In a patent infringement suit where non-infringement may be easily determined, a lack of an adequate pre-suit investigation may be sufficient to result in an award of attorney’s fees to the accused party.
The Federal Circuit recently affirmed a district court’s award of attorney’s fees under 35 U.S.C. § 285. In particular, the Federal Circuit affirmed the lower court’s decision based on the plaintiff’s inadequate pre-suit investigation of infringement in the related cases. See Thermolife Int’l, LLC v. GNC Corp., Nos. 2018-1657, 2018-1666, 2019 U.S. App. LEXIS 13135 (Fed. Cir. May 1, 2019) (Before Taranto, Bryson, and Stoll, J.) (Opinion for the Court, Taranto, J).
Leland Stanford Junior University (Stanford) and Thermolife International, LLC (Thermolife) are the owners and exclusive licensee, respectively, of U.S. Patent Nos. 5,891,459, 6,117,872, 6,646,006, and 7,452,916 directed to methods and compositions involving the amino acids arginine and lysine, to be ingested to enhance vascular function and physical performance. Thermolife, later joined by Stanford, brought suit alleging Hi-Tech, Vital, and multiple companies from the GNC family infringed the aforementioned patents. The parties agreed to bifurcate the proceedings: a consolidated trial on invalidity and enforceability would be held; and if necessary, separate proceedings on infringement would follow. The district court found the asserted claims of all four patents invalid as either being anticipated or obvious.
Thereafter, Hi-Tech and Vital (collectively, “defendants”) moved for attorney’s fees under 35 U.S.C. § 285. The defendants argued Thermolife and Stanford (collectively, “plaintiffs”) would have discovered that the accused products did not infringe the asserted claims had they read the labels on the accused products and conducted simple tests. Further, defendants more broadly argued that Thermolife and Stanford filed numerous suits without adequate investigation simply to extract nuisance-value settlements. The lower court agreed that plaintiffs failed to conduct an adequate pre-filing investigation mainly because the accused products failed to include the claimed amount of L-arginine. Additionally, the plaintiffs’ actions strongly suggested plaintiffs brought suit against many defendants without carefully reviewing their claims as a calculated risk that might yield nuisance-value settlements including: bringing suit on expiring patents; filing numerous infringement suits; and settling early for small dollar amounts.
Octane Fitness Applied
The Federal Circuit began its analysis by noting a court “in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. An exceptional case is one that, under the totality of the circumstances, “stands out from others with respect to the substantive strength of a party’s litigating position” or “the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014).
First, the Federal Circuit agreed that the district court properly struck the declaration of plaintiffs’ lead counsel, Mr. Woods, who almost four months after defendants moved for attorney’s fees then described the pre-filing investigation that he and his co-counsel undertook. The Federal Circuit held that striking the declaration was proper because plaintiffs were on notice of the need to address the adequacy of their pre-filing investigation when defendants moved for attorney’s fees.
Next, while recognizing that awarding attorney’s fees without reaching a determination on infringement was unusual, the Federal Circuit noted the lower court’s familiarity with the issues related to the award of attorney’s fees and plaintiffs lack of a request for a hearing on the issue as rendering the decision proper.
Furthermore, the Federal Circuit found that the district court did not err in finding that plaintiffs failed to conduct an adequate pre-filing investigation. The Federal Circuit noted that testing a product in an infringement suit is not a necessity, but instead dependent on the circumstances. Here, because the products’ labels indicated a lack of infringement, testing was necessary as part of pre-filing investigation.
Nuisance-Value Argument Rejected
Regarding the second prong of defendants’ argument, bringing many suits to yield nuisance-value settlements, the Federal Circuit disagreed with the lower court’s finding as applied to four specific suits pointed out by plaintiffs. More specifically, bringing the four suits on expiring patents where six years’ worth of past infringement may have existed, and even bringing many suits for seemingly small amounts, did not rise to an exceptional case without the additional evidence of inadequate pre-suit investigation.
In analyzing the effect of settling many suits for small dollar amounts, the Federal Circuit noted that “there is no minimum damages requirement to file patent infringement case,” and “[a]sserting seemingly low damages against multiple defendants—or settling with defendants for less than the cost of litigation—does not necessarily make a case exceptional.” (quoting AdjustCam, LLC v. Newegg, Inc., 861 F.3d 1353, 1361 (Fed. Cir. 2017). In affirming the lower court’s decision, the Federal Circuit noted that the four suits did not stand alone and that the larger overall pattern of plaintiffs’ conduct in bringing “suit against many defendants without carefully reviewing their claims,” as well as the lack of pre-suit investigation, rendered a finding of an exceptional case proper.