On August 18, we posted about the Supreme Court’s Octane Fitness ruling and the potential consequences the case may have on the future of patent litigation.  It appears at least one New York federal judge followed the Supreme Court’s ruling and awarded partial attorney’s fees to HTC Corp., Mortorola Mobility LLC and BlackBerry Ltd. for a dismissed patent infringement suit brought by Advanced Video Technologies, LLC.

In its ruling, the judge referred to Advanced Video Technologies as a “patent troll”—never a good thing—and found the case to be exceptional under the lowered standard set forth in Octane Fitness. So what makes this case “exceptional”?

Apparently Advanced Video Technologies failed to conduct enough due diligence before bringing the suit—something required under Federal Rules of Civil Procedure—to ensure it actually owned the patent-in-suit.  In fact, the judge said in her ruling, “I have never before had a case on my docket in which the purported owner of the patent-in-suit did not in fact own the patent — that alone makes this case ‘exceptional’ for I have no basis on which to believe that suing on a patent one does not own falls within the bounds of normal litigation behavior.”

What is interesting is the judge did not impose sanctions upon Advanced Video Technologies counsel, but rather simply imposed partial fees associated with the patent ownership issue on Advanced Video Technologies. Considering Advanced Video Technologies’ counsel was required to perform some sort of due diligence before bringing the suit, it is somewhat odd its counsel did not receive a slap on the wrist for its epic failure.

The ability to award attorneys’ fees for litigation is solely within the discretion of the trial court and any appeal of an award of attorneys’ fees must meet a heavy burden to be successful. Because this issue depends so much on the circumstances of a particular case, and the particular judge, it is extremely difficult to predict the outcome of a fees request. However, we now know that a failure to determine ownership of a patent prior to bringing a suit is enough to make a case “exceptional” under the Octane Fitness ruling.

Moral of the Story?

Adequate due diligence prior to bringing any lawsuit is critical. It is critical for your counsel to ensure you have at least a plausible legal claim—in intellectual property cases, this typically requires ownership of whatever intellectual property is at subject of the suit. Despite due diligence being something typically handled by attorneys, we see from this case the actual party to the suit was the one financially on the hook for what could be counsel’s lack of proper due diligence.