Wednesday, January 11, 2006

GETTING THE OTHER SIDE TO PAY YOUR ATTORNEY FEES: When patent holders sue companies, there is the inevitable charge by the defendant that the lawsuit is "baseless." When certain cases make the headlines, the chattering masses immediately start making allegations of "harassment" or "extortion" upon the patentee.

In some cases it's true. In most cases it's not. But when you can show that a case is "exceptional," you can force the patent holder to pay a portion or all of your attorney fees for defending the lawsuit.

35 U.S.C. § 285 provides that a court may award attorney fees to the requesting party only in "exceptional cases." To get fees, the prevailing party must first establish the exceptional nature of the case by clear and convincing evidence. Second, the court must determine whether attorney fees are appropriate. This decision is within the discretion of the trial judge.

Exceptional cases against a patent plaintiff include inequitable conduct before the USPTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; or a frivolous suit. Patent plaintiffs enjoy a presumption that they assert infringement of a duly granted patent in good faith. The burden is on the defendant to provide affirmative evidence of bad faith.

A frivolous infringement suit is one which the patentee knew or, on reasonable investigation, should have known, was baseless. Where a patentee is manifestly unreasonable in assessing infringement in court, the court can infer bad faith (wrongful intent, recklessness, gross negligence).

While many think that all holding companies file frivolous lawsuits, you often need more than neglect to get your fees back. A party's success on the merits of an ultimate issue in a patent case does not automatically render a case "exceptional" for purposes of the attorney fee statute.

To illustrate, here are some cases where the Federal Circuit found cases to be exceptional:

  • patentee continued to sue even after another court affirmed an adverse claim construction in a related case;
  • patent holder engaged in misconduct before the court by falsifying his engineering notebooks;
  • patentee failed to perform tests suggested by the alleged infringer, and its own tests did not establish infringement, and its own expert performed no tests concluding infringement had taken place.
Cases that were not exceptional include:
  • counsel performed a good-faith, informed comparison of the asserted claims and where there was no evidence that the plaintiff unreasonably or vexatiously multiplied post-filing proceedings;
  • patent owner reasonably relied on several opinions of counsel and other experts even though it was revealed that the product contained an inconsequential amount of an enzyme, and the patent owner conducted an adequate pretrial investigation and had reason to believe the patent was valid;
  • patentee had allegedly been negligent in failing to properly evaluate prosecution history;
  • there was no evidence of egregious misconduct during litigation or patent prosecution amounting to inequitable conduct;
  • where the patentee failed to obtain favorable infringement opinion of counsel and instead based its allegations of infringement on rumor and speculation;
  • where there was "slim evidence," from the appellate court's perspective, of the breadth of a patentee's pretrial investigation; and
  • where the plaintiff hired an expert and secured an opinion before trial, and had the expert testify at trial, but negligently followed up on developing evidence.

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