CAFC says Attorney’s Fees are an Equitable Remedy Not Subject to Right to a Jury Trial

AIA Am., Inc. v. AVID Radiopharmaceuticals, (Fed. Cir. Aug. 10, 2017) (Before Newman, Lourie, and Hughes, J.) (Opinion for the court, Hughes, J.)

AIA sued Avid for infringement of the ’169 and ’258 patents. These patents are generally directed to research stemming from the discovery of the “Swedish mutation,” a genetic mutation associated with early-onset Alzheimer’s disease. In response, Avid alleged that AIA lacked standing to assert the patents because Ronald Sexton, AIA’s founder, and Dr. Mullan, the purported sole inventor, orchestrated a scheme to appropriate for themselves inventions owned by the Imperial College and the University of South Florida. The jury found in favor of Avid. The district court held that AIA lacked standing to assert the ’169 and ’258 patents and entered judgment in favor of Avid. The court then awarded fees in the amount of $3,943,317.70 to Avid. AIA appealed the award of attorney’s fees, but not the amount awarded.

AIA argued that the Seventh Amendment requires a jury trial to decide the facts forming the basis for an award attorney’s fees under § 285 of the Patent Act. The Seventh Amendment preserves the right to a jury trial for “[s]uits at common law.” Suits at common law refer to suits in which only legal rights and remedies are at issue, as opposed to equitable rights and remedies. A two-step inquiry determines whether a modern statutory cause of action involves only legal rights and remedies.

First, the court must “compare the statutory action to the 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity.” Second, the court must “examine the remedy sought and determine whether it is legal or equitable in nature.” Under step one, English courts have allowed claims for attorney’s fees in the courts of law and equity. When brought in a court of law, judges, not juries, determined attorney’s fees. From this history the Court found that attorney’s fees generally do not involve legal rights.

However, under the second step, when attorney’s fees are themselves part of the merits of an action, they are regarded as a “legal” remedy. But when attorney’s fees are awarded to a prevailing party pursuant to a statutory provision, they are regarded as an “equitable” remedy because they raise “issues collateral to and separate from the decision on the merits.”

Avid sought fees as a prevailing party under § 285, and therefore the attorney’s fees in this action were properly characterized as an equitable remedy, properly decided by a judge. AIA argued that when an award of attorney’s fees is based in part or in whole on a party’s state of mind, intent, or culpability, only a jury may decide those issues. The Court rejected this argument because AIA provided no cases holding that once an issue is deemed equitable, a Seventh Amendment right to a jury trial may still attach to certain underlying determinations.

Next, AIA argued that the district court erred by making factual findings on issues that were not considered by a jury. The Court rejected AIA’s argument, holding that its decisions in Door-Master Corp. v. Yorktowne, Inc. and Jurgens v. CBK, Ltd. stand for the proposition that after a trial on legal issues, a court may not make findings contrary to or inconsistent with the resolution of any issues necessarily and actually decided by the jury. These decisions do not prevent a court, when deciding equitable issues, from making additional findings not precluded by the jury’s verdict. Therefore, the district court was not foreclosed from making additional findings about AIA’s state of mind, intent, and culpability.

Finally, AIA argued that its due process was violated because the district court did not give AIA the opportunity to submit evidence regarding its intent, state of mind, or culpability. The Court rejected this argument because the district court provided both parties the opportunity to fully brief the motion seeking attorney’s fees and the court held a hearing on the motion where AIA was allowed to present arguments.

When attorney’s fees are sought by a prevailing party under § 285 of the Patent Act they are properly characterized as an equitable remedy, within the court’s discretion, and not subject to a right of trial by jury.

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