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Federal Circuit: No Supplemental Fees in IP Government Loss

July 30, 2020 | Posted in : Expenses / Costs, Fee Award, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Request, Fee Statute, Practice Area: IP Litigation, Prevailing Party Issues, Supplemental Fees

A recent Law 360 story by Dave Simpson, “Fed. Cir. Won’t Add to $4.4M Atty Fee in IP Suit Gov’t Lost,” reports that the Federal Circuit refused to tack supplemental attorney fees onto a $4.4 million fee award and a $200,000 judgment against the government in a patent case out of the U.S. Court of Federal Claims, ruling that only the claims court has the authority to grant such fee requests.  In a unanimous unpublished decision, the panel rejected the government to pay appellate fees accrued by Hitkansut LLC and Acceledyne Technologies Ltd. LLC, which had argued that Section 1498 of the Patent Act provides the Federal Circuit with such authority.

"Section 1498 is a limited waiver of sovereign immunity, and waivers of sovereign immunity are construed narrowly in favor of the government," the panel said. "Section 1498's text contains no unequivocal expression by Congress that the United States is subject to the type of fees Hitkansut is seeking in this court."

The companies, owned by late inventor Donna Walker, who passed away in 2018, asked the appeals court for supplemental attorney fees after a three-judge panel on May 1 affirmed the U.S. Court of Federal Claims' March 2019 grant of fees.  The lower court found in 2017 that government researchers at the Oak Ridge National Laboratory directly took Hitkansut's patent-pending technology, which can be used to relax stressed metal in large metal structures like airplanes, without giving Walker any credit, funding or contracts.

Hitkansut and Acceledyne were able to recoup fees at the claims court under a provision of the Patent Act that allows independent inventors, nonprofits and small businesses to recover fees when the government infringes, provided they can show the United States' position was not "substantially justified."

The Federal Circuit said in its May 1 opinion that the government's litigation position was not substantially justified because its arguments were contrary to the evidence in the case and the testimony of government employees, and that its invalidity argument was "contradicted by its own expert witness." The court, however, instructed the parties to bear their own costs.

But Hitkansut and Acceledyne contended that the court has the authority to order the government to pay additional fees under Section 1498, which they argued is not limited to the claims court action, thereby entitling them to recoup all of their costs, including those associated with defending their initial fee bid.  And although the appeals court hadn't previously addressed whether fees for defending an initial fee bid can be recouped under Section 1498, Hitkansut and Acceledyne argued that the court has done so in Wagner v. Shinseki under an analogous law — the Equal Access to Justice Act.

The court in Wagner said that because he partially prevailed in defending against the government's challenge to his initial bid for fees, "he was entitled to supplemental fees."  The Wagner court reasoned that a prevailing party can recoup fees not just for underlying litigation but also for defending an initial EAJA fee request.

Hitkansut and Acceledyne urged the court to apply the same reasoning it did in Wagner to this case, but the government contends its reliance on Wagner is "misplaced" because it says the EAJA is "fundamentally different" from Section 1498, which doesn't give the Federal Circuit jurisdiction over supplemental fee requests.

Congress enacted the Section 1498 fee provision because it believed the EAJA was unavailable for such claims, the government said.  "Had it wanted to do so, Congress had a clear model in EAJA to [ensure] recovery of appellate fees and costs. But Congress selected a different path," the government said.

The panel said that it cannot derive fee authority simply from the reviewed tribunal's ability to award fees, also noting that the circuit has recognized that EAJA and Section 1498 have substantial differences.  "And unlike EAJA, which empowers 'any court having jurisdiction,' Section 1498 authorizes an infringement action against the government only in the Court of Federal Claims, empowering only that tribunal to award reasonable costs, which includes reasonable fees for attorneys, as part of the 'reasonable and entire compensation' for the underlying use of the patent," the panel said.