Cir. 2015) in support. The "remarkable" similarities in the settlement amounts also supported the Magistrate's conclusion that My Health was "exploiting the high cost to defend complex litigation to extract a nuisance value settlement" as in Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011), inter alia, because "[t]he settlement amounts against the different defendants could not have possibly been tied to a reasonable royalty for use of the claimed invention" nor relating to "the alleged inventions' footprint in the marketplace" or the rough equivalence of the amounts of infringing units made by each of these disparate defendants. And the settlement amounts appeared to the Magistrate to represent "nuisance" value, signaling the Magistrate's apprehension that My Health was acting as a patent troll (without ever mentioning this disparaging term).

My Health's purported misfeasance and malfeasance undoubtedly made it easy for the Magistrate to be persuaded that these defendants were entitled to attorney's fees and that this was an exceptional case. But the Magistrate's predicate basis for reaching his decision is frankly based on a conclusion that, regardless of a patent claim's presumption of validity, merely asserting the '985's claims was improper because they were clearly invalid. There may be circumstances where a change in the law rendered by the Federal Circuit or Supreme Court might support such a decision. Respectfully, the current state of patent subject matter eligibility is not one of them.

Posted at 11:54 PM in Damages, District Court, Patentable Subject Matter | Permalink | Comments (10)

August 14, 2017

AIA America, Inc. v. Avid Radiopharmaceuticals (Fed. Cir. 2017)

By Kevin E. Noonan --

As patent practitioners learned to their chagrin in the AMP v. Myriad Genetics case, sometimes broader Constitutional issues arise even in patent law. This is also true of matters relating to the Bill of Rights; for example, the last time the Seventh Amendment was considered in the patent context was Markman v. Westview Instruments, Inc., resulting in the Supreme Court affirming the Federal Circuit's understanding that claim construction was not a matter invoking that Amendment's right to a jury to decide construction questions. (Yes, those were more doctrinally peaceful times indeed.) The Seventh Amendment has once more been raised as a patent-related issue in AIA America, Inc. v. Avid Radiopharmaceuticals in a decision by the Federal Circuit last week. Once again the Federal Circuit held that the right to jury trial does not attach, in this case regarding a request for attorney's fees under 35 U.S.C. § 285, keeping in place a fee award to defendant Avid of $3,943,317.70.

The case arose in the context of (Alzheimer's Institute of America) AIA's infringement lawsuit over U.S. Patent Nos. 5,455,169 and 7,538,258; the subject matter of these patents were nucleic acids comprising mutations (known in the art as "the Swedish mutation") associated with Alzheimer's disease onset; claims 1 from each patent are representative:

From the '169 patent:

1. An isolated nucleic acid encoding human amyloid precursor protein 770 (APP No) including the nucleotides encoding codon 670 and 671 of human amyloid precursor protein 770, wherein the nucleic acid encodes asparagine at codon 670 and/or leucine at codon 671 or an isolated fragment of said nucleic acid having at least ten nucleotides and encoding at least positions 4 and 5 of SEQ ID NO:1.

From the '258 patent:

1. A transgenic mouse whose genome comprises a nucleic acid encoding human amyloid precursor protein including the nucleotides encoding codon 670 and 671 of human amyloid precursor protein 770, or encoding the codons corresponding to these in other isoforms of APP, operably linked to a promoter, wherein the nucleic acid encodes an amino acid other than lysine at codon 670 and/or an amino acid other than methionine at codon 671 and, wherein the mouse expresses a human amyloid precursor protein or fragment thereof which has an amino acid other than lysine at codon 670 and/or an amino acid other than methionine at codon 671.

As explained in the Federal Circuit's opinion, the provenance of these patents is muddy at best. The sole named inventor, Dr. Mullan, had worked as a post-doctoral fellow in a London laboratory that had discovered the first genetic mutation associated with Alzheimer's disease (known as the "London mutation"). Due to a dispute between Dr. Hardy, the head of the London research lab, his institution (Imperial College), and its licensee (Athena Pharmaceuticals), Dr. Hardy did not pursue an insight that there was a separate mutation associated with Alzheimer's disease to be found in a Swedish family grouping, but rather sent DNA to Dr. Mullen, who had moved to the University of South Florida. "To hide the involvement of Dr. Hardy and the Imperial [College] researchers," the patents-in-suit were filed solely in Dr. Mullan's name, as the facts were characterized in the Court's opinion. This "scheme" also involved Dr. Hardy sending "false letters" to Imperial denying that Dr. Hardy had any involvement in the Swedish mutation's discovery, while at the same time maintaining to USF that the claimed invention had been made under Imperial's auspices who thus had the patent rights. These prevarications were sufficiently artful that Dr. Mullan and AIA's founder, Ronald Sexton, were successful in having USF waive any rights to the invention. (The opinion also describes Mr. Sexton's role as convincing Dr. Hardy and other Imperial College researchers that Imperial and Athena had "undervalued" their invention of the London mutation.) As a consequence of these maneuverings, AIA was the sole assignee of the '169 and '258 patents.

