Federal Circuit - Anneal v Almirall - Reverses Attorney Fee Award for Work on Inter Partes Review

In Anneal v Almirall, the Federal Circuit held that a court cannot award attorney fees under 35 U.S.C. § 285 for work incurred on an inter partes review (IPR) and on appeal from IPR decision, because 35 U.S.C. § 285 is limited to "judicial proceedings."

Copyright © 2020 Robert Moll. All rights reserved.

Federal Circuit - Munchkin v. Luv n’ Care - Reverses Attorney Fee Award

In Munchkin, Inc. v. Luv n’ Care Ltd. the Federal Circuit reversed a district court's award of attorney’s fees to defendant Luv n’ Care, because the court had abused its discretion in determining the case "exceptional."

The Federal Circuit noted Munchkin's attorney fee motion failed to present facts and the analysis required to establish "Munchkin’s patent, trademark, and trade dress infringement claims were so substantively meritless to render the case exceptional."

See 35 U.S.C. § 285 and 15 U.S.C.§ 1117(a) which require an "exceptional case" to award attorney fees to a prevailing party in patent and trademark cases.

Copyright © 2020 Robert Moll. All rights reserved.

Federal Circuit - Intellectual Ventures v. Trend Micro - Attorney Fees Awards, 35 USC § 285

In Intellectual Ventures v. Trend Micro, the Federal Circuit remanded a case to the district court to reconsider Trend Micro's attorney fees award under the proper legal standard.

Under 35 USC § 285, a court may award attorney fees to the prevailing party in "an exceptional case." An exceptional case stands out from others with respect to the (1) strength of a party’s litigating position (considering the law and facts) or (2) unreasonable manner in which the case was litigated.

Intellectual Ventures (IV) sued Trend Micro and Symantec for infringement of US patents, including US Patent No. 6,460,050, related to filtering data files (e.g., email messages).

The Symantec action proceeded first. During the claim construction and throughout pretrial IV's expert opined the "characteristic" of documents in claims should be interpreted as including "bulk email." After the court adopted the expert's opinion, the expert changed his opinion after he talked to IV's attorneys.

After the Symantec trial was complete, Trend Micro moved for clarification on claim construction and the IV attorney argued the expert's opinion had not changed. Trend Micro then moved for attorney fees due to the expert's changed opinion. The district court granted attorney fees of $444,051. It didn't appreciate the expert's last minute change and the attorney arguing nothing had changed.

The Federal Circuit vacated the attorney award stating the court must determine whether the case overall is exceptional not whether an isolated action is exceptional. Notably, the district court granted attorney fees, but conceded IV's case was not overall unreasonable. The district court relied on the circumstances surrounding the changed expert's opinion alone.

I agree that isolated mistakes must be viewed within the totality of the circumstances. Experts may change opinions and attorneys misstate their position, but the court must consider whether the overall case and manner of litigation is reasonable before granting attorney fees. Otherwise, it encourages parties to seek attorney fees for isolated acts that are "exceptional" with respect to the overall case.

Copyright © 2019 Robert Moll. All rights reserved.

Stanford Technology Law Review - Octane Fitness: The Shifting of Patent Attorneys' Fees Moves Into High Gear

Scott Flanz's article Octane Fitness: The Shifting of Patent Attorneys' Fees Moves Into High Gear published in the Stanford Technology Law Review is worth reading.

Here is the abstract:

"In 2014, the United States Supreme Court decided Octane Fitness. LLC v. ICON Health Fitness, LLC, significantly altering the standard for granting attorneys' fees shifting at the close of a patent litigation. Combine with precedent announced on the same day in Highmark Inc. v. Allcare Health Management Systems, scholars have opined that under the new regime, the standard for proving entitlement to attorneys’ fees in patent litigations will be considerably relaxed. Despite the widespread acceptance of the viewpoint, few empirical analyses—if any—have objectively confirmed it.

