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.