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Category: Practice Area: IP Litigation

Federal Circuit Doubtful of Second Attorney Fee Request in IP Case

June 17, 2021

A recent Law 360 story by Christopher Cole, “Fed. Circ. Doubtful of Ex-Worker’s 2nd Atty Fee Bid in IP Case,” reports that Federal Circuit judges seemed skeptical of a manufacturer's ex-employee returning to the court seeking attorney fees incurred in a spat over control of a machine patent that ended in a voluntary dismissal that made no mention of fee payment.  Larry Butterfield has appealed to the circuit a second time in his quest to recover some $200,000 in fees after battling patent, breach-of-contract and trade secret misappropriation claims in Oregon federal court from his former employer Keith Manufacturing Co.

But it didn't take long in oral arguments for U.S. Circuit Judge Todd M. Hughes to question Butterfield's contention that an Oregon federal judge abused his direction by denying the fee bid a second time on Federal Circuit remand.  The lower court judge found in his second ruling that Butterfield was not in fact a "prevailing party" entitled to recover attorney fees, as he had previously ruled.  "Wasn't it well within his discretion to [reconsider] his prior order?"  Judge Hughes asked a Butterfield lawyer.  "What's the legal basis that would prevent him from reconsidering the case after we vacated his order?"  "I don't understand your procedural objections here at all," he added.  "That try-again doesn't mean that he is precluded from reconsidering the prevailing party status."

Butterfield's attorney, Shawn Kolitch of Kolitch Romano LLP, noted that the Federal Circuit's remand order was aimed squarely at the judge's purported overreliance on the U.S. Supreme Court's 2017 Microsoft Corp. v. Baker decision, in which the justices rejected the notion that the voluntary dismissal of an individual's claims with prejudice amounted to a final decision that could be appealed.  The Federal Circuit found in April 2020 that Microsoft wasn't applicable to the Keith suit.  Kolitch maintained that on remand, the judge again went too far, this time by using a procedural rule to reconsider his client's "prevailing party" status, without a required motion from Keith to do so.

The new appeals court scrap is the latest in a suit that Keith lodged in 2015 accusing former employee Butterfield of improperly obtaining a patent by filing an application based on inventions he made during his employment at Keith.  The patent details a headboard used as part of a machine to clear asphalt from a truck.  After Butterfield sent Keith a covenant not to sue on the patent, both sides filed a joint stipulation to dismiss the case with prejudice without a court order, according to the panel opinion.

The stipulation did not mention fees, and Butterfield filed a motion for attorney fees shortly thereafter, according to the opinion.  But U.S. District Judge Michael H. Simon denied the bid in 2017 after determining that the stipulation was not an appealable order under the Microsoft ruling, prompting the first appeal at the Federal Circuit.  Keith's suit has long since been dropped, with a stipulation of voluntary dismissal with prejudice.  But the two sides disagree whether that means Butterfield is the "prevailing party" in the suit.

A key legal question with the case back in the Federal Circuit is whether Butterfield obtained prevailing party status under Oregon law when the parties reached a stipulation of dismissal with prejudice.  Kolitch told the three-judge panel that under Oregon rules of civil procedure, a dismissed party is the prevailing party.  "That is standard when dismissed voluntarily," he said.  "There were no circumstances in this case indicating otherwise."

He also argued that even though Oregon state courts have a "procedural requirement" to enter a judgment document in cases of voluntary dismissal, that does not apply to federal courts because of the Erie doctrine, which says that if state and federal procedures conflict, district courts must follow the federal rules as long as they follow statute and are constitutional.

An attorney for Keith, Bruce Kaser of Vantage Law PLLC, who noted that Butterfield is trying repeatedly to overturn the federal court, said the Oregon rule requiring judgment to be entered to confer prevailing party status "is a substantive requirement" that Butterfield has not met.  Kaser said the appellant "doesn't have any authority" for the positions he has been taking in the effort to recover fees.  If the panel takes Butterfield's side, it would represent a major decision requiring "new topics and continuing education classes for both accountants and lawyers," Kaser said.

SCOTUS Won’t Hear Dispute Over Patent Attorney Fee Awards

June 14, 2021

A recent Law 360 story by Tiffany Hu, “Justice Won’t Hear Dispute Over Atty Fees in Patent Cases,” reports that the U.S. Supreme Court declined to hear a question on courts' allegedly "inconsistent and contradictory" discretion over attorney fees in a patent case involving lost luggage technology.