This paper provides a first glimpse into whether the Supreme Court’s decision in Octane changed the attorneys’ fees standard in practice. By investigating the rate at which courts have granted attorneys’ fees motions before and after Octane, broken down by whether the movant was a patentee or accused infringer, the technology of the patent asserted, the circuit and district where the suit was decided, and what factors were considered by each court in its opinion, this research confirms that Octane’s reinterpretation of § 285 has had observable effects. In particular, this study finds a statistically significant increase in the rate of attorneys’ fee shifting after Octane, particularly for motions filed by accused infringers and in motions concerning electronics and software patents. The results of this study shed light on meaningful and recent changes to the patent litigation incentive structure and will be helpful in predicting future changes to the patent litigation landscape."

Copyright © 2016 Robert Moll. All rights reserved.

US Supreme Court - Standards for Ordering Attorney Fees in Intellectual Property Cases

Professor Ronald Mann of Columbia Law has an interesting article on the US Supreme Court's effort to clarify when attorney fees should be granted in intellectual property cases. The Court will hear the parties arguments next week.

See Professor Mann's article in the SCOTUS blog: Argument preview: “The first thing we do, let’s pay all the lawyers!” – Justices return, again, to standards for ordering attorney’s fees in IP cases.

Copyright © 2016 Robert Moll. All rights reserved.

WSJ - Senate Tees Up Bipartisan Bill Aimed at Patent Litigation

Today, I suggest reading the WSJ article Senate Tees Up Bipartisan Bill Aimed at Patent Litigation:

"Last year, the House of Representative cast a vote in support of patent reform, specifically for measures intended to clamp down on a flood of patent lawsuits. Corporate defendants, academics and others thought plaintiffs were abusing the court system, filing 'nuisance' lawsuits that were likely to trigger quick settlements. But the Senate's effort to play ball with the House died amid a flurry of finger-pointing. Earlier this year, the House reintroduced its bill — the Innovation Act — and Wednesday afternoon, the Senate offered up a companion to the House bill that seems to have bipartisan support among some influential senators. The bill was introduced by Sens. Charles Schumer (D., N.Y.); John Cornyn (R., Texas);Senate Judiciary Chairman Charles Grassley (R., Iowa) and that committee’s ranking Democrat, Patrick Leahy (D., Vt).

This bipartisan bill shifts the legal burden back onto those who would abuse the patent system in order to make a quick buck at the expense of businesses that are playing by the rules," said Sen. Schumer, in a statement. 'I'm hopeful we can move quickly and in a bipartisan way to get this bill passed in committee and on the Senate floor this summer.'"

The article gives a summary of the Innovation Act that loses me on several points. The article never talks the dramatic decrease in patent infringement lawsuits last year. Is this carelessness or related to the sources of the article? It fails to talk about the defendants overwhelming success in the America Invents Act (AIA) trials. Defendants have had a long losing streak there, and the Innovation Act seeks to remove the estoppel provisions. Why isn't this discussed? The article exaggerates support for patent reform in 2014. It didn't die because of "finger pointing" in Congress. It died because it changed decades of how we conduct patent litigation. Congress hit a snag because it tried to pass laws that would weaken patent owner rights. Each party pays its own attorney fees unless it's an exceptional case in the USA to encourages patent owners to come to court if they cannot settle a patent infringement case. However, the Bill proposes mandatory attorney fee shifting for losers in patent litigation. Mandatory fee shifting would reduce patent troll lawsuits, but would also discourage patent owners with legitimate claims. It proposes to tilt the playing field further in favor of big companies who can shift all their legal fees on small companies who make the mistake of suing for patent infringement and losing the case.

I don't know if patent reform will pass this year. What seems more certain to me is tech lobbyists will push for patent reform (even reviving what failed) and present it as in the public interest and protecting us from those patent trolls. It's getting impossible to not conclude it's really about lowering costs of doing business (e.g., paying patent licenses) of big tech in the USA.

Copyright © 2015 Robert Moll. All rights reserved.

Congresswoman Kaptur - The Innovation Act is Bad News for America's Patent System

Today, I suggest reading Congresswoman Marcy Kaptur's article in IP Watchdog: The Innovation Act is Bad News for America’s Patent System. Ms. Kaptur states certain ways this proposed Act would weaken US patent owners rights. I agree this Act is not what is needed today.

Copyright © 2015 Robert Moll. All rights reserved.

