Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Category: Exceptional Case

Federal Circuit Urged to Toss IP Fee Award in ‘Exceptional Case’

October 20, 2022

A recent Law 360 story by Kelly Leinhard, “Reverse Dish, Sirius XM Fee Award in IP Row, Fed. Circ. Urged” reports that patent-holding company Dragon Intellectual Property LLC urged a federal appeals court to overturn a ruling that found a decade-long infringement fight exceptional, allowing counsel for Dish Network and Sirius XM to collect more than $3 million in attorney fees.  Dragon alleged that the Delaware district court abused its discretion when finding the case exceptional, which led to higher attorney fees, by misreading claim language and not fully considering Dragon's expert testimony.

"When it accepted the unreviewed determination as resolving the issues presented by the exceptional case motions, the district court disregarded Dragon's presentation, ignored the requirements of Supreme Court authority, and abused its discretion," Dragon said.  "The exceptional case finding should be reversed."

The district court had found that the case was exceptional and that the defense team was entitled to higher fees because the infringement allegations had no merit when faced with "one of the clearest cases of prosecution history disclaimer the court had ever seen."  Disclaimers are made by applicants during patent application reviews and can limit the scope of protection provided by a patent.

Even without the disclaimer, Dragon continued to pursue the "meritless" case for nearly a decade.  However, even though Dish's counsel, Baker Botts, and Sirius' counsel, Kramer Levin Naftalis & Frankel, netted a combined $3.3 million, the attorneys still were not awarded their full fee request and petitioned the court in August for the rest of the money.  Dragon said in a response brief that the case should never have been found to be exceptional because it was based on a flawed disclaimer ruling resulting from the district court's misreading of the claim language.

According to Dragon, the district court erred by misreading the claim language as a verb — "to begin a recording" — instead of a noun — "a recording."  By conflating the noun form of the claim language with the verb form, the court caused a series of events leading to a claim construction order finding that Sirius and Dish had included clear disclaimers of continuous recording devices in their products.

The patent-holding company hinted that Sirius and Dish pushed the court toward this thinking, saying the two companies wanted to pass off the idea of beginning a recording by initiating the storage of specific broadcast program information, which Dragon said is agnostic as to whether the overall recording process was underway.  "In this exchange, the district court equated the noun form of the claim language with a verb form requiring that the entire recording process, rather than the storage of specific broadcast program information of the invention, begin upon actuation of the key," Dragon said.

The court's disclaimer ruling based on this conflation resulted in "stipulated judgments of noninfringement," Dragon said, because the court found that Dish and Sirius had clearly included a disclaimer that their product contained continuous recording devices.  The disclaimer finding has remained the foundation for "many years of subsequent litigation" without review, despite the absence of evidence proving that Dish and Sirius included a clear disclaimer on their products, Dragon said.

According to Dragon, the U.S. Supreme Court found in 1990's Lewis v. Continental Bank Corp. that an interest in attorney fees is insufficient to claim an extraordinary case, and in Dragon's case, no other justiciable case or controversy has come forward since the cases became moot.  Dragon filed the suits against the companies nearly 10 years ago in December 2013, claiming both Dish and Sirius XM were infringing a patent on a keyboard equipped with audiovisual recording and playback technology.

Toys R Us Wins Attorney Fees in ‘Exceptional’ IP Action

June 27, 2022

A recent Law 360 story by Dani Kass, “Toy R Us Wins $1.6M Atty Fees in Failed Toy Pencil IP Suit” reports that Toys R Us has won more than $1.6 million in attorney fees after beating litigation in Florida federal court that a toy chalk holder sold in its stores violated intellectual property owned by Lanard Toys Ltd.  U.S. District Judge Marcia Morales Howard adopted a magistrate judge's report and recommendation for $1.63 million in fees, alongside another $21,000 in costs, saying a "significant fee award is warranted," particularly for failed Lanham Act claims.

"This is an exceptional case, one that stands out from others both due to the significant flaws in the legal theories advanced and in the overly aggressive and uncivil way it was litigated," Judge Howard said.

