Developments in Attorney’s Fees after Octane Fitness and

© 2021 ROBINS KAPLAN LLP

Andrea L. GothingFortress Investment Group

Annie HuangRobins Kaplan LLP

Developments in Attorney’s Fees after Octane Fitness and Highmark

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Polling Question No. 1

A district court bifurcates trial with invalidity to be tried before infringement

• Court finds patents invalid

• Infringement is never litigated or tried

• Defendants move for attorney fees under 35 U.S.C. § 285 alleging that Plaintiff did not conduct an adequate pre-suit infringement investigation

Court:

A. Denies Motion for Fees

B. Grants Motion for Fees

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True or False, when filing motions for fees under 35 U.S.C. § 285, defendants

are generally more successful

A. True

B. False

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United States Patent and Trademark Office issues a patent for a computer implemented invention

• The patent holder files an infringement suit against defendant

• Defendant immediately files a motion to dismiss under 35 U.S.C. § 101 alleging the patent is directed towards ineligible subject matter

• The district court grants the motion to dismiss

• Defendant moves for attorney fees

Court:

A. Denies Motion for Fees

B. Grants Motion for Fees

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Win or lose, each party

is responsible for

paying its own

attorney's fees

The “American Rule”

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Two-Way fee shifting has been available since the 1946

Patent Act

– “35 U.S.C. § 70”— A court “may in its discretion award

reasonable attorney’s fees to the prevailing party.”

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Patent Act of 1952 limited two-way fee shifting to

“exceptional cases”

– “35 U.S.C. § 285”— “The court in exceptional cases may award

reasonable attorney fees to the prevailing party.”

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Exceptional Case- “Totality of the Circumstances” Test

Until 2005, the regional circuits and the Federal Circuit instructed lower courts

to consider various factors, or the “totality of the circumstances” when making a

fee determinations under § 285.

See, e.g., Rohm & Haas Co. v. Crystal Chemical Co., 736 F.2d 688, 691 (Fed. Cir. 1984)

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In 2005, Federal Circuit Raised the Bar for Fee-Shifting

1. Exceptional if “material inappropriate conduct” related to the patent or litigation

– E.g., litigation misconduct, willful infringement, inequitable conduct in procuring patent

2. Absent misconduct, a case is “exceptional” only if both

– (1) the litigation is brought in subjective bad faith, and

– (2) the litigation is objectively baseless

3. Must be proven by “clear and convincing” evidence

Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378 (Fed. Cir. 2005)

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In 2014, the Supreme Court Lowers the Bar for Fee

Shifting in Patent Cases

Octane Fitness LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014)

• Rejected Brooks Furniture as inconsistent with the Patent Act and “unduly rigid”

• Fees may be awarded:

1. if the case “stands out from others with respect to the strength of a party’s

litigating position” or

2. “the unreasonable manner if 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

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District Court Decision is Reviewed for “Abuse of

Discretion”

Highmark Inc. v. Allcare Health Mgmt. Sys., Inc, 572 U.S. 559 (2014)

• District court is better positioned to decide whether a case is “exceptional”

• Rejected the Federal Circuit’s “de novo” review of “exceptional case” status

• Standard of review is “abuse-of-discretion”

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The Purpose of Section 285

“The purpose of section 285, unlike that of Rule 11, is not to control the local

bar's litigation practices . . . but is remedial and for the purpose of

compensating the prevailing party for the costs it incurred in the

prosecution or defense of a case where it would be grossly unjust, based on

the baselessness of the suit or because of litigation . . . misconduct, to

require it to bear its own costs.”

Vasudevan Software, Inc. v. Microstrategy, Inc., No. 11-cv-06637-RS, 2015 U.S. Dist. LEXIS 110522,

at *17 (N.D. Cal. Aug. 19, 2015) (quoting Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d

1300, 1310, n.1 (Fed. Cir. 2012))

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The Overall Numbers:

A Tick Up in Filings and Grants

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Motion for Fees under 35 U.S.C. § 285 by Year

Source of data: Docket Navigator (2008-present)

Octane Fitness decided April 29, 2014

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All U.S. District Courts

YearNumber of Motions for

Attorney's Fees Filed

Number of Motions for Attorney's

Fees GrantedPercent Granted

2014* 123 27 21.95%

2015 216 43 19.91%

2016 195 40 20.51%

2017 186 53 28.49%

2018 156 49 31.41%

2019 176 42 23.86%

2020 136 29 21.32%

2021 (YTD) 58 17 29.31%

Total 1246 300 24.08%

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Motion for Fees Under 35 U.S.C. § 285

U.S. Dist. Courts

2008-2014

Average/Yr

2015-2020

Average/Yr

Granted 26.7 (21%) 41 (25%)

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Octane Fitness decided April 29, 2014

average filings

average grants

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Numbers by Location

Source of data: Docket Navigator

2015-2021 (est.)

# of Fees

Motions

Filed

# Granted % Granted

All U.S.

Dist.

Courts

1246 300 24.08%

May 2014 – June 16, 2021

# of Fees

Motions

Filed

# Granted % Granted

D. Del. 129 19 14.7%

E.D. Tex. 113 19 16.8%

N.D. Cal. 124 29 23.4%

C.D. Cal. 134 44 32.8%

S.D.N.Y. 50 14 28%

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Patent Owners vs Alleged Infringers

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Patent Owners are Generally More Successful

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What is “Exceptional Conduct”?

