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Federal Circuit Affirms Fees in Patent Suit

October 12, 2015 | Posted in : Expenses / Costs, Fee Award, Fee Award Factors, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Jurisprudence, Fee Shifting

A recent The Recorder story, “NetApp Wins Fees in ‘Double Dip’ Patent Suit” reports that the Federal Circuit has affirmed a $1.4 million attorney fee award against an Acacia Research Corp. entity for bringing suit over patents it had already licensed via a third party.

The ruling means Sunnyvale data-management company NetApp Inc. can collect all of its fees and expenses in Summit Data Systems v. NetApp, after fighting out an infringement suit that many other co-defendants had settled.  U.S. District Judge Gregory Sleet made the award a few months after the U.S. Supreme Court loosened the standard last year for obtaining fees under Section 285 of the Patent Act.

"After Octane Fitness, you're seeing a larger number of courts willing to take nonpracticing entities to task," said NetApp general counsel Matthew Fawcett. "I think the tide is turning."

Sleet certainly did take Summit Data to task in this case.  He found that the company had struck a licensing deal with RPX Corp. in June 2010 that covered Microsoft Corp.  Because the accused NetApp products run on Microsoft operating systems, the license indirectly covered NetApp as well.

But NetApp didn't learn about the RPX license until some 18 months after Summit Data had filed suit.  In the meantime Summit Data had collected settlements ranging from to $60,000 to $170,000 from five other companies.  "The court finds Summit's practice of extracting settlements worth a fraction of what the case would cost to litigate supports a finding of exceptionality," Sleet had written.

Summit Data argued that it wasn't so clear from its complex, 40-page licensing agreement with RPX that NetApp was covered, and that NetApp could have helped cleared up the confusion sooner.  Once NetApp made clear it had a meritorious defense, Summit Data agreed to drop the case, Summit's appellate attorney Robert Greenspoon of Flachsbart & Greenspoon had argued.  Instead, it got hit with a $1.4 million award without getting an opportunity to challenge the amount of fees, he argued.  He had asked the Federal Circuit to rule that patentees should never be punished when they agree to drop cases early.

NetApp, conversely, had argued that a presumption of fee shifting should apply whenever a patent holder "double dips" by suing a company it has already licensed.  Another Acacia subsidiary got socked with attorney fees on similar grounds earlier this year in Colorado.