WSJ - Patent Reform Bill Arises Again in Congress

Tonight, I suggest reading the Wall Street Journal article Patent Reform Bill Arises Again in Congress, discussing Congress' latest effort to change US patent law to address patent litigation abuse.

If you want details, here's Innovation Act 2015, which I will refer to as the Bill. If you want a brief account of Congress' latest patent reform, here's the key changes with brief comments:

1. Attorney Fee Awards - Current law permits the recovery of attorney fees to the prevailing party in an exceptional case, while the new law would require an award attorney fees to the prevailing party unless a judge finds that (1) the legal position and litigation conduct of the non-prevailing party was reasonably justified in law and fact; or (2) special circumstances (e.g., severe hardship to inventor) make attorney fee awards unjust. If the patent owner cannot pay the attorney fees, the court can make "the interested parties" (e.g., investors) pay the attorney fees.

My comment - This is a major change from the American rule where each party pays its own attorney fees. It will reduce patent litigation by smaller companies as they will now have to bear the risk of paying all of the attorneys if they lose and a court decides the legal position was unjustified and cannot establish special circumstances. No doubt many defendants may want this, but the Supreme Court's Highmark and Octane decisions adequately protect the "poor defendants" who hope to reduce patent litigation to just a "sport of kings."

2. Complaints Need Claim Charts - When a patent owners sues for patent infringement, the complaint will need to include a claim chart showing how the claim(s) read on the accused product or process except if it cannot be reasonably known before filing the complaint. Form 18 governing the content of complaints is eliminated, but not if you are pharmaceutical company.

My comment - this higher pleading standard will eliminate some patent infringement suits, because preparing a claim chart makes one stare at the infringement case. If you can't do a claim chart, maybe the case should not be filed. Placing the initial cost of a claim chart on the patent owner is better than asking a court to take on a poorly researched case that wastes court resources and defendant's money. Not sure eliminating Form 18 is useful. The Judicial Conference already says it plans to eliminate Form 18 in 2015 and why give pharmaceuticals "a free pass" on Form 18?

3. PTAB Claim Construction - The Bill proposes to replace the Patent Trial and Appeal Board (PTAB)'s broadest reasonable interpretation (BRI) for claims in inter partes review, post-grant review, and covered business methods with the court's narrower interpretation of claims.

My comment - This will help patents survive invalidity challenges in the USPTO, and better corresponds to the reality that patent owners rarely succeed on motions to amend claims.

4. Limit Discovery - This has a couple of parts: (1) claim construction must happen before much discovery occurs; and (2) only large companies or posting a bond will get discovery of non-core documents.

My comment - Claim construction before significant discovery sounds right, but saying a large company gets discovery without posting a bond only increases their advantages over a smaller company, and may raise disputes on whether certain requested discovery is "core" or "non-core."

5. Willful Infringement  - The Bill would require demand letters identify the patent, the patent owner, accused product, and importantly how the product infringes at least one claim of the patent.

My comment - This imposes another claim chart into the process of patent enforcement, which of course helps defendants avoid treble damages by merely showing a claim chart did not accompany the demand letter.

6. Transparency of Ownership - This penalizes a patent owner who fails to update the USPTO within 90 days on changes of ownership with no enhanced damages, or attorney fees and an award of attorney fees to the defendant who spent money researching the ownership information.

My comment - Patent ownership should be transparent during enforcement, but the consequences of missing the 90 day window sounds draconian. Paying the attorney fees to find out the actual ownership should suffice.

7. Stay of Customer Suits - Courts may stay (suspend) a patent infringement suit of a customer lawsuits when the manufacturer of the product challenges the patent.

 My comment - Why would anyone sue a customer?

Copyright © 2015 Robert Moll. All rights reserved.

Supreme Court - Award of Attorney Fees, 35 USC 285 - Professor Mann's Article on Octane Fitness and Highmark Hearings

Today, the award of attorneys fees is a hot issue in patent law. 35 USC 285 states that "the court in exceptional cases may award attorney fees to the prevailing party," but courts rarely award attorneys under 35 USC 285. Thus, some corporations are lobbying Congress to redefine that standard to increase the risk of paying "humongous" attorney fees to cut off patent licensing / troll activities.