The District Court held a jury trial on the question of whether USF had knowingly waived its rights to the invention, which the jury found it had not (based at least in part on testimony by Dr. Hardy regarding the "conspiracy" through which he and Dr. Mullan and Mr. Sexton had denied both Imperial College's and USF's rights to the Swedish mutation invention). Accordingly, the Court ruled that AIA lacked standing to sue on the '169 and '258 patents and entered judgment in favor of Avid; the Federal Circuit previously affirmed this decision in Alzheimer's Inst. of Am., Inc. v. Avid Radiopharmaceuticals, 560 F. App'x 996 (Fed. Cir. 2014).

Thereafter the District Court considered Avid's motion for attorney's fees under § 285 and after "extensive briefing, evidence and declarations" and a hearing where "AIA was allowed to present arguments in opposition to the motion," awarded almost $4 million in fees to Avid. AIA appealed, but (perhaps unwisely) not as to the amount awarded.

The Federal Circuit affirmed, in an opinion by Judge Hughes, joined by Judges Newman and Lourie. AIA's first argument was that it had a Seventh Amendment right to have a jury decide the facts from which a court could award attorney's fees. The basis for this argument was that an attorney's fees award "is based in part or in whole on a party's state of mind, intent, or culpability," questions that only a jury should consider if a party does not waive her Seventh Amendment rights (the Court and AIA recognizing that there is no provision for trial by jury in the statute regarding fee awards under § 285). The opinion parses the amendment to require a jury trial only for suits at common law (as opposed to suits in equity, using that archaic dichotomy of remedies and where to find them). In modern practice, the Court recognizes a two-step process for determining whether the jury trial right applies: first, a court must "compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity," citing Tull v. United States, 481 U.S. 412, 417 (1987). Second, the court should "examine the remedy sought and determine whether it is legal or equitable in nature," with this prong of the test being "the more important of the two" pursuant to Supreme Court precedent. Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565 (1990).

With regard to step one, the panel noted that attorney's fees could be pursued in English courts of both law and equity, but that when considered in the law courts "judges, not juries, determined attorney's fees." This practice suggested to the Court that attorney's fees do not generally implicate legal rights and thus does not support AIA's position. Regarding the second step, the panel differentiated cases where attorney's fees "are themselves part of the merits of an action" (exemplified in the opinion by cases where a lawyer makes a claim against a client for fees or under a contractual indemnification clause) and where the fees are part of a statutory "prevailing party" provision, where fees are considered an equitable remedy as being "collateral to and separate from the decision on the merits," citing Budinich v. Becton Dickinson & Co., 486 U.S. 196, 200 (1988). Thus, the panel's application of the Tull test led to the conclusion that the requested remedy is equitable and thus does not implicate the Seventh Amendment's right to trial by jury.

The opinion goes on to consider AIA's "state of mind" position, the panel stating that, if true then the Seventh Amendment protections could apply. Unfortunately for AIA, the opinion finds AIA presented no authority that "once an issue is deemed equitable, a Seventh Amendment right to a jury trial may still attach to certain underlying determinations." Under 18th Century English law (the Supreme Court's touchstone), a judge deciding a case in equity could refer factual matters to a jury but was not compelled to do so, even when considering the "state of mind" issues raised by AIA in its argument. Finally, the panel found that AIA's position is "at odds with other statutory prevailing party provisions," citing Great Am. Fed. Sav. & Loan Ass'n v. Novotny, 442 U.S. 366, 375 (1979) (involving Title VII).

