Back in 1988, the Federal Circuit reversed a district court decision that refused to award a party its reasonable attorney's fees incurred in successfully litigating a patent's validity before the Patent Office. PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565 (Fed. Cir. 1988). The Office determined that the patent asserted in litigation-stayed pending the Office's review-was invalid and obtained through inequitable conduct. Nobody contested the district court's conclusion that the case was exceptional. The panel, which included Judge Rich, held that the requester was entitled, under 35 U.S.C. ' 285, to recover those fees because the Patent Office proceedings substituted for the district court litigation on all issues the Office considered. Id. at 1569. The court thus sanctioned a common-sense solution to a then-rare instance where the Patent Office resolved an inter partes dispute over patent validity. But what was once rare is now routine. Yet it remains remarkably difficult to obtain attorney's fees. Why?
In the American legal system "each party in a lawsuit ordinarily shall bear its own attorney's fees unless there is express statutory authorization to the contrary." Hensley v. Eckerhart, 461 U.S. 424, 429 (1983). That's the "American Rule." But patent law is special because Congress carved an exception out of the American Rule, broadly stating that: "The court in exceptional cases may award reasonable attorney's fees to the prevailing party." 35 U.S.C. ' 285. In 2014, the Supreme Court resolved competing interpretations of "exceptional" to "hold . that an 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). Octane made it easier to recover attorney's fees.
But despite Octane, a handful of Federal Circuit decisions this spring reveal some difficulties in obtaining an award of attorney fees. With a few exceptions, these cases share a basic set of facts. First, the patent owner files a district court action alleging infringement. Next, the accused infringer successfully asks the Patent Office to review the patent, and the district court action pauses. The Patent Office cancels the patent though an inter partes proceeding costing each party at least a few hundred thousand dollars in attorney's fees. The accused infringer then asks the court to award it the attorney's fees it incurred. As summarized below, even if the case is "exceptional," the court might not award fees.
In mid-April, the Federal Circuit affirmed a district court's refusal to award attorney's fees based on both courts' interpretation of "prevailing party" in Section 285. O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC, Appeal 1019-1134 (Fed. Cir. Apr. 13, 2020). The case presented the same story told above. After its patent was cancelled, the patent owner voluntarily dismissed its infringement action under Rule 41 of the Federal Rules of Civil Procedure, (link). Under that rule, the formality over how the case substantively concluded doomed the prevailing patent challenger's request for fees. Both courts said that the patent challenger was not a "prevailing party" because the dismissal was not a judicial declaration altering the legal relationship between the parties. Cf. B.E. Technology, L.L.C. v. Facebook, Inc., 940 F.3d 675, 678-79 (Fed. Cir. 2019) (holding that "a defendant can be deemed a prevailing party even if the case is dismissed on procedural grounds rather than on the merits."). The courts' reasoning makes too little practical sense. The patent owner no longer has a patent to assert. Logically, it lost, and its opponent prevailed. Yet the Federal Circuit said that without a final court decision the successful patent challenger was not a prevailing party.
Days later, a different Federal Circuit panel vacated a district court's refusal to award attorney's fees based on another interpretation of "prevailing party" in Section 285. Dragon Intellectual Prop., LLC v. Dish Network LLC, Appeal 2019-1283 (Fed. Cir. Apr. 21, 2020). The case presented the...
