A recent Law 360 story by Dani Kass, “Full Fed. Circ. Urged to Fix Divergent Attorney Fee Ruling,” reports that the Federal Circuit deviated from nearly every other circuit court and U.S. Supreme Court precedent when it upheld a ruling that a settlement precluded BigCommerce Inc. from collecting attorney fees, the e-commerce company said in a bid for rehearing.  BigCommerce maintains that it was the prevailing party in its litigation with Diem LLC, as while Diem’s underlying patent infringement claims were settled, a contract dispute that came out of the deal was decided entirely in BigCommerce's favor.  Nearly every other circuit has allowed companies to prevail even if some claims are settled, the petition for rehearing by the panel or en banc states.

Diem, a nonpracticing entity, had accused BigCommerce of infringing its website-generation and -hosting patent with the storefront manager service offered on BigCommerce's website.  As part of a settlement, Diem and Commerce entered into a contract under which the district court would look only at whether Diem had a particular infringement theory in its original infringement allegations.  If so, BigCommerce would have to license the patent for $30,000, and if not, the case would be dismissed with prejudice, according to BigCommerce's appeal.  The district court ruled in favor of BigCommerce and dismissed Diem's suit.

BigCommerce maintains that it's the prevailing party because it escaped the litigation without having to license the patent it was accused of infringing, pay anything to Diem, or change its products or services.  Both the district court and Federal Circuit have disagreed.  The rehearing petition turns on the Supreme Court’s ruling in Buckhannon Board & Care Home Inc. v. West Virginia Department of Health & Human Resources, which struck down the so-called catalyst theory.  Under that theory, a party was considered “prevailing” if its lawsuit caused the defendant to voluntarily change conduct.

BigCommerce said that during oral arguments, the panel claimed it was being asked to stray from the justices' 2001 ruling, but the company said that’s not true.  In 2016's CRST Van Expedited Inc. v. EEOC, the justices said they hadn’t set a “precise test” on how to determine whether a party has prevailed, the petition states.

According to BigCommerce, the Federal Circuit read a test into Buckhannon that “virtually every circuit has squarely rejected.”  It provided examples from the First, Second, Third, Fourth, Fifth, Seventh, Eighth, Ninth and Eleventh circuits to back up that argument.  Buckhannon is just about the catalyst theory and “has no relevance” in a case that doesn't invoke that theory, the petition states.

“BigCommerce never cited any BigCommerce-led action that induced a voluntary change in Diem’s conduct in support of its ‘prevailing party’ arguments in the lower court or before this court,” the petition states.  “In fact, Diem refused to voluntarily do anything BigCommerce requested.  A district court had to retain enforcement jurisdiction over the parties’ settlement agreement, resolve the parties’ dispute, rule in favor of BigCommerce, rule against Diem, which finally caused the dismiss[al] of this case with prejudice.”

The 2006 Federal Circuit case cited by the district court when denying fees, Exigent Tech. Inc. v. Altrana Solutions Inc., was also decided incorrectly, BigCommerce said.  In that case, the court said merits-based relief is required to become a prevailing party, which BigCommerce said contradicts the high court’s ruling in CRST.  If the Federal Circuit doesn’t adjust its holding, then the term "prevailing party" will mean one thing under the Patent Act and something else under every other law, which can’t stand, BigCommerce said.