That uncivil litigation included the court having "twice admonished Lanard's lead counsel for lack of civility and professionalism," including sending emails to opposing counsel with text including: "spare me your pious and self-serving cant, and stick to your knitting as local counsel," according to the first of U.S. Magistrate Judge Patricia D. Barksdale's two reports and recommendations.

The case dates back to March 2014, but in March 2019, Judge Howard granted Toys R Us, Dollar General Corp. subsidiary Dolgencorp LLC and Ja-Ru Inc. — who all have the same counsel — summary judgment, which the Federal Circuit affirmed in May 2020.

Both courts found that a toy chalk holder designed to look like a giant No. 2 pencil doesn't infringe Lanard's design patent or trade dress, and that Lanard's copyright covering the item is invalid, because it does not qualify as a work of art.

Judge Barksdale had recommended that Toys R Us deserved fees for the Lanham Act trade dress claims, and unfair competition under both the Lanham Act and the Florida Deceptive and Unfair Trade Practices Act, but not for the patent and copyright claims.  However, she stopped short of recommending Toys R Us get its requested $2.5 million.

Judge Howard rejected Lanard's bid to further cut fees by changing how they were calculated "given the common facts and related legal theories underlying all four claims, much of the time spent defending this action cannot feasibly be allocated to any particular claim."

In objecting to Judge Barksdale's report, Lanard argued that it has been punished enough, and that "a seven-figure award is excessive and amounts to an undue punishment."  For example, the company said it has lost $2 million paying for its own attorneys, "two large retail customers" and the invalidation of its IP.  The district court judge wasn't persuaded.

"Plaintiff appears to contend that its conduct in this case was reasonable given that when it initiated the case it had 'a registered patent and a registered copyright, and had uncovered evidence that defendants did use its product in the design process,'" the order states.  "Of course, those arguments do not address the more salient question of whether it was reasonable for plaintiff to assert trade dress and unfair competition claims absent any evidence of secondary meaning or consumer confusion."

Counsel for Toys R Us pointed to a footnote where Judge Howard said if she were to review the first report issued by the magistrate judge, she'd likely grant fees over the copyright claims, which "lacked merit in so many ways" and were more broadly an "overreach."

Philip Morris Attorneys Earn $575K Fee Award in E-Cig Suit

February 23, 2022

A recent Law 360 story by Lauren Berg, “Philip Morris Attys Nab $575K Fee in Extinguished E-Cig Suit” reports that a Georgia federal judge on awarded Philip Morris $575,000 in attorney fees after the tobacco giant beat an electronic nicotine device pipe maker's patent infringement suit, saying the complaint included attached evidence that revealed the futility of the infringement allegations. 

U.S. District Judge Timothy C. Batten Sr. awarded Philip Morris USA Inc. and Philip Morris Products SA $575,529 in attorney fees — about $64,000 shy of their $639,043 request — finding that Healthier Choices Management Corp.'s suit is exceptional because it ignored that two U.S. Food and Drug Administration documents attached to the complaint refuted its infringement claims.

"By knowingly alleging a baseless claim of infringement, continuing to pursue that claim in the face of the court's rebuke, and then, in its proposed amended complaint, simply omitting the exhibit that rendered its claims futile, plaintiff's litigation conduct reflects 'studied ignorance' about the futility of its patent claims," Judge Batten said.  Instead of citing case law supporting the reasonableness of its litigation conduct, Healthier Choices used its opposition to Philip Morris' request for attorney fees to relitigate why the suit should not have been dismissed, according to the order.

In his order, Judge Batten found that the billing rates and number of hours reported by the Philip Morris defendants' counsel are reasonable, but said a few series of billing entries were too vague, including one labeled "attention to motion to dismiss" and another called "case development and strategy."  The judge made a 10% reduction to the total award to account for the vague entries, according to the order.  The judge said he would also subtract some money for clerical tasks performed by paralegals.

Some Defense Fees are Shifted in Flawed IP Case

February 21, 2022

A recent Law 360 story by Jeff Montgomery, “Some Defense Fees Are Shifted to Wi-LAN for Case Flaws” reports that Wi-LAN Inc. must pay a substantial share of the defense costs Vizio Inc. and Sharp Electronics Corp. incurred while fighting needlessly prolonged patent infringement claims that Wi-LAN knew were unsupportable, a Delaware federal judge has ruled. 

