In Rothschild Connected Devices Innovations, LLC v. Guardian Protection Servs., Inc., the United States Court of Appeals for the Federal Circuit (the "CAFC") reversed and remanded a decision by the United States District Court for the Eastern District of Texas (the "EDTX") denying attorneys' fees to ADS Security.20 After being sued by Rothschild, ADS sent an email to Rothschild alleging that the asserted patent was ineligible under Section 101 and also anticipated by prior art.21 ADS offered to settle if Rothschild paid $43,330 in ADS attorneys' fees.22 Rothschild declined, which prompted ADS to file a motion for judgment on the pleadings, and to serve Rothschild with a Rule 11 motion.23 Prior to expiration of the Rule 11 safe-harbor period, Rothschild moved for voluntary dismissal of the case, but ADS opposed and cross-moved for attorney fees under Section 285.24 The EDTX then granted Rothschild's motion, and denied ADS's cross-motion, finding that Rothschild acted reasonably in view of the voluntary withdrawal and his plausible validity positions.25 The CAFC disagreed, holding that the district court had abused its discretion and instructing the district court on remand to calculate attorney fees consistent with the opinion.26
First, the CAFC reasoned that the district court failed to consider Rothschild's willful ignorance of the prior art.27 More specifically, the district court failed to properly consider Rothschild's admitted failure to review the prior art cited in ADS's email and Rule 11 motion.28 Although Rothschild's counsel and founder each attested that they made good faith pre-suit infringement inquiries, the CAFC reasoned that the district court erred in crediting this evidence since the attestations failed to identify any exemplary websites, product brochures, manuals, or other publicly available information that they reviewed before filing suit.29
Second, the CAFC ruled that the district court misjudged Rothschild's prior litigation conduct, because Rothschild had a history of filing repeated patent infringement actions for the sole purpose of forcing settlements, and this type of conduct supports an exceptional case finding.30 Interestingly, the CAFC seems to put the burden on Rothschild to disprove that its prior litigation conduct was unreasonable.31 The mere fact that it had filed and quickly settled numerous prior litigations (for what ADS simply contended was below the cost of litigation) warranted an exceptional case finding.32
Last, the CAFC ruled that the district court erroneously conflated Rule 11 with 35 USC § 285.33 Section 285 may be broader in some instances and requires consideration of the "totality of the circumstances," which may warrant an award of attorneys' fees even where specific underlying conduct is not sanctionable.34
Judge Mayer wrote separately in a concurrence to point out that Rothschild's complaint was frivolous on its face.35 He noted that the "specification and the prosecution history indicate that claim 1 is limited to consumable liquid products" and that Rothschild's assertion against a wide range of "Internet"-based products was "remarkable."36 He cited an article in the Washington Post dubbing the patent one of the worst four patents of 2015.37
Footnotes
20 2017 WL 2407870, __ F.3d __ (Fed. Cir. June 5, 2017).
21 Id. at *1.
22 Id.
23 Id.
24 Id.
25 Id. at *2.
26 Id. at *5.
27 Id. at *3.
28 Id.
29 Id. at *4.
30 Id. at *4–5.
31 Id.
32 Id.
33 Id. at *5.
34 Id.
35 Id. at *5–6.
36 Id. at *6.
37 Id. at *5.
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