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Federal Circuit Unsure It Can Affirm IP Attorney Fee Award

February 10, 2020 | Posted in : Fee Award, Fee Doctrine / Theory, Fee Entitlement, Fee Issues on Appeal, Fee Jurisprudence, Fee Request, Prevailing Party Issues

A recent Law 360 story by Britain Eakin, “Hotel Wants Four Seasons’ $1M Atty Fee Request Slashed, reports that a Federal Circuit panel struggled to understand how far beyond the case record it should go in reviewing whether Munchkin Inc.’s infringement case over a spill-proof sippy cup was so unreasonable that it should pay $1.1 million in attorney fees.

In an order granting Luv N’ Care Ltd.’s fee bid, the district court had said the case was exceptional because Munchkin had concealed relevant prior art sippy cups during litigation, and its amended trademark infringement claims were so weak they were abandoned.  But during a 40-minute hearing in Washington, D.C., attorneys for both companies told the Federal Circuit panel that the lower court didn’t make factual determinations on either issue.

The panel appeared hung up on whether it needed to delve into the factual issues the district court left undecided to determine whether it abused its discretion in granting the fee award.  Munchkin attorney Travis W. McCallon of Lathrop GPM LLP urged the panel to reverse, saying that relitigating factual issues after the fact would put the panel “too far afield” from the case record.

U.S. Circuit Judge Timothy B. Dyk asked the attorney what prior cases say about going outside the record to determine whether to grant attorney fees.  “There’s language in Supreme Court cases saying this shouldn’t be the occasion for a new litigation,” Judge Dyk said.  “Certainly you’re going to have discovery on the merits, a trial on the merits, in connection with the attorney’s fees.  But do the cases say the district court is limited to the record that has already been made?”  McCallon said he wasn’t sure if prior cases have specifically held that, but said “a finding of exceptionality should be readily apparent from the record,” and that no mini trials on the merits should be necessary to make that determination.

Munchkin sued Luv N' Care and Admar International Inc. for trademark infringement and unfair competition in 2013. Munchkin moved to amend the trademark claim the following year, deciding to assert a different trademark in the case, and then added a patent infringement claim to the suit in 2015.  Luv N' Care later challenged the validity of Munchkin’s patent at the Patent Trial and Appeal Board, which invalidated all of the challenged claims.  After the PTAB invalidated the patent, the district court ruled in favor of Luv N' Care and deemed it the prevailing party.

The district court tacked on the cost of the PTAB proceedings to the fee award, as well as Munkchin's appeal of the PTAB decision to the Federal Circuit, which affirmed.  McCallon urged the Federal Circuit panel to reverse the district court’s fee order, saying it “sets a new low bar for exceptional case findings.”

But U.S. Circuit Judge Richard G. Taranto pointed to the Federal Circuit’s ruling last year in ThermoLife International LLC v. GNC Corp., in which the court held in what it called an “unusual” case that Stanford University and ThermoLife owed $1.3 million in attorney fees even though the reason the fee was awarded was divorced from the only issues litigated.  “It can’t be that fees can be awarded only on the basis of things that happened in the merits of litigation ... past the filing of the complaint,” Judge Taranto said.