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Category: USPTO

Article: Absent Explicit Statutory Language? The American Rule Still Applies

September 6, 2021

A recent article by Jiaxiao Zhang, “Absent Explicit Statutory Language? The American Rule Still Applies,” reports on attorney fee entitlement in patent litigation.  This article was posted with permission.  The article reads:

The U.S. Court of Appeals for the Federal Circuit vacated a district court’s award of attorney’s fees under the prevailing party rule but affirmed the district court’s denial of the U.S. Patent & Trademark Office’s (PTO) request for expert witness fees under 35 U.S.C. § 145. Hyatt v. Hirshfeld, Case Nos. 20-2321;–2325 (Fed. Cir. Aug. 18, 2021) (Hughes, J.).  The case involved prolific inventor Gilbert Hyatt and the latest chapter in his battles with the PTO.

Mr. Hyatt is known for his prolific patent and litigation filings (including hundreds of extraordinarily lengthy and complex patent applications in 1995 alone) and for often “’adopt[ing] an approach to prosecution that all but guaranteed indefinite prosecution delay’ in an effort to submarine his patent applications and receive lengthy patent terms.”  After the PTO denied some of his patent applications, Mr. Hyatt elected to pursue a district court appeal under 35 U.S.C. § 145 to challenge the PTO’s decisions.  The district court ordered the PTO to issue some of the patents and awarded Mr. Hyatt attorney’s fees as the prevailing party.  The PTO spent millions of dollars examining Mr. Hyatt’s applications and sought, under §145, reimbursement of its expert witness fees from the case.  The district court denied the PTO’s request for expert witness fees, holding that its shifting of “[a]ll the expenses of the proceedings” to the applicant does not overcome the American Rule presumption against shifting expert fees. The PTO appealed.

The PTO challenged both the award of attorney’s fees and the denial of expert fees.  In an earlier appeal by the PTO, the Federal Circuit held that the PTO correctly asserted prosecution laches as a defense against Mr. Hyatt, which “render[s] a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution that constitutes an egregious misuse of the statutory patent system under a totality of the circumstances.”  Accordingly, the Court vacated the district court’s decision ordering the issuance of patents, and in this appeal, the Court vacated the district court’s holding that Mr. Hyatt is entitled to attorney’s fees—since he is no longer the prevailing party—and remanded for further proceedings.

According to the statute, in an action under § 145, “[a]ll the expenses of the proceedings shall be paid by the applicant.”  However, the Federal Circuit agreed with the district court that the statutory language was not sufficiently explicit to overcome the presumption against fee-shifting under the American Rule and that litigants pay their own fees “unless a statute or contract provides otherwise.”  In doing so, the Court looked at statutory phrasing, dictionary definitions (e.g., Black’s and Webster’s), legislative history, relevant case law and similarly phrased statutes to confirm whether expert fees were specifically and explicitly contemplated as being included by US Congress in the statute.  The Supreme Court of the United States’ 2019 NantKwest decision (that “expenses” under §145 does not invoke attorney’s fees with enough clarity to overcome the American Rule) guided the Court’s analysis as did the many statutes that explicitly list “costs and fees” separately, suggesting that the legislature could have explicitly referenced fees should they have intended.  Having found this high bar to overcome the American Rule not met, the Court affirmed the district court’s denial of expert fees.

Jiaxiao Zhang is an associate at McDermott Will & Emery in Orange County, CA.

Client Says It Doesn’t Owe Attorney Fees in Patent Action

May 9, 2021

A recent Law 360 story by Diana Novak Jones, “UCANN Says It Doesn’t Owe Atty Fees After Patent Suit,” reports that United Cannabis Corp. is fighting CBD company Pure Hemp Collective's bid for $300,000 in attorney fees after United Cannabis dropped a patent infringement suit against the company, arguing it has no liability because Pure Hemp willingly dropped its claims as well.  United Cannabis, or UCANN, was suing Pure Hemp for infringement on a patent covering a liquid formula for a tincture containing 95% CBD when it entered bankruptcy, but dropped the suit after its Chapter 11 petition was dismissed earlier this year.  Pure Hemp dismissed its counterclaims at the same time, according to court records.

But in April, Pure Hemp asked the judge in the patent suit to award it about $300,000 in attorney fees, arguing in part that UCANN got its patent by misleading the U.S. Patent and Trademark Office, according to court filings.  UCANN pushed back, arguing there's no evidence it misled anyone and Pure Hemp has already dismissed the claims it's trying to use to get the fees.  "Pure Hemp's motion raises several disputed issues of fact as to materiality, knowledge, and intent," UCANN told the court.  "By dismissing its inequitable conduct counterclaims, Pure Hemp waived its right to have these factual disputes adjudicated."

The dispute between UCANN and Pure Hemp, which began in 2018, was closely watched in the cannabis industry as it presented one of the earliest opportunities to see how a federal court handled cannabis patent claims.  UCANN accused Pure Hemp of infringing its patent on the liquid cannabinoids, while Pure Hemp brought counterclaims accusing UCANN of suing to enforce a patent it knew was invalid.  In 2019, UCANN scored a major win when U.S. District Judge William Martinez denied Pure Hemp's motion for summary judgment, holding that liquid cannabinoid formulations were UCANN's creation and did not occur in nature.

In March of last year, the parties agreed to reduce the suit to questions of the patent's validity and enforceability, with Pure Hemp agreeing to pay $4,420 in royalties if UCANN prevailed.  But the next month, UCANN filed its Chapter 11 petition, halting the patent litigation.  The U.S. Trustee and the bankruptcy judge had questions about whether UCANN belonged in bankruptcy court given its connections to cannabis, and ultimately the company's petition was dismissed.  Not long after the dismissal, which UCANN didn't appeal, it told the judge overseeing its suit against Pure Hemp that the parties were dropping their respective claims.

But two weeks later, Pure Hemp filed its motion for fees, court records show. The motion remained sealed, but Pure Hemp's counsel James Gourley of Carstens & Cahoon LLP told Law360 his client alleges that UCANN misled the patent office by copying and pasting text from another product in the paperwork for the patent UCANN was suing over.

PTAB: Inability to Pay Fees No Reason to Deny IPR

September 20, 2020

A recent Law 360 story by Britain Eakin, “PTAB Says Inability To Pay Legal Fees No Reason To Deny IPR,” reports that the Patent Trial and Appeal Board has agreed to review Dareltech LLC's "selfie stick" patent, rejecting the company's argument that since it can't afford to pay for counsel, Microsoft's inter partes review challenge should be denied.  The decision instituting IPR, the board said Dareltech's inability to pay to defend its patent doesn't qualify as a reason for the board to exercise its discretion to deny review, as the company had argued.

"Patent owner's current financial circumstances are not sufficient reason to preclude petitioner from pursuing its statutory rights to challenge the patentability of the claims," the decision said.  Dareltech had asserted that its lead counsel doesn't participate in post-grant matters, and that its backup counsel had been representing the company in other matters pro bono, but is unable to devote the time and resources to this IPR.

Additionally, Dareltech argued that it incurred expenses to prosecute the patent family, develop and commercialize the claimed invention without significant revenue and defend related IPRs, and so the board should deny review.  But the board was unmoved.  The PTAB also shot down Dareltech's argument that the board should deny the petition because it has no district court dispute with Microsoft, which it contends is acting as a proxy for Chinese technology company Xiaomi.

 

 

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA