Ever since the Supreme Court handed down its decisions in Octane Fitness, LLC v. ICON Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. about five years ago, liberalizing (or at least simplifying) the law regarding awarding district court awards of attorneys' fees in patent cases under 35 U.S.C. § 285, those courts (and the Federal Circuit) have been assaying the metes and bounds of sanction-worthy behavior. The Supreme Court's rubrics relied heavily on the sound discretion of the district court judge, another example of the Court's penchant for "knowing it when we see it" jurisprudence and (as applied to the attorneys' fees question) one without any guidance from the Court except to consider the "totality of the circumstances." But, as expected, any behavior that could be characterized as "abusive" became much more in the § 285 crosshairs, particularly those involving plaintiffs suing a large number of putative defendants or that could be accused of performing a less than diligent pre-complaint filing investigation as required under the Federal Rules of Civil Procedure. Both allegations were successfully made against plaintiffs Thermolife International LLC and the Board of Trustees of the Leland Stanford Junior University and affirmed by the Federal Circuit last week in Thermolife Int'l LLC v. GNC Corp.
The case arose over Stanford's U.S. Patent Nos. 5,891,459, 6,117,872, 6,646,006, and 7,452,916, directed to "methods and compositions involving the amino acids arginine and lysine, to be ingested to enhance vascular function and physical performance"; the '459, 926, and '006 patents had expired before litigation ensued (but infringing activity during the life of these patents was plead). The '006 patent claimed compositions, while the other patents-in-suit claimed methods of using the claimed compositions for achieving the desired physiological effects. The following claims were recited as representative of the issues before the Court:
Claim 1 of the '459 patent:
1. A method of improving vascular NO activity of the vascular system of a human host by enhancing endothelial NO, said method comprising:
administering orally as a dietary supplement to said host in accordance with a predetermined regimen a prophylactic dose in an amount sufficient to enhance endogenous endothelial NO, L-arginine or L-arginine hydrochloride, as other than a natural food source and in the absence of other amino acids and polypeptides as other tha[n] dietary supplements, to enhance the level of endogenous NO in the vascular system [emphasis in opinion].
Claim 1 of the '872 patent:
1. A method for enhancing physical performance of a mammal prior to said physical performance, said method comprising:
administering to said mammal prior to said physical performance as the active ingredient an amino acid composition consisting of at least one amino acid selected [from] the group consisting of arginine and lysine of at least about 60 mg/kg/day within 24 h of said physical performance [emphasis in opinion].
Claim 1 of the '916 patent:
1. A method of enhancing nitric oxide production comprising orally administering to a human host in need thereof a composition comprising L-arginine or a physiologically acceptable salt thereof, wherein (i) said composition includes an amount of L-arginine or its physiologically acceptable salt sufficient to increase the level of nitric oxide production in said human host and (ii) said composition is a dietary or food supplement or a pharmaceutical composition in a form suitable for oral administration selected from the group consisting of a pill, a powder, a liquid, and a capsule, wherein said administering provides a daily amount rang-ing from 1 to 12 grams of L-arginine or its physiologically acceptable salt and wherein the composition further comprises at least one additional compound associated with production of nitric oxide other than L-arginine or a physiologically acceptable salt thereof [emphasis in opinion].
And claim 3 of the '006 patent:
3. A composition comprising L-arginine or a physiologically acceptable salt thereof and at least one additional compound associated with production of nitric oxide other than L-arginine or a physiologically acceptable salt thereof, said composition excluding other amino acids which are not precursors of nitric oxide, wherein said composition is in a form suitable for oral administration selected from the group consisting of a pill, a powder, a liquid, and a capsule [emphasis in opinion].
Thermolife is the exclusive licensee of these patents and sued (over a 9-month period) multiple parties ("dozens" according to the Court, actually a total of 81, wherein a number of them settled for "seemingly small dollar amounts" that implied an intention by plaintiffs to obtain "nuisance-value settlements'), including surviving defendants GNC Corp., Hi-Tech Pharmaceuticals, Inc., and Vital Pharmaceuticals, Inc. for both direct (literal) infringement under 35 U.S.C. § 271(a) and indirect infringement under 35 U.S.C. §§ 271(b) and 271(c). Relevant to the decisions in this case, plaintiffs alleged infringement by defendants' sale of specific products.
After finding all of the asserted claims invalid for anticipation and/or obviousness (conclusions not challenged on appeal), the District Court entertained and granted prevailing defendants' motion for attorneys' fees supported by two arguments. First, that there was no basis to assert infringement against the specified products because they contained less than the at least 1 gram of L-arginine (or its hydrochloride salt) per serving as required by the asserted claims. This was evident by inspection (on the ingredients recited on the bottles) or by "publicly available" analytical methods. Defendants asserted these contentions in support of their argument that "plaintiffs did not conduct an adequate pre-suit investigation into infringement." Also, defendants argued that the case was exceptional because plaintiffs' own expert testified that amounts less than one gram per serving of L-arginine (or its hydrochloride salt) were ineffective to enhance nitric oxide production (and hence that the method claim were also not infringed). Defendants also argued that plaintiffs' pattern of suing multiple defendants and settling for nuisance value recoveries was evidence that the District Court properly found the case to be exceptional. Plaintiffs did not (indeed, according to the decision could not) challenge the facts defendants set forth to support their arguments, but argued that there was insufficient evidence to support the conclusion that they had sued multiple parties to improperly extract nuisance-value settlements.
The District Court was persuaded by these arguments ("the pattern of action here is indeed one that strongly suggests Plaintiffs brought suit against many defendants without carefully reviewing their claims as a calculated risk that might yield nuisance-value settlements"; emphasis in opinion) and granted defendants' motion (amounting to awards of $903,890.13 to Hi-Tech and $406,131.76 to Vital; GNC did not move for attorneys' fees below). This appeal followed, limited to the question of whether the District Court properly determined that this was a "special case" as required under the Supreme Court's Octane Fitness and Highmark decisions.
The Federal Circuit affirmed, in a decision by Judge Taranto joined by Judges Bryson and Stoll. The Court noted that this case was unusual as not being directed (as most attorneys' fees cases tend to be) to plaintiff attorneys' trial conduct (there having been no trial on infringement) but rather on the question of whether the lawsuit should have been filed in the first instance.
As an initial matter, the Federal Circuit approved, as being properly within the exercise of the District Court's discretion, various procedural decisions below (striking trial counsel's untimely filed declaration regarding the extent of pre-filing investigation, for example). Substantively, the panel held that the District Court had properly based its exceptional case determination on an issue (infringement) that had not been "fully litigated" in the underlying dispute, consistent with the Federal Circuit's decision in Lumen View Technology LLC v. Findthebest.com, Inc., 811 F.3d 479, 481–83 (Fed. Cir. 2016). However, citing Spineology, Inc. v. Wright Med. Tech., Inc., 910 F.3d 1227, 1230 (Fed. Cir. 2018), the panel noted that while it is unusual to find support for an attorneys' fees award on unlitigated issues it is not an abuse of discretion by a district court. And the Court noted that while such deference is not plenary:
To be sure, due process and other procedural rights must be respected in deciding the exceptional-case question as a precondition to awarding fees against a losing party[, a]nd more process may well be needed on a fees motion when the issue presented as a basis for fees has not previously been litigated there is no such denial of plaintiffs' procedural due process rights in this instance [citation omitted].
The panel also declined to impose ("retroactively") a requirement (unfulfilled here) of notice by plaintiffs (for example, by filing a Rule 11 motion) for their grounds of seeking attorneys' fees, inter alia, because of the unusual nature of this case where infringement was bifurcated in favor of a separate trial on validity.
Next the Court held that the District Court's consideration of the inadequacy of plaintiffs' pre-filing investigation also occasioned no abuse of discretion, particularly the lower court's restriction to considering only claim 1 of the '459 patent. Nor was there error in the District Court finding that infringement required administering L-arginine (or its hydrochloride salt) at dosages of 1 gram. This determination the opinion bases on "science," not claim interpretation, finding support in trial testimony regarding the amount of L-arginine (or its hydrochloride salt) required to have the claimed effect. And thus the failure of the accused infringing articles to provide this dosage constituted a failure to perform an adequate pre-filing investigation when plaintiffs accused the non-infringing articles (and their use) of infringement. This conclusion was supported both by the concentration and dosage amounts recited on the labels of the accused infringing articles and the failure of plaintiffs to perform any of the publicly known analytical techniques that would have shown that the 1 gram dosage was not administered according to defendants' formulations and instructions (including the absence of arginine in any form in one of the accused products).
With regard to the District Court's findings regarding litigation (mis)conduct, the opinion asserts that standing alone these would not be sufficient per se to support the award of attorneys' fees, particularly with regard to the number of suits and defendants and the (generally small) size of the awards. But these activities were considered in the context of the rest of the evidence considered by the District Court, and in toto the award of attorneys' fees was not an abuse of discretion.
Finding no abuse of discretion by the District Court, the Federal Circuit affirmed.
Thermolife Int'l LLC v. GNC Corp. (Fed. Cir. 2019)
Panel: Circuit Judges Taranto, Bryson, and Stoll
Opinion by Circuit Judge Taranto
