Abstract
Following a Supreme Court ruling in 2014, district courts have awarded attorneys' fees to defendants in an increasing number of patent litigations. As one example, a district court in Texas recently awarded attorneys' fees to prevailing defendants finding the case "exceptional" because of the plaintiff's unreasonable positions and vexatious litigation strategy.
Under U.S. law (35 U.S.C. § 285), district courts can award
reasonable attorneys' fees to prevailing parties in
"exceptional cases." In 2014, the Supreme Court's
opinion in Octane Fitness, LLC v. Icon Health & Fitness,
Inc. held that a case is "exceptional" if a
party's litigation position or conduct during litigation
"stands out from others." Following Octane
Fitness, district courts have increasingly granted motions for
attorneys' fees. From 2002-2013, district courts granted
motions for attorneys' fees in roughly 20-25% of cases. By
contrast, since Octane Fitness in April 2014, district
courts have granted 36% of motions for attorneys' fees (64 out
of 176 cases).
Recently, in eDekka LLC v. 3Balls.com,
Inc.,1 the U.S. District Court for the Eastern
District of Texas awarded attorneys' fees to prevailing
defendants, finding the case exceptional because the plaintiff
presented unsupportable arguments in response to defendants'
motions to dismiss, and the because the plaintiff sued a large
number of defendants with the goal of extracting nuisance
settlements.
Background
Plaintiff eDekka, a non-practicing entity, filed lawsuits against 130 defendants in 2014 and 89 defendants in 2015, alleging infringement of a patent directed to storing and labeling information. Numerous defendants in the 2015 actions filed motions to dismiss, arguing that the asserted patent was invalid because it was directed to unpatentable subject matter. The court granted defendants' motions to dismiss and held that the asserted claims of the plaintiff's patent were not patent-eligible. The defendants then moved for attorneys' fees under § 285.
The eDekka Decision
The court granted the defendants' motion for attorneys'
fees, holding that the case was "exceptional" because (1)
eDekka's case was objectively unreasonable and (2) eDekka
litigated in an unreasonable manner.
According to the court, eDekka's case was objectively
unreasonable because no reasonable patentee could have expected
success on the merits in light of the defendants' motions to
declare the patent invalid for claiming unpatentable subject
matter. The court found that eDekka repeatedly offered
insupportable arguments on behalf of an "obviously weak
patent" and questioned whether eDekka even engaged in a
reasonable and thorough pre-suit investigation regarding the
validity of its patent. In part to deter eDekka and other patentees
from engaging in similar conduct, the court found that eDekka's
unreasonable patentability positions supported an
"exceptional" case finding.
The court also found eDekka litigated in an unreasonable manner by
filing similar lawsuits against over 200 defendants and using a
strategy that avoided testing the case on the merits by aiming for
early nuisance value settlements. The court noted that
historically, defendants agreed to settlements with eDekka at early
points in the litigation for amounts significantly below the cost
of taking the case to trial. In particular, eDekka contacted
numerous defendants days before the patentability hearing with
offers to settle for $3,000 each—an offer, the court noted,
that was an extraordinarily low amount. The court concluded that
eDekka's goal was clearly to exploit the high cost of defending
a complex patent litigation in order to extract nuisance value
settlements. Considering the totality of the circumstances,
including eDekka's unreasonable positions regarding
patentability, and its vexatious litigation strategy, the court
held the case was "exceptional" under 35 U.S.C. §
285, and granted defendants' motion for attorneys'
fees.
Strategy and Conclusion
Since Octane Fitness, district courts are increasingly
willing to grant motions for attorneys' fees. Plaintiffs can
limit their liability for attorneys' fees by conducting
thorough pre-suit investigations into infringement and
patentability, including patent-eligibility issues , and presenting
supportable, well-reasoned arguments during litigation. A
comprehensive pre-suit investigation will also be useful in
preparing the Complaint prior to suit in light of the recent
heightened pleading standard for patent suits under the Federal
Rules.
On the other hand, defendants facing unreasonable patent suits
increasingly have the opportunity to recover attorneys' fees
and to deter patentees from filing suit in the future. In some
situations, motions to dismiss a patent as being directed to
unpatentable subject matter can also be a powerful tool for
defendants—not only to invalidate the plaintiff's patent,
but also to expose unreasonable litigation positions early in the
litigation.
Footnote
1 The eDekka decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/eDekkaLLCv3balls.com-txed-2-15-cv-00585-177.pdf.
Previously published by LES Insights
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