Failing to perform any pre-suit investigation*

ThermoLife Int'l LLC v. GNC Corp., 922 F.3d 1347, 1358 (Fed. Cir. 2019):

– District Court found all asserted claims invalid as anticipated or obvious

• Defendant moved for attorney fees arguing

– No basis to continue to assert infringement

– No pre-suit investigation

• District Court awarded fees under § 285

– Federal Circuit affirmed

*Intellectual Ventures II LLC v. Commerce Bancshares, Inc., No. 2:13-cv-04160-NKL, 10 (W.D. Mo. Sept. 29, 2017)

(holding lack of pre-suit investigation did not warrant attorney fees)

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Asserting patent claims that are clearly invalid in view of Alice

Inventor Holdings, LLC v. Bed Bath & Beyond, Inc., 876 F.3d 1372, 1377-79 (Fed. Cir. 2017)

– Claims directed at using conventional technology to purchasing goods at a local

retailer from a remote seller

– Defendant filed a motion to dismiss arguing claims were directed towards that abstract

idea and therefore invalid under 35 U.S.C. § 101

• District granted the motion

– Defendant moved for fees under 35 U.S.C. § 285

• District court granted the motion

– The Federal Circuit affirmed: “[T]he patent claims here are directed to a fundamental

economic practice, which Alice made clear is, without more, outside the patent system.”

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No basis to maintain suit after a Markman hearing or discovery

– An infringement theory that violates ordinary language

• Segan LLC v. Zynga Inc., 131 F. Supp. 3d 956 (N.D. Cal. 2015)

– While the Northern District awarded fees under Rule 11, it stated “Zynga is

entitled to a full fee award against Segan under section 285.”

– Plaintiff on notice that accused device was on sale before patents critical date

• Big Baboon, Inc. v. SAP Am., Inc., No. 17-CV-02082HSGEDL, 2019 WL 5088784, at *6

(N.D. Cal. Sept. 9, 2019), report and recommendation adopted, No. 17-CV-02082-HSG,

2019 WL 5102644 (N.D. Cal. Oct. 11, 2019)

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General litigation misconduct that unnecessarily compounds and delays

– Awarding fees based on false declarations before the PTO, without which, the

court concluded, the plaintiff would not have obtained the patents at issue

• Intellect Wireless, Inc. v. Sharp Corp., 45 F. Supp. 3d 839 (N.D. Ill. 2014)

– Awarding fees when plaintiff pursued an “illogical” legal argument, meaning it had

been advanced in bad faith

• Arcona, Inc. v. Farmacy Beauty, LLC, No, 2:17-cv-7058-ODW (JRx), 2021 WL 2414856,

at *5 (C.D. Cal. June 14, 2021)

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What is NOT Necessarily “Exceptional Conduct”?

• Weak claim construction and collateral estoppel applied

– The issue of whether collateral estoppel applied was not settled law and therefore plaintiff’s arguments were

in good faith. Further, defendants had not disclosed information necessary for plaintiff to see its claim

construction was weak and it promptly stipulated to non-infringement once it received that information. Sprint

Communs. Co., L.P. v. Cequel Communs., LLC, No. 18-1919-RGA, 2021 WL 1820562 (D. Del. May 6, 2021)

• “Kitchen Sink” Approach

– Even when plaintiff knew or should have known its case was fatally flawed and accused of making losing

arguments. “Every case will have a loser” and plaintiff’s tactics were not rare or unusual. Innovation Scis,

LLC v. Amazon.com, Inc., No. 4:18-cv-474, 2021 WL 2160521, at *6 (E.D. Tex. May 27, 2021)

• Nuisance fee litigation absent record of improper motive

– Newegg failed “to make a record supporting its characterization of SFA's improper motivations.” SFA Sys.,

LLC v. Newegg Inc., 793 F.3d 1344, 1350 (Fed. Cir. 2015) (denial of fees affirmed)

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Improper Conduct and Overreach

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In re Glob. Equity Mgmt. (SA) Pty. Ltd., 2020 U.S. Dist. LEXIS

148130 (N.D. Cal. Aug. 15, 2020)

• Case originally filed in Texas against Ebay, Alibaba.com and several other

defendants

• After claim construction, district court invalidated half of the asserted claims

• Judge transferred case to the Northern District of California

• Case was stayed pending outcome of inter partes review

• Patent Office invalidated remaining claims and the Federal Circuit affirmed

• Defendants moved for attorney’s fees 35 U.S.C. § 285

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148130, at *6-7 (N.D. Cal. Aug. 15, 2020)

• “The overreach here takes the cake.”

• “Conceivably, a much narrower motion might have prevailed here ... But

greed and overreach has ruined it all. There will be no second chance. No

further motions for fees will be entertained.”

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148130 (N.D. Cal. Aug. 15, 2020)

• Defendants introduced privileged statements made by patent owner's counsel during a mediation session

– “Defendants had the good sense to file this information under seal, but not the good sense to explain why federal mediation privilege…does not prohibit the use of this information.”

• Defendants “overreach[ed]” in seeking fees in connection with the two inter partes reviews defendants filed

”Patent owner committed no wrong in defending its presumptively valid claims from attack.”

• “Defendants grossly misstate[d] the actual record.”

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General Conclusions

• It is unlikely one specific action will lead to a grant of fees

– Exception: Suits that are frivolous or meritless at outset

• Actions that repeatedly and unnecessarily increase costs are more likely to lead to fees

– Improper discovery tactics, e.g., untimely disclosures, refusals to produce documents

• Do not overreach

– A party can seek fees under section 285 for less than ALL--e.g., fees incurred after Markman hearing or trial

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Annie Huang

Partner // Robins Kaplan LLP

New York

[email protected]

212.980.7438

Andrea L. Gothing

Director // Fortress Investment Group

San Francisco

[email protected]

mailto:[email protected]

mailto:[email protected]

© 2020 ROBINS KAPLAN LLP

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Developments in Attorney’s Fees after Octane Fitness and