Redefining the standard may just generate uncertainty and not help long term. Another approach is to wait for the Supreme Court to clarify the standard. Last week the Supreme Court conducted hearings to consider the substantive standard for awarding attorney fees in Octane Fitness and the standard of review for appeals in Highmark.

I started to read through the Supreme Court hearing transcripts this weekend, but found a nice argument recap by Columbia law professor Ronald Mann Justices hard to read in twin disputes about attorney's fees in patent litigation, which can help one navigate where we are going in this area of the law.

Copyright © 2014 Robert Moll. All rights reserved.

Federal Circuit Chief Judge Rader Speech - Patent Law and Litigation Abuse

Federal Circuit Chief Judge Rader seems to relish poking the anti-patent crowd in the eye. On November 1, 2013, Judge Rader gave a speech Patent Law and Litigation Abuse in Plano, Texas.

Here's a passage from his speech:

"As an illustration of the crisis of confidence in the benefits of Patent Law, I wished to just discuss one unsubstantiated charge against the merits of this system of Constitutional dimension. Academics often charge the Patent system with creating a so-called "tragedy of the anti-commons." This academic canard suggests that a "thicket" of patents can actually inhibit innovation; that the administrative burdens of enforcing patents can multiply to frustrate the goal of the Act. Thus, the law of innovation supposedly works against itself. In an age of empirical research to verify every legal hypothesis, I would urge you and any policymaker to reject this academic supposition – whether it comes from a high court or any other source – until and unless it is verified by empirical data. By the way, the only studies on this topic that I have seen could not verify this guess but generally confirmed the opposite – that patents spur innovation.

May I offer a common sense rebuttal to this academic hypothesis? [Hold up my smart phone] This smart phone resides in the technological space most occupied by patents, perhaps in the history of patent law dating back to 1624. With design patents as part of the equation, this device probably includes easily more than a thousand active patents. If you count expired patents in this technology back to the advent of the computer age, this device would implicate tens of thousands of patents. If ever the administrative burdens of a concentration of patents would inhibit innovation, this technology would be the place to observe that encumbrance. Now you tell me: is this technology experiencing sluggish and encumbered innovation? I doubt that I could keep track of the pace of innovation in this technology if I devoted my full time to the project.
No doubt a study would show that the disclosure benefits of patents bring the entire world into the innovation circle that drives smart phone technology forward faster than any of us can fathom. I am afraid the “tragedy of the anti-commons” has its own tragedy: it simply is academic nonsense. The patent system does not inhibit
invention."

Copyright © 2013 Robert Moll. All rights reserved.

US Supreme Court Certiorari - Octane Fitness v. Icon Health and Fitness - Exceptional Cases Under 35 USC 285 and Attorney Fees

On September 5, Mary Dwyer of the SCOTUS Blog stated the petition of the day relates to the Federal Circuit's nonprecedential decision in Octane Fitness v. Icon Health and Fitness. If the Supreme Court takes the case, it may increase the likelihood that a losing patent assertion entity case is held exceptional under 35 USC 285 resulting in an attorney fee award.

The issue is framed: Whether the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriates a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants.

See the papers, orders, and proceedings at SCOTUS blog page.

Updated October 1, 2013: Petition Granted.

Copyright © 2013 Robert Moll. All rights reserved.

NY Times - Make Patent Trolls Pay in Court - A Comment

Today, in Make Patent Trolls Pay in Court, Federal Circuit Chief judge Randall Rader and law professors Colleen Chien and David Hricik note patent trolls have strategic advantages over companies since patent trolls (1) don't make anything so cannot be countersued; (2) have no concern with business reputation as litigation is their business; (3) can defer attorney fees unless they win due to contingency fee representation; and (4) total litigation costs can be low even when they lose. However, Professor Crouch notes in Fight Litigation Misconduct, But Not Through Hyperbole the typical costs of a patent troll that loses is not a court filing fee. Yet, these advantages often lead defendants to settle even when a patent is of doubtful validity.

