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Federal Circuit Faults Judge in Patent Fee Award

December 26, 2019 | Posted in : Fee Award, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Jurisprudence, Fee Request

A recent Law 360 story by Ryan Davis, “Fed. Circ. Faults Judge’s $444K Fee Award in IV Patent Case,” reports that the Federal Circuit vacated a Delaware judge’s decision ordering patent licensing company Intellectual Ventures to pay Trend Micro Inc. $444,000 in attorney fees after a failed patent suit, saying the judge may not have used the right legal standard.  The appeals court said it seemed that after Chief Judge Leonard P. Stark of the District of Delaware invalidated Intellectual Ventures’ patents, he only considered one aspect of the case to have “stood out from others,” the U.S. Supreme Court’s standard for when attorney fees are warranted, rather than the case as a whole.

The Patent Act states that attorney fees may be awarded "in exceptional cases.”  When he awarded fees to Trend Micro in 2017, Judge Stark said an unusual situation in the case, when Intellectual Ventures’ expert witness changed his testimony, was exceptional, but the case as a whole was not.  He ordered the company to pay Trend Micro’s fees related to that witness, but the Federal Circuit said it was concerned by the judge’s statement that the overall case was not exceptional.

“Instead of determining whether the case was exceptional, it appears that the district court may have focused on whether one discrete portion of the case stood out from other cases," the Federal Circuit said.  "This is not the appropriate analysis."  The court noted that it has held that an award of attorney fees can be related to particular conduct and circumstances that stood out and made the case exceptional, "but in all such cases we have required a finding of an exceptional case — not a finding of an exceptional portion of a case — to support an award of partial fees."  The court therefore remanded the case so that Judge Stark can consider whether the specific circumstances render the case exceptional and deserving of attorney fees.

During pretrial proceedings in that case, Intellectual Ventures' expert offered an opinion about the meaning of a phrase in one of the patents.  During trial, however, the expert offered a different interpretation, saying he changed his opinion after working with Intellectual Ventures' lawyers.  Judge Stark later invalidated all three patents, finding that they claim only abstract ideas.  Trend Micro then moved for attorney fees and Judge Stark granted the motion, ruling that Intellectual Ventures' conduct was exceptional, "solely with respect to this collection of circumstances" regarding the changed expert testimony.

The Federal Circuit ruled that because Judge Stark only found that those specific circumstances were exceptional, "it is not clear that the district court applied the proper legal standard when it considered whether the case was exceptional."  However, the appeals court rejected Intellectual Ventures' argument that attorney fees can only be awarded for a pattern of "bad faith, sharp tactics, and unreasonable litigation positions," and not for a single act.