Last Week in the Federal Circuit (October 18-22): Inequitable Conduct = Attorneys’ Fees?

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After a couple of weeks with lots of precedential decisions, the Federal Circuit caught its breath last week and issued only non-precedential ones (with the possible exception of a sealed opinion that may or may not be precedential). Below we provide our usual weekly statistics and our case of the week—our highly subjective selection based on whatever case piqued our interest. Given the lack of precedential decisions last week, we picked a precedential decision from the week before.

Precedential opinions:  0

Non-precedential opinions:  6

Rule 36:  2

Longest and shortest (non-Rule 36) pending case from argument:  University of South Florida v. Fujifilm Medical Systems, No. 20-1872 (261 days) (sealed opinion)

Case of the week:  Energy Heating, LLC v. Heat On-The-Fly, LLC, No. 20-2038

Panel:  Chief Judge Moore and Judges Prost and Stoll, with Judge Prost writing the opinion

You should read this case if:  you have a matter involving attorneys’ fees

This week’s case of the week involves attorneys’ fees under 35 U.S.C. § 285.  Section 285 is pretty bare—“[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”  That requires a case to be “exceptional,” a party to be the “prevailing party,” and the fees to be “reasonable.”  And even then, the statute says only that the court “may” award fees.  After the Supreme Court’s decisions in Octane Fitness, LLC v. ICON Health Fitness, Inc., and Highmark Inc. v. Allcare Health Management Systems, Inc., that leaves district courts pretty wide latitude to determine when a case is “exceptional” and, even so, whether to award fees.

In the latest case, Heat On-The-Fly got into a spat with its competitors over alleged infringement of Heat On-The-Fly’s patent claims related to hydraulic fracking.  The district court held all claims invalid for obviousness and unenforceable due to inequitable conduct.  On inequitable conduct, the court found that Heat On-The-Fly deliberately withheld material information about prior public use and sales from the Patent Office during prosecution.  The district court ultimately granted attorneys’ fees to the competitors based in part on “the nature and extent of” the inequitable conduct and also on a jury finding that Heat On-The-Fly had acted in bad faith in representing that it had a valid patent.

The Federal Circuit affirmed the fees award.  It rebuffed the argument that the district court had erred by not independently weighing an alleged lack of litigation misconduct:  “while the ‘manner’ or ‘broader conduct’ of litigation is relevant under § 285, the absence of litigation misconduct is not separately of mandatory weight.”  Instead, under Octane Fitness there is “no precise rule or formula” for deciding exceptionality.

The Court also rejected complaints about a bright-line rule equating inequitable conduct with a requirement to award attorneys’ fees.  Heat On-The-Fly based that complaint on the district court’s observation that “it appears other courts have universally” found exceptionality after a finding of inequitable conduct.  The Federal Circuit saw nothing wrong with that observation because the “district court correctly explained that ‘a finding of inequitable conduct does not mandate a finding of exceptionality.’”

Finally, the Court denied the competitors’ requests for attorneys’ fees for the appeal, also under Section 285.  The Court noted that it had the authority to grant those fees in the first instance.  But the request was “premature under Federal Circuit Rule 47.7, which requires that ‘the application must be made within thirty (30) days after entry of the judgment.’”  In other words, Heat On-The-Fly may not be out of the woods yet (although anecdotally, it seems to be fairly rare for the Federal Circuit to grant fees on appeal in the first instance).

[View source.]

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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