While Congress is considering a set of new bills, such as End Anonymous Patents Act, Patent Quality Improvement Act of 2013, and SHIELD Act, to address patent trolls, the Chief judge Rader notes that courts already have certain laws to curtail the advantages of patent trolls. For example, judges can dismiss an unworthy patent case at the outset under Federal Rule of Civil Procedure Rule 11. Yet this rarely happens. For cases that go further, 35 USC 285 gives judges the authority to shift a defendant's attorney fees to the abusive patent troll for payment if the plaintiff knew the action is being brought in bad faith and the case is objectively baseless. Given attorney fees dwarf all other costs of litigation this would give patent trolls a reason to pause on the case with no merit.

Yet, judges rarely shift the defendant's attorney fees to the patent owner. Part of the problem is the Federal Circuit's "subjective bad faith and objectively baseless" standard. It is difficult. Another is the customary slack district court judges give trolls before they are willing to find a case "exceptional" as defined the Federal Circuit's interpretation of 35 USC 285 and shift the attorney fees. In fact in 2011, federal judges awarded fee shifts only 0.7% of the time (20 times out of 3,000 cases). Think about it, only 1 case in 100 is without merit? The media makes it sound like this is not the case.

Thus, the article suggests the solution is right in front of us. Just enforce the existing laws such as 35 USC 285 to curb abusive patent litigation rather than await passage of bills, which seem like hasty band-aids with obvious flaws.

Copyright © 2013 Robert Moll. All rights reserved.

SHIELD Act of 2013 - A Problematic Solution to Patent Trolls

I thought the effort to pass the SHIELD Act died last year, but read Joe Mullin's article tonight: Peeved politicians want "loser pays" rule for patent trolls - SHIELD Act would target patent shell companies, exempt inventors, universities. I was wrong, it's repackaged as the SHIELD Act of 2013! It's changed a bit, but still not a good idea.

Part of the problem is it's a huge departure from centuries of America law. The America rule requires each party in litigation bear its own expenses, including attorney fees. In 1946, the U.S. patent statute was amended to "discourage infringement of a patent by anyone thinking all he would be required to pay if he loses the suit would be a royalty." The Senate Committee at that time noted, "it is not contemplated that the recovery of attorney fees will become an ordinary thing in the patent suits." In 1952, the U.S. patent statute was amended to add that attorney fees would only be recoverable in "exceptional cases." Even then attorney fees are intended to compensate the "good party" for its expenses and not punish the "bad party." So despite the rhetoric U.S. patent law already has a mechanism to tackle patent trolls.

This Act's proposed fee shifting ignores that plus opens a can of worms when parties have vastly different financial resources. For example, if a small company becomes aware a large company is infringing its patent, offers a license, which is ignored, it may need to go to court to seek redress. This bill would encourage defendants to engage a large law firms (many attorneys are assigned to the case) to quickly run up a huge legal bill, which is not difficult if you bill at $600-$1,000/hour, generate a "victory," and hand the entire legal bill (which should belong to the defendant for not exercising any judgment and ignoring the relatively low cost inter partes review in the USPTO) to punish the small company for having the audacity to want to license its patent. Ultimately if passed, the SHIELD Act may just shield large companies who want to freely infringe small companies patented inventions.

The SHIELD Act definitions of a patent troll is also problematic. A company or individual risks being held a patent troll by defendant's motion if (1) it doesn't practice the invention; (2) it doesn't have at least one inventor in its employ; or (3) it is not the original patent owner. Assigning so much importance on practicing the invention has no basis in US patent law. Wouldn't the bill's definition of patent troll be met by companies none of us consider to be patent trolls? For example, is Google forced to litigate as a patent troll under this bill if it seeks to enforce the Motorola Mobility patents? Better not lay off the affected Motorola inventors then. How about Facebook's purchase of AOL and IBM patents? How much practice of the invention suffices to defeat the patent troll label? Could a company avoid the patent troll label by building and selling a prototype? Couldn't someone be exempt from the Act simply by hiring one of the inventors? Maybe plaintiff and defendant could bid for the inventor. Does exempting an original owner but not any subsequent assignee discourage transfer of patents? Congress may mean well, but these types of consequences make the bill worse than the problem.

Copyright © 2013 Robert Moll. All rights reserved.