The opinion then addressed AIA's second argument, that the District Court improperly considered evidence and made factual findings on its state of mind without having a jury make a predicate determination on these issues. But the opinion sets forth the panel's belief that the cited Federal Circuit case law (Door-Master Corp. v. Yorktowne, Inc., 256 F.3d 1308 (Fed. Cir. 2001) and Jurgens v. CBK, Ltd., 80 F.3d 1566 (Fed. Cir. 1996)) only stood for the proposition that a court could not "make findings contrary to or inconsistent with the resolution of any issues necessarily and actually decided by the jury," which was not the case here.

Finally the opinion rejected AIA's contention that it was denied due process, finding that it had ample opportunity to present its case, just not to a jury.

Showing a capacity to learn from hard experience, this panel's opinion appropriately follows the manner with which the Supreme Court has considered similar issues (grounding its understanding of the Amendments and how they should be applied to procedural matter with reference to how related concepts were considered under 18th Century English law). The decision also makes practical sense, insofar as motions for attorney's fees are made after a jury has rendered a verdict, and requiring that jury to make factual determinations on attorney's fees after sitting through a patent infringement trial seems unreasonable. Moreover, insofar as there are situations, as here, where a patentee's behavior could be construed in a harsh and unfavorable light, it may be (paradoxically) more favorable to such a patentee to have a judge rather than a lay jury pass judgment (literally) by making a cash award to a prevailing defendant. This may prove especially true if changing venue rules increase the likelihood that an infringement action will be brought in a defendant's home forum, where it can be expected that a lay jury might be more easily swayed to punish a patentee who can be painted with the brush of unnecessary and perhaps unjustified allegations of infringement against a local defendant and employer.

AIA America, Inc. v. Avid Radiopharmaceuticals (Fed. Cir. 2017)
Panel: Circuit Judges Newman, Lourie, and Hughes
Opinion by Circuit Judge Hughes

Posted at 11:37 PM in Damages, Federal Circuit | Permalink | Comments (6)

June 27, 2017

Nantkwest, Inc. v. Matal (Fed. Cir. 2017)

By Josh Rich --

Patent applicants dissatisfied with final outcome of patent prosecution proceedings have long had two options for court review of a Patent and Trademark Appeal Board decision: an appeal to the Federal Circuit under 35 U.S.C. § 141 or a civil action in the Eastern District of Virginia under 35 U.S.C. § 145. For over 175 years, applicants faced the same risk of paying the Patent and Trademark Office's fees in either proceeding. But in the Nantkwest case, the Patent and Trademark Office asserted that it was entitled to recover attorneys' fees (and other expenses) regardless of the outcome of the case; a divided panel of the Federal Circuit affirmed that it was entitled to receive those fees. As a result, future applicants dissatisfied with Patent and Trademark Office results are likely to think twice before filing an action under § 145.

Background

Dr. Hans Klingemann filed a patent application in 2001 directed to a method of treating cancer by administering natural killer cells. His claims were rejected for obviousness by the examiner, and he appealed the Patent Trial and Appeal Board. The Board affirmed the examiner's rejection. Dr. Klingemann's assignee, Nantkwest, filed a civil action under § 145. The District Court granted summary judgment of obviousness to the Patent and Trademark Office (which was upheld on appeal by the Federal Circuit). The Patent and Trademark Office then sought to recover all of its expenses, including expert, paralegal, and attorneys' fees.

Section 145 permits applicants dissatisfied with the final outcome of patent prosecution proceedings to file a civil action; it also provides that "[a]ll the expenses of the proceedings shall be paid by the applicant." Traditionally, the Patent and Trademark Office applied that provision to seek recovery of costs -- not attorney's fees -- in cases in which it had prevailed.

The Nantkwest District Court held that the Patent and Trademark Office was entitled to recover expert costs, but not attorneys' fees. Nantkwest, Inc. v. Lee, 162 F. Supp. 3d 540 (E.D. Va. 2016). It started with the strong presumption of the "American Rule": that each party is required to pay its own attorneys' fees, regardless of the outcome of the case, in the absence of a clear statutory or contractual obligation to the contrary. Id. at 542. In doing so, the District Court relied on decades of Supreme Court decisions holding that "departures from the American Rule are authorized only when there is a 'specific and explicit provision[] for the allowance of attorneys' fees under [the] selected statute[].'" Id. (quoting Baker Botts L.L.P. v. ASARCO LLC, ___ U.S. ___, 135 S.Ct. 2158, 2164 (2015); Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 260(1975)). The District Court found that § 145 was not sufficiently specific and explicit to vary from the American Rule. Id. at 543-45. In doing so, it asserted that it was not compelled to follow the Fourth Circuit's decision in Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015), cert. denied sub nom. Shammas v. Hirshfeld, 136 S. Ct. 1376 (2016), because Shammas was erroneously decided. Id. at 545-46.

