A recent The Recorder story, “Acacia Subsidiary Wins Attorney Fee Fight Against Newegg,” reports that the U.S. Court of Appeals for the Federal Circuit has deferred to the judgment of U.S. Magistrate Judge Paul Grewal on attorney fees in a nonpracticing-entity patent case against Newegg Inc.

The Federal Circuit affirmed Grewal's finding that a suit brought by Acacia Research Corp. subsidiary Site Update Solutions, while at times "highly problematic," was "not so egregious" to be deemed "exceptional" under Section 285 of the Patent Act.

"Although reasonable minds may differ, the district court ruled from a position of great familiarity with the case and the conduct of the parties, and it determined that Site Update's tactical blunders and mistakes do not warrant fees," Judge Jimmie Reyna wrote for a unanimous panel in Site Update Solutions v. CBS.

The panel rejected the position taken by Newegg general counsel Lee Cheng, who vowed last year to "explore the limits of Section 285 jurisprudence."  Since then his company has lost two appeals at the Federal Circuit, while two others were sent back to district court for reconsideration, including one that "appears to have significant merit," according to the appellate court.  The company also recovered $15,000 last fall because of a frivolous appellate argument.  A fifth case was argued to the Federal Circuit on Monday.

Cheng said he was "disappointed but not surprised" by Monday's ruling.  He said it serves as further evidence of "how hard it is for defendants to obtain even a modicum of justice against organizations like Site Update and its parent, Acacia Research."

Collins Edmonds Schlareth & Tower partner John Collins, who had the winning argument for Site Update, did not immediately respond to a request for comment.

A year ago, Grewal issued a 34-page opinion setting out his reasons for denying fees, even under the looser standard adopted by the U.S. Supreme Court in 2014's Octane Fitness decision.  Site Update's initial claim-construction positions were "highly problematic," he found, but the company eventually took a more reasonable approach in response to Newegg's criticisms.  Ultimately it wasn't a winning argument, but it was "not so egregious as to make this case exceptional," Grewal wrote.

Newegg and Paul Hastings partner Yar Chaikovsky say it was a phony argument designed to leverage a nuisance-value settlement.  But Reyna wrote in Monday's nonprecedential ruling that they were essentially asking the Federal Circuit to substitute its judgment for Grewal's.  The Supreme Court instructed the Federal Circuit in a companion case to Octane Fitness that it must show deference to district courts on fee awards.

"We do not believe that the district court based its ruling on an erroneous view of the law," Reyna concluded, "and we are not left with a definite and firm conviction that the district court erred in its assessment of the evidence."