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Federal Circuit Considers Attorney Fees in Tossed IP Action

February 11, 2022 | Posted in : Exceptional Case, Fee Award, Fee Dispute, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Jurisprudence, Fee Shifting, Fees & Judicial Discretion, FRCP, Practice Area: IP Litigation, Prevailing Party Issues

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."