The high court denied Roadie Inc.'s petition to take up its appeal of a Federal Circuit ruling that shot down its request for attorney fees, despite the company's arguments that the case should have been deemed exceptional because of procedural missteps by an attorney for rival Baggage Airline Guest Services Inc. The Federal Circuit affirmed the invalidation of BAGS' patent, which BAGS alleged Roadie had infringed.

Roadie had argued that it was "forced to defend a case that should never [have] been brought" and that the lower courts should have considered the weakness of BAGS' case — and Roadie's "strong showing of noninfringement" — and awarded Roadie fees for fending off the suit.

"Since 2014, judicial 'discretion' has been inconsistent and contradictory in a way that frustrates the goal of [the Patent Act] which is to improve the efficiency of the judiciary by discouraging the filing of bogus lawsuits," Roadie said in its petition.

According to Roadie, the district court's decision not to consider the issue of noninfringement went against the high court's 2014 ruling in Octane Fitness LLC v. ICON Health & Fitness Inc. , which made it easier for prevailing parties to obtain fees, according to the petition.

Around that same time, the high court also ruled in Highmark Inc. v. Allcare Health Management System Inc. that because determining whether a case is "exceptional" is up to the district court's discretion, that decision can be reviewed on appeal for abuse of discretion, Roadie argued.

BAGS filed its opposition last month, contending that the Federal Circuit's decision to defer to the lower court's "reasoned analysis" did not meet the statutory requirements for certiorari. Roadie's arguments before the Supreme Court did not "include anything persuasive not already considered by the district court and the Federal Circuit," it added.

Edward A. Pennington of Smith Gambrell & Russell LLP, an attorney for Roadie, told Law360 in an email Monday that "every entity that tries to bring an important matter to the Supreme Court is disappointed when the court does not take the case," but that his client realizes few petitions are granted "no matter how important the fee reversal issue is."

"Fee reversal ... should be an important deterrent against ill-conceived patent suits, but as long as district courts have loosely defined factors to consider, we will continue to see inconsistent decisions," Pennington said.

The dispute dates to 2017, when BAGS accused Roadie, which pairs customers who need items shipped to drivers already headed in the correct direction, of developing an app that infringes the patent.

Roadie had asked a Delaware federal judge for judgment on the pleadings based on invalidity and noninfringement simultaneously. The court granted the motion on invalidity, with the Federal Circuit later affirming the decision, finding BAGS' patent was directed to a patent-ineligible abstract idea of "coordinating and monitoring baggage delivery."

The district court declined to consider Roadie's noninfringement arguments, which were fully briefed, since it found the patent invalid. Had it factored the noninfringement issue into its exceptionality finding, Roadie argued, that would have supported the argument that the case was meritless and that Roadie deserved fees.

The district court denied Roadie's bid for fees, however, saying there was no evidence of nefarious intent despite the missteps by BAGS, which the district court chalked up to inexperience and mistakes. The Federal Circuit affirmed the ruling in November.

Tenth Circuit Sets Patent Standard for Trademark Attorney Fee Awards

June 13, 2021

A recent Reuters story by Blake Brittain, “10th Circuit Adopts Patent Law Standard for Trademark Attorneys’ Fees,” reports that the 10th U.S. Circuit Court of Appeals ruled Tuesday that the U.S. Supreme Court’s attorneys’ fees standard for “exceptional” patent cases also applies to trademark cases, joining every other U.S. circuit court in applying the standard to Lanham Act disputes.

The Supreme Court's 2014 decision in Octane Fitness made it easier for litigants to recover attorneys' fees under the Patent Act's fee-shifting provision, and it applies to trademark law because of the Lanham Act's identical provision, U.S. Circuit Judge Carlos Lucero wrote for a three-judge panel.

Plaintiff Derma Pen LLC and its attorney Michael Zimmerman of Zimmerman Booher didn't immediately respond to a request for comment. Jefferson Gross of Gross & Rooney, who represented defendants Joel and Sasha Marshall, also didn't immediately respond to a request for comment.

Derma Pen makes microneedles for skin treatments, and won a permanent injunction in Utah federal court in 2017 against Stene Marshall, who had been misusing the "Dermapen" name to sell his own products, to stop him from infringing its trademark.

Derma Pen later moved to hold Marshall's brother and sister-in-law Joel and Sasha Marshall in contempt for acting in concert with him to violate the injunction. They fended off Derma Pen's motion and won more than $190,000 in attorney fees in 2019 after U.S. District Judge David Nuffer in St. George, Utah found the case exceptional under Octane Fitness, which said that an exceptional case is "simply one that stands out from others" in the strength of a party's litigating position or unreasonable manner of litigation.