In the Shammas case, the Fourth Circuit considered whether the Patent and Trademark Office could recover fees when a dissatisfied applicant in an ex parte trademark proceeding elected to commence a de novo action in the district court. As with § 145, 15 U.S.C. § 1071(b) permits such an action in relation to a trademark application. But 15 U.S.C. § 1071(b)(3) provides, "In any case where there is no adverse party, a copy of the complaint shall be served on the Director, and, unless the court finds the expenses to be unreasonable, all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not."

The Fourth Circuit started from the proposition, admitted by Shammas, that "all the expenses of the proceeding" would generally be a broad enough term to include attorneys' fees. 784 F.3d at 222. Shammas argued, however, that § 1071(b)(3) would have had to expressly identify attorneys' fees if it were to include them. The Fourth Circuit recognized that the American Rule would compel such a requirement if it applied. But it then determined that the American Rule did not apply because:

[§ 1071(b)(3)] is not a fee-shifting statute that purports to rebut the presumption of the Rule. Rather than imposing expenses based on whether the PTO prevails, § 1071(b)(3) imposes the expenses of the proceeding on the ex parte plaintiff, "whether the final decision is in favor of such party or not." (Emphasis added). Thus, even if Shammas had prevailed in the district court, he still would have had to pay all of the PTO's expenses. Because the PTO is entitled to recover its expenses even when it completely fails, § 1071(b)(3) need not be interpreted against the backdrop of the American Rule. Therefore, even assuming that a statute must explicitly provide for the shifting of attorneys fees to overcome the presumption of the American Rule, that requirement is not applicable here.

Id. at 223-24. Thus, the Fourth Circuit awarded attorneys' fees to the Patent and Trademark Office.

The Federal Circuit's Nantkwist Decision

Like the Fourth Circuit in Shammas, the Federal Circuit in Nantkwest started with the question of whether the American Rule was applicable to the case. The Federal Circuit rejected Nantkwest's argument that the Supreme Court's Baker Botts precedent applied to all fee-shifting statutes. Rather, it found that the precedent only applied when a party was "attempting to extend [a fee-shifting statute's] reach to ancillary litigation Congress never intended." Nonetheless, the Federal Circuit decided that attorneys' fees should be assessed, regardless of whether the American Rule applied.

As the Supreme Court held in the Alyeska Pipeline case, the American Rule does not apply when a statute specifically and explicitly authorizes an award of fees. Relying on the Shammas case and a Second Circuit case (United States v. 110-118 Riverside Tenants Corp., 886 F.2d 514 (2d Cir. 1989)), the Federal Circuit found that § 145 was sufficiently clear to authorize fees under the American Rule. Specifically, it relied upon legal dictionaries and treatises to support the inclusion of attorneys' fees in expenses, and distinguished between costs -- which normally do not include fees -- and expenses. The Court relied upon the belief that its conclusion was "particularly important here in the context of § 145's all expenses provision." Unlike private attorneys, the Patent and Trademark Office relies upon the Office of Solicitor's employees, who do not bill hours individually or collect fees from a client. Thus, it asserted that those fees were more similar to expenses for the government than a "fee."

The majority of the panel also rejected Nantkwest's argument that the Patent and Trademark Office would have had to pay the attorneys' salaries regardless of whether it had to defend against Nantkwest's suit. The Court rejected that argument "because the litigation required the lawyers to divert their time away from other pending matters." Notably, the Court considered the imposition of expenses under § 145 regardless of the outcome of the case to be an intentional disincentive for the bringing of such a de novo case because of the expense and difficulty imposed by a review of all issues, with discovery available to the aggrieved applicant. Thus, it held that the Patent and Trademark Office could recover all expenses including attorneys' fees in any such case.

Judge Stoll dissented from the majority's decision, relying primarily on the American Rule. She found that § 145 "neither mentions 'attorneys' fees' nor reflects a congressional intent to authorize them." Unlike the majority, she relied primarily on the language of the statute and its lack of mention of attorneys' fees as a particularly telling sign. Unlike other statutes that permit recovery of attorneys' fees, there is no discussion of fees, either as part of recoverable expenses or otherwise. That was especially true in light of sources contemporaneous with the 1839 enactment of § 145's predecessor statute, which defined expenses as costs, and vice versa. Finally, Judge Stoll noted that it would be particularly unusual to view § 145 as a fee-shifting statute in light of the imposition of expenses on both unsuccessful and successful litigants.

