Exceptional Case Finding Results in $12 Million Fee Award

by McDermott Will & Emery
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Gabriel Techs. Corp. v. Qualcomm Inc.

In a non-precedential decision addressing a finding of exceptional case under 35 U.S.C. § 285, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s award of more than $12 million in attorneys’ fees , finding that the plaintiff’s claims were objectively baseless and brought in subjective bad faith and that plaintiff was liable for litigation misconduct.  Gabriel Techs. Corp. v. Qualcomm Inc., Case No. 13-1205 (Fed. Cir., Mar. 18, 2014) (per curiam).

Gabriel Technologies filed a lawsuit for more than $1 billion against Qualcomm and SnapTrack alleging 11 causes of action, including claims for correction of inventorship and misappropriation of trade secrets, among other contract and unfair competition claims.  At the heart of the dispute, Gabriel alleged that Qualcomm had misappropriated and improperly patented GPS technology licensed from Gabriel.  The district court dismissed several of Gabriel’s 11 causes of action for failure to state a viable claim, for claim preemption and for failure to plead with particularity.  As the case progressed, the district court required Gabriel to post an $800,000 bond to continue its suit, noting that Qualcomm had presented significant evidence that Gabriel’s remaining claims were meritless and were brought in bad faith.  Further, despite years of litigation and discovery, Gabriel had failed to draw any “meaningful connection” between Gabriel’s technology and the allegedly misappropriated information in Qualcomm’s patents.  Gabriel posted the bond and proceeded with its case, but the district court later granted summary judgment in favor of Qualcomm.  On Qualcomm’s motion for fees, the district court found that the case was objectively baseless and brought in subjective bad faith and that Gabriel had engaged in litigation misconduct and awarded Qualcomm approximately $12 million in attorneys’ fees.  Gabriel appealed.

The Federal Circuit affirmed, agreeing that Gabriel’s claims were objectively baseless.  For example, regarding Gabriel’s claims that inventorship needed to be corrected, the Court found that Gabriel could not identify any person who claimed to have invented or contributed to the Qualcomm patent. 

The Federal Circuit also affirmed the district court’s finding of subjective bad faith, noting that in many cases proving a litigant’s subjective bad faith is challenging, but “this is not such a case.”  The Court found compelling emails from Gabriel’s executives admitting the case was meritless.  The Federal Circuit rejected Gabriel’s argument that its willingness to post the $800,000 bond and the fact that a law firm was willing to take their case on a contingency basis showed that they had a good faith belief in their claims.  In light of the damaging emails, the Court disagreed.  Further, the Court found that Gabriel’s refusal to drop its lawsuit after it was warned by the district court about the weakness of its case justified the finding for subjective bad faith.

Finally, the Court agreed with the district court that Gabriel’s attempt to reassert claims that had been dismissed with prejudice and to try to continue litigating trade secret claims that were clearly time-barred justified the finding of litigation misconduct.

Practice Note:  This decision issues at a time the U.S. Supreme Court is considering two cases on fee shifting in patent disputes; Octane Fitness v. Icon Health and Fitness (IP Update, Vol. 16, No. 10) and Highmark v. Allcare Health Management Systems (IP Update, Vol. 16, No. 10).  The High Court heard argument in both cases on February 26, 2014 and decisions are pending.  The decisions in these two cases are expected to focus on the proper standard for an “exceptional case” finding under 35 U.S.C. § 285 and the proper standard for review on appeal.  Also of interest is the Federal Circuit’s decision in Kilopass Tech. Inc. v. Sidense Corp. (IP Update, Vol. 17, No. 1), which issued shortly prior to the Supreme Court arguments in Octane Fitness and Highmark.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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