Friday, 20 June 2008

Attorney's Fees for Patent Infringement: What is an "exceptional" case?

What determines whether a party is entitled to attorney's fees in a federal patent infringement suit?  Under federal law, an award of attorneys fees requires an “exceptional case.”  35 USC§ 285 reads: “The court in exceptional cases may award reasonable attorneys fees to the prevailing party.”  In Trading Techs. Int’l, Inc. v. eSpeed, Inc., the Illinois District Court for the Northern District said that an exceptional case requires “inequitable conduct, litigation misconduct, willful infringement, or that the opposing party's conduct was vexatious, frivolous, or otherwise in bad faith.”  Trading Techs. Int’l, Inc. v. eSpeed, Inc., No. 04 C 5312, Slip Op. 1-2 (N.D. Ill. Jan. 3, 2007) (Moran, Sen. J.).  But what types of actions fall into these categories?  According to the Illinois District Court, a non-objectively reckless defense of non-infringement does not rise to the level of “exceptional.”

But where a patent case is not close, and where a party willfully infringes on a patent because it did not consult with counsel and made a superficial search of the validity and extent of the patent it infringed, courts have awarded attorney's fees.  Engineered Products Co. v. Donaldson Co., Inc., 335 F.Supp.2d 973 (N.D. Iowa 2004), affirmed in part, vacated in part and remanded 147 Fed.Appx. 979 (2005).  Attorney's fees have also been awarded where a party failed to rely on the advice of its counsel and negligently did not investigate a pre-existing patent.   nCUBE Corp. v. SeaChange Intern., Inc., 313 F.Supp.2d 361 (D. Del. 2004), affirmed 436 F.3d 1317, 77 U.S.P.Q.2d 1481, rehearing and rehearing en banc denied.

“Weak” allegations of infringement that aren't in bad faith or otherwise frivolous have been held not to be “exceptional.”  Porter v. Farmers Supply Service, Inc., 790 F.2d 882 (Del. 1986), 229 U.S.P.Q. 814.  But a “clearly hopeless” appeal from a finding of infringement where a party left out parts of the relevant law damaging to its case and made frivolous arguments has resulted in an award of attorney's fees.  Id.  In general, any bad faith, misleading, or dilatory tactics in a patent infringement suit will lead to an award of attorney's fees.  American Standard, Inc. v. York Intern. Corp., 244 F.Supp.2d 990 (W.D. Wis. 2002). 

Typically, courts consider whether the parties acted in bad faith, whether the attorney's used frivolous or abusive tactics, or whether the case was not close or otherwise meritless.  Perricone v. Medicis Pharmaceutical Corp., 432 F.3d 1368 (C.A. Fed 2005), 77 U.S.P.Q.2d 1321, on remand 2008 WL 748424.  But, strangely enough, even where a case does meet the “exceptional” standard, courts can award $0 in attorney's fees.  Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340 (C.A. Fed 2001), 60 U.S.P.Q.2d 1694.  In making these decisions, the judge asks whether there is clear and convincing evidence that the actions of one party were exceptional. 

An award of attorney's fees is neither usual or customary in a patent infringement suit, but if you feel that your patent has been willfully infringed by a party who knew or should have known about your patent after a reasonable investigation, or if that party has acted in bad faith or has otherwise acted abusively, you may be entitled to attorney's fees.  Protecting your intellectual property rights should not be taken lightly; your innovation is the lifeblood of the information economy and should be protected to the fullest extent of the law.

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