Conclusion

In light of the Federal Circuit's Nantkwest decision, applicants disappointed with Patent and Trademark Office proceedings will have to think twice before pursuing a de novo district court action. The added cost of the Patent and Trademark Office's fees and expenses -- in this case, over $100,000 -- will have to be weighed against the greater chance of obtaining a patent. If the pivotal issue is a question of law, rather than some fact missing from the record before the Board, it strongly suggests seeking an appeal to the Federal Circuit under § 141. Only when additional fact-finding is required, and the patent application is especially important, will a district court action under § 145 be worth it.

Nantkwest, Inc. v. Matal (Fed. Cir. 2017)
Panel: Chief Judge Prost and Circuit Judges Dyk and Stoll
Opinion by Chief Judge Prost; dissenting opinion by Circuit Judge Stoll

Posted at 10:46 PM in Damages, Federal Circuit | Permalink | Comments (2)

June 25, 2017

GlaxoSmithKline LLC v. Glenmark Pharmaceuticals Inc. (D. Del. 2017)

District Court Overrules Defendants' Objections to Magistrate's Report on Lost Profits

By Donald Zuhn --

Earlier this month, in GlaxoSmithKline LLC v. Glenmark Pharmaceuticals Inc., U.S. District Judge Leonard P. Stark of the U.S. District Court for the District of Delaware issued a Memorandum Order that, inter alia, overruled objections by Defendants Glenmark Pharmaceuticals Inc., USA and Teva Pharmaceuticals USA, Inc. to a Report and Recommendation issued by Magistrate Judge Burke and adopted the Report. The Report had recommended, in part, that the District Court deny Defendants' motion for summary judgment related to a claim for lost profits by Plaintiffs GlaxoSmithKline LLC and SmithKline Beecham (Cork) Ltd.

Glenmark and Teva had objected to the Magistrate's Report on two grounds, the first of which is relevant to this discussion. In particular, Defendants argued that the Report wrongly permitted GlaxoSmithKline to present a lost profits calculation that contemplates a "but-for" world that excludes non-party manufacturers' generic products (in this case, generic carvedilol products). In summarizing Defendants' argument, the Court noted that:

Defendants insist that the but-for world to which comparisons must be made in order to assess GSK's claim for lost profits damages is a world in which non-party manufacturers of generic carvedilol would have existed, and from which direct infringers (i.e., physicians) would have obtained carvedilol. It follows, then, that GSK lost no profits due to Defendants' allegedly infringing conduct, because even absent Defendants' infringement, GSK would still have lost those same sales -- albeit to non-party manufacturers, rather than to Defendants.

The District Court, however, found Defendants' argument to be unpersuasive. Although the Court noted that "at all times relevant to the lost profits analysis, there were generic carvedilol tablets available from at least eight different generic manufacturers," the Court also noted that the Report had properly explained that "the law is clear that a lost profits analysis must be based on a world in which infringement of the asserted patent does not exist, and therefore it does not allow for infringing alternatives to be available in the hypothetical 'but for' world." The Court indicated that "the generic carvedilol of these non-party manufacturers is an infringing alternative -- and not a non-infringing alternative," and therefore concluded that "[t]hese non-parties' products, thus, would not exist in the but-for world, which must be constructed to include 'likely outcomes with infringement factored out of the economic picture'" (emphasis in Memorandum Order).

The Court also stated that "[t]he issue for the lost profits calculation is whether the product is non-infringing, not whether the alternative supplier has been, or could be, successfully sued for infringement," agreeing with GlaxoSmithKline that "[i]t doesn't matter whether the sales by other generic suppliers would be non-infringing, because the ultimate use of those products by doctors would be infringing and thus not a permissible consideration" (emphasis in Memorandum Order). In denying Defendants' objections to the Report and adopting the Report, the Court concluded that "because the but-for world is one in which no infringing alternatives exist, other generic carvedilol products that directly infringe [GlaxoSmithKline's patent] must be excluded, even if the sales of those products are not induced by Defendants."