In a decision, U.S. District Court Judge Leonard P. Stark found that the conduct of Canada-based intellectual property licensing venture Wi-LAN was "exceptional" in its unacknowledged weaknesses and unreasonable pursuit of litigation from at least April 2018 to the final judgment against Wi-LAN on Sept. 12, 2019.

"The Court's fee award reflects the unnecessary effort defendants had to expend to continue defending claims that Wi-LAN knew or should have known by no later than the date I identified, rested on unreliable, insufficient, and inadmissible evidence," Judge Stark said in an 11-page memorandum order.

At issue were U.S. Patent Nos. 6,359,654; 6,490,250; and 5,847,774, but Judge Stark found that only Wi-LAN's handling of the '654 patent pushed the company's conduct into the orbit of Title 35 of the U.S. Code, Section 285, which allows fee awards to prevailing parties in "exceptional" circumstances.

The ruling will oblige Wi-LAN to pay Sharp's and Vizo's reasonable attorney fees incurred in fighting the '654 patent infringement claims from the date of the last third party declarations, April 26, 2018, through the court's entry of final judgment on the patent, Judge Stark said.

Gianni Cutri of Kirkland & Ellis LLP, lead counsel for Sharp and the attorney who led briefing on the motion to declare the case exceptional, said the legal team was pleased with the victory.  "We are also gratified that the court agreed with our view that it was unreasonable for Wi-LAN to continue to press its infringement claims and further ordered Wi-LAN to pay a substantial portion of Sharp Electronics Corporation's attorneys' fees because of this exceptional conduct," Cutri said.

Federal Circuit Considers Attorney Fees in Tossed IP Action

February 11, 2022

A recent Law 360 story by J. Edward Moreno, “Netflix Is Owed Atty Fees In Tossed IP Suit, Fed. Circ. Told,” reports that a Federal Circuit panel questioned whether Netflix is owed $400,000 in attorney fees after a California federal judge considered the streaming giant a "prevailing party" in a patent infringement case that was filed against it and then was voluntarily dismissed.  Texas-based Realtime Adaptive Streaming LLC is appealing a district court decision granting Netflix's motion for attorney fees, which Realtime contends was improper because it voluntarily dismissed its infringement suit against the streaming giant and so Netflix can't be considered the prevailing party.

At issue is whether Netflix can be considered a prevailing party in this case, which Realtime dismissed upon receiving an adverse ruling in a separate case enforcing the same family of patents.  Under Rule 41 of the Federal Rules of Civil Procedure, a prevailing party is established after a dismissal only if there is a "judicially sanctioned change in the legal relationship of the parties."  Netflix argues that any end to a plaintiff's case in the litigation or through the judicial process counts as a judicially sanctioned change in relationship.  Realtime, however, holds that because the case wasn't ended by a judge's ruling, Netflix doesn't count as a prevailing party.

In November 2017, Realtime filed a patent infringement suit against Netflix in Delaware alleging infringement of six data compression patents.  The magistrate judge issued a report and recommendation in December 2018 advising U.S. District Judge Colm F. Connolly to grant Netflix's motion to dismiss with regard to four of the patents, but deny it as to the remaining two.  Judge Connolly ruled in a parallel case in July 2019 that five related patents owned by Realtime's parent company were invalid. Realtime, who had relied on those patents to base its argument in the Delaware case, filed to dismiss the case it brought against Netflix days after Connolly's ruling.

Days later, Realtime refiled the underlying case in the Central District of California, challenging the same patents. Netflix had only filed a motion to transfer the case back to Delaware before Realtime voluntarily dismissed the case in November 2019.  According to Netflix, it's the prevailing party in this case and is therefore entitled to attorney fees from Realtime.  A California federal judge agreed with that argument in September 2020, granting Netflix $400,000 in attorney fees, noting in the ruling that the case was "exceptional" because of Realtime's "impermissible forum-shopping."