Federal Circuit Refuses to Overturn District Court’s Award of Attorney Fees to Dow

Federal CircuitNova Chems. Corp. v. Dow Chem. Co., (Fed. Cir. May 11, 2017) (Before Prost, C.J., Dyk, and Hughes, J.) (Opinion for the court, Prost, C.J.)

This appeal arises from an award of attorney fees to Dow under 35 U.S.C. § 285. Following a patent infringement suit involving several appeals, NOVA discovered alleged evidence that Dow had committed a fraud on the court in the underlying infringement suit. Because a motion for setting aside a judgment based on fraud was time-barred, NOVA filed a separate action in equity alleging Dow committed two frauds on the court. The district court dismissed the action upon motion by Dow, and dismissal was affirmed by the Court. Dow then moved in district court for attorney fees. The district court granted Dow’s motion due to the extreme manner in which NOVA pursued this case, although its claims were not plausible given the high burden of proof. NOVA appealed and the Court affirmed.

NOVA challenged the district court’s exceptional-case determination. It argued that the district court abused its discretion by basing its ruling almost entirely on NOVA’s pursuit of an equity action, which NOVA alleged was its only federal court option. The Court agreed and explained that “a party whose only option for relief from a prior judgment is to file a separate action in equity should not be discentivized from doing so if that party has a plausible basis for relief.”

Nevertheless, the Court disagreed that the district court’s sole basis for finding exceptional circumstances was that NOVA filed an action in equity. The Court noted that the district court also relied on the substantive weakness of NOVA’s position, which can independently support an exceptional-case determination. It is the substantive strength of a party’s litigating position that can lead to an exceptional case determination not correctness or success of that position. For instance, NOVA’s allegations of fraud were supported exclusively by conflicting testimony, a fact going to the strength of the action.

NOVA also argued that the district court erred by comparing this case to patent infringement cases generally as opposed to actions to set aside a prior judgment. The Court disagreed, and rejected placing harsh constraints the district court’s discretion to determine exceptional circumstances. The Court explained that NOVA’s argument ran counter to the Supreme Court’s general instruction that an analysis of exceptional circumstances considers the totality of the circumstances. Therefore, the district court did not abuse its discretion in finding exceptional circumstances warranting an award of attorney fees.

An award of attorney fees by a district court is discretionary. When determining whether exceptional circumstances exist, the substantive weakness of a party’s litigating position can support an exceptional case determination.

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