Nuffer noted in his decision on Derma Pen's claims against Joel and Sasha Marshall that Derma Pen provided no evidence of damages, had abandoned its trademark, and failed to comply with discovery orders, among other things.

Lucero, joined by Circuit Judges Harris Hartz and Allison Eid, decided to add to the "chorus of circuits" that have applied Octane Fitness to trademark cases, citing the relevant laws' identical language, indications in the Octane Fitness ruling that the two provisions should be interpreted the same, and Congress' reference to the Patent Act in enacting the Lanham Act provision.

SCOTUS Won’t Hear IP Attorney Fee Claim

May 17, 2021

A recent Law 360 story by Dani Kass, “’Radical’ IP Atty Fee Claim Doesn’t Strike Justices’ Interest,” reports that the U.S. Supreme Court rejected a patent-holding company's attempt to limit when district court judges can make plaintiffs in frivolous patent cases cover attorney fees.  WPEM LLC's March 16 petition had called U.S. District Judge Rodney Gilstrap's decision to make it pay fees after a failed patent suit a "radical expansion" on the court's powers.  But the justices weren't persuaded, and rejected the petition without further comment.

The petition was rejected at the high court before the opposing party, SOTI Inc., had a chance to file an opposition or waive its right to do so, according to the court's online docket.  WPEM had sued Canada-based SOTI in 2018, accusing it of infringing a patent with a manual for a product called the MobiControl Speed Lockdown.  Judge Gilstrap then dismissed the case, saying a reasonable plaintiff "conducting minimally diligent" research into the case would have found an earlier version of the manual was issued before WPEM's patent.

Looking at WPEM's own evidence, Judge Gilstrap had found it was "clear that WPEM conducted no pre-filing investigation into the validity and enforceability of the asserted patent at all," and he ordered WPEM to cover SOTI's attorney fees.  The Federal Circuit upheld that ruling in December 2020, in a nonprecedential opinion.  Three months later, WPEM told the justices the ruling reflected "a radical expansion of discretion," as Judge Gilstrap was still obligated to presume that its patent was valid.

"The district court determined petitioner's case to be frivolous because the accused technology was prior art, but the district court did not make an invalidity determination, as such would require clear and convincing evidence," the company said in its petition.  WPEM had argued that Judge Gilstrap should have done more to figure out if its patent was also invalid, and said if it wasn't invalid, that would necessitate a new ruling on those fees and whether the case was exceptional.

Federal Circuit Backs $4.2M Fee Award in IP Case

May 11, 2021

A recent Law 360 story by Adam Lidgett, “Fed. Circ. Backs Apple and Cisco’s $4.2M Fee Win in IP Case,” reports that the Federal Circuit has refused to undo a lower court order allowing Apple and Cisco to collect $4.2 million in attorney fees from tech company Straight Path in a patent case, despite arguments that a California federal judge wrongly found the case was exceptional.  In a short order, a three-judge appellate panel affirmed the California federal court's decision handing Cisco $1.9 million and Apple $2.3 million in fees from Straight Path in a dispute over internet phone patents.  The panel gave no reason behind its decision.

The order came just days after oral arguments in which the panel had a hard time believing that U.S. District Judge William Alsup — who delivered the fee award almost a year ago — lacked the discretion to do so.  Judge Alsup declared the case exceptional since Straight Path's infringement claims contradicted a position it had advocated at the Federal Circuit in appealing a Patent Trial and Appeal Board decision.

The fee dispute between the parties has been a lively one, sparking fireworks in the courtroom during a May 2020 hearing when Judge Alsup scolded Apple and Cisco for initially requesting $10 million in fees after beating the suit.  The judge said the tech giants "played games," used "abusive" tactics and were motivated by "greed, G-R-E-E-D."  He required them to resubmit their fee bids and appointed a special master to determine a reasonable amount of fees and costs.  In May of last year, the court awarded Cisco $1.9 million — half of its initial request — while Apple netted $2.3 million of its initial $3.9 million ask.

Straight Path argued that as a result, Federal Circuit precedent required it to reverse Judge Alsup's finding of exceptionality, which is required for a prevailing party in a patent dispute to get fees.  Desmarais LLP attorney Justin P.D. Wilcox, an attorney for Cisco, told Law360 that his team was "pleased with the Federal Circuit's ruling and that the Federal Circuit affirmed Judge Alsup, who down at the district court had ruled that Cisco was entitled to attorneys' fees for the exceptional case that Straight Path had brought."