Posted at 11:25 PM in Damages, District Court | Permalink | Comments (0)

March 22, 2017

Bayer CropScience AG and Bayer S.A.S. v. Dow Agrosciences LLC (Fed. Cir. 2017)

By Donald Zuhn --

Last week, in Bayer CropScience AG and Bayer S.A.S. v. Dow Agrosciences LLC, the Federal Circuit determined that the District Court for the District of Delaware did not abuse its discretion in determining that, under the totality of the circumstances, the case was an exceptional one, and the Federal Circuit therefore affirmed the District Court's grant of attorney fees to Dow Agrosciences LLC.

An earlier appeal involving the same parties focused on the scope of Bayer's license to Dow's business partner M.S. Technologies, LLC ("MS Tech"), and more specifically, whether the license granted MS Tech a broad license to commercialize and sublicense the licensed technology (i.e., soybeans genetically engineered to tolerate herbicide). Bayer's position was that it had only licensed MS Tech rights to non-commercial exploitation of the technology, and Dow countered that the Bayer-MS Tech agreement conveyed broad rights to MS Tech, including the right to commercialize the licensed technology. The District Court agreed with Dow's interpretation of the Bayer-MS Tech agreement and granted summary judgment in Dow's favor. The Federal Circuit affirmed that decision in Bayer CropScience AG v. Dow AgroSciences LLC, 580 F. App’x 909 (Fed. Cir. 2014) (Bayer I).

The case was returned to the District Court, where the Court awarded Dow attorney fees pursuant to 35 U.S.C. § 285. In characterizing that decision, the Federal Circuit explained that "[t]he district judge examined the full duration of the litigation and concluded that, in her view, Bayer's weak positions on the merits and litigation conduct supported a finding that this was an exceptional case," adding that "the district judge emphasized that 'Bayer's own witnesses as well as key documents contradicted Bayer's contorted reading of the contract'" and that "'Bayer's conduct in litigating this case in the face of evidence that contradicted its contorted reading of the Agreement was objectively unreasonable.'"

Bayer had relied on an exception clause in the licensing agreement that granted "a worldwide, fully paid-up, exclusive license [to MS Tech] with the exception of the rights to increase, market, distribute for sale, sell and offer for sale, granted to STINE by separate agreement." The separate agreement to Stine referenced in the exception clause concerned a non-exclusive license Bayer gave to Stine Seed Farm, Inc. Bayer contended that the exception clause carved all commercialization rights completely out of the MS Tech license, while Dow argued that the provision indicated that the MS Tech license was not exclusive with respect to the separate license rights Stine had been granted. The District Court, however, determined that "[t]he positions Bayer took to support their contract interpretation arguments were directly contradicted by the record evidence Bayer had obtained through early discovery and Bayer should have made every effort to discover before filing suit" adding that "[h]ad Bayer done any due diligence, it would have learned that no witness supported Bayer's construction of the Agreement and this case [] should never have been filed."

In affirming the District Court's grant of attorney fees, the Federal Circuit noted that in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014), the Supreme Court had clarified what constitutes an exceptional case, namely:

[A]n "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. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.

The Federal Circuit determined that the District Court had not abused its discretion in finding the case to be exceptional and had applied the correct legal test under § 285, examining the totality of the circumstances to determine whether the case stood out from others. The panel opinion notes, for example, that "[o]ne Bayer executive at the time of the deal testified that Bayer did not retain commercial rights because 'it was relatively black and white certainly in my mind that we were divesting these assets,'" and that same executive further testified that "'[i]t seems incongruous that we would sell an asset to somebody, receive remuneration for the sale, and then somehow prevent the acquirer from making use of the asset he just acquired.'"

The Federal Circuit also determined that the District Court did not abuse its discretion in concluding that Bayer failed to perform a diligent pre-suit investigation of its claims against Dow, indicating that "Bayer's own witnesses testified against its contract interpretation," and stating that "[w]e cannot say that the district court erred in reasoning that had Bayer conducted a more searching pre-suit investigation—at least of its own easily-obtainable evidence—it would have not filed suit." The Federal Circuit therefore held that the District Court had not abused its discretion in determining that this was an exceptional case, and affirmed the District Court's grant of attorney fees.

Bayer CropScience AG and Bayer S.A.S. v. Dow Agrosciences LLC (Fed. Cir. 2017)
Panel: Circuit Judges Newman, Chen, and Stoll
Opinion by Circuit Judge Stoll

Posted at 11:59 PM in Damages, Federal Circuit | Permalink | Comments (0)

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