“Exceptional Case”: Factors For And Against

  • District Court Has Discretion Whether To Base Exceptional Case Determination On Merits Of Defense Or Claim Not Previously Adjudicated On The Merits: While district court has “wide latitude … to refuse to add to the burdens of litigation by opening up issues that have not been litigated but are asserted as bases for a fee award,” it may consider such an issue so long as due process rights are respected. Thermolife Int’l (Fed. Cir. 05/01/19); see Mosaic Brands (Fed. Cir. 12/20/22) (district court had discretion to decide (or to decline to decide) motion for Summ. J. on inequitable conduct affirmative defense after ruling claims invalid for anticipation, in connection with pending motion for a fees award, even though that defense, not asserted as a counterclaim, was moot); Munchkin (Fed. Cir. 06/08/20) (rev’g award of fees based on alleged weakness of trademark, trade dress and patent cases not adjudicated on merits, where movant did not present sufficiently detailed showing of exceptional weakness).
  • Inequitable Conduct Finding Supports Exceptional Case Finding: “Prevailing on a claim of inequitable conduct often makes a case ‘exceptional,’ leading potentially to an award of attorneys’ fees.” Therasense (Fed. Cir. 05/25/11) (en banc); Brasseler (Fed. Cir. 10/09/01) (aff’g award of attorney fees to defendant (who had already won case on “on sale bar”) based primarily on patent owner’s inequitable conduct in failing to disclose “on sale bar” evidence to PTO); Energy Heating I (Fed. Cir. 05/04/18) (remanding denial of fees motion; requiring explanation why fees not awarded where inequitable conduct was found); Energy Heating II (Fed. Cir. 10/14/21) (aff’g award of attorney fees). Whether challenger must show materiality and intent by “clear and convincing” or “preponderance” standard when seeking fees based on inequitable conduct, is a “thorny issue.” In re Rembrandt Tech. (Fed. Cir. 08/15/18) (aff’g exceptional case finding under either standard and not deciding this issue).
  • Patent Owner Failure To Consider Allegedly Anticipatory Prior Art Supports Exceptional Case Finding: Patent owner’s failure to assess prior art presented by defendant as allegedly anticipating the claims, supports an exceptional case finding. Rothchild (Fed. Cir. 06/05/17) (rev’g refusal to award fees, based on vexatious litigation against others and lack of supporting evidence for patent owner’s allegations of good faith).
  • May Base Fees Award On Vexatious Litigation Conduct: Ct. did not overturn Fed. Cir.’s precedents (including Monolithic (Fed. Cir. 08/13/13) (patentee misrepresented date of key evidence, and tried to mask false testimony); MarcTec (Fed. Cir. 01/03/12) (patentee misrepresented law of claim construction and the court’s constructions); Eon-Net (Fed. Cir. 07/29/11) (patentee lodged incomplete and misleading extrinsic evidence)) for basing exceptional-case determination on unreasonable and vexatious litigation tactics. SFA Sys. (Fed. Cir. 07/10/15) (aff’g denial of attorney fees).  See Energy Heating II (Fed. Cir. 10/14/21) (aff’g award of attorney fees; litigation misconduct is not necessary to find case exceptional; and “while the ‘manner’ or ‘broader conduct’ of litigation is relevant under § 285, the absence of litigation misconduct is not separately of mandatory weight”).
  • Inadequate Presuit Investigation: Thermolife Int’l (Fed. Cir. 05/01/19) (aff’g fees award based on lack of showing of adequate presuit investigation as to one claim of four asserted patents; claim recited substance in “an amount sufficient to” have a physiological effect, and infringement therefore was to be based on scientific evidence about what that amount would be at the time the suit was filed, regardless of what amounts the patentee thought would be effective at the time of the application or whether accused products included labels alleging that they had that physiological effect; aff’g no error in requiring patentee to have performed test to determine amount of substance in accused products where product labels were ambiguous as to whether sufficient amount was included and it was undisputed that a “simple test” would have shown the amount included).
  • Surviving Summ. J., Or Absence Of Summ. J. Motion, Is Factor Against Exceptional Case Finding: “‘Absent misrepresentation to the court, a party is entitled to rely on a court’s denial of summary judgment and JMOL . . . as an indication that the party’s claims were objectively reasonable and suitable for resolution at trial.’” Checkpoint Sys. (Fed. Cir. 06/05/17) (rev’g award of fees against patent owner who lost on all issues at jury trial); but see Eko Brands (Fed. Cir. 01/13/20) (2-1) (aff’g award of attorney fees based on ill-founded infringement allegations and denial of obviousness: “Checkpoint did not hold that the denial of summary judgment conclusively establishes objective reasonableness.”); See Prism Tech. (Fed. Cir. 06/23/17) (non-precedential) (challenger’s failure to move for Summ. J. of non-infringement belies contention that infringement allegation was exceptional).
  • Single Isolated Action May Support Exceptional Case Finding: “A district court has discretion, in an appropriate case, to find a case exceptional based on a single, isolated act.” Intellectual Ventures (Trend Micro) (Fed. Cir. 12/19/19) (vacating fees award where district court did not decide case was exceptional but found isolated act was exceptional).

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