CAFC Affirms District Court Denial of Attorney Fees in Oil Drilling Patent Dispute

“Industry competitors zealously advocating their positions often results in resource- and time-intensive litigation. But that alone is insufficient to make a case ‘exceptional.’” U.S. District Court for the Southern District of Texas

attorney feesOn Tuesday, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision affirming a district court ruling that denied attorney fees to oil drilling equipment company, FMC Technologies.

OneSubsea, a competitor in the offshore oil extraction industry, originally sued FMC for patent infringement in 2015; FMC subsequently countersued. At the heart of the patent infringement dispute was whether fluid flows through FMS’s device, as in the OneSubsea patent.

The district court ruled in FMC’s favor and granted summary judgment to the company in 2020, but later rejected the company’s motion for attorneys’ fees.

The appeals court agreed with the district court and found that FMC failed to show that the lower court abused its discretion in denying the attorneys’ fees.

‘Divert’ or ‘Continuous’?

During the district court proceedings, the two firms disputed the claim construction of the term, “divert”. Ultimately, the district court determined that “divert” meant “the direction of the fluid’s flow is forced to change from its current flowpath to a different flowpath.”

As a result, FMC requested a summary judgment of noninfringement based on this claim construction. The firm claimed that its device had only one continuous flowpath and therefore did not infringe on OneSubsea’s patent. But OneSubsea argued that FMC’s internal documents and diagrams referred to multiple flowpaths.

Before the district court reached a verdict on the petition for summary judgment, the court stayed the case due to ongoing inter partes review (IPR) proceedings related to the patents by the Patent Trial and Appeal Board (PTAB). The district court case was thus halted for almost three years.

In the meantime, FMC was granted a victory by the PTAB when it invalidated 76 claims of OneSubsea’s patents. However, the claims in the district court case were not brought before the PTAB, so the court reinstated the case.

FMC submitted an updated motion for summary judgment in 2020, and later challenged the admissibility of OneSubsea’s expert testimony. The district court sided in both cases with FMC and ruled the expert testimony “failed to identify the different flowpath” in the FMC device. Therefore, the court granted FMC’s motion for summary judgment.

Attorney Fees

In January 2021, FMC filed a motion in the district court for attorneys’ fees under 35 U.S.C. § 285, which states that a district court “in exceptional cases may award reasonable attorney fees to the prevailing party.”

FMC argued that the case was exceptional because OneSubsea’s case was “litigation misconduct” that had “substantively weak infringement claims.” FMC bolstered its case by pointing out that OneSubsea failed to produce any admissible evidence, and it claimed that its competitor’s litigation position was baseless.

Furthermore, the firm argued that OneSubsea’s expert witness disregarded the district court’s claim constructions. FMC also took issue with OneSubsea’s choice of venue for the lawsuit, “not promptly providing final contentions of infringement, making late-stage changes to its infringement theory, and ignoring the import of the PTAB rulings.”

OneSubsea countered that its expert witness testimony was made in good faith and pointed out that the original 2016 motion for summary judgment was not granted.

The district court rejected FMC’s arguments and denied its motion for attorneys’ fees. The district court judge said, “industry competitors zealously advocating their positions often results in resource- and time-intensive litigation. But that alone is insufficient to make a case ‘exceptional,’ and the prevailing competitor is not entitled to fees simply because it won the hard-fought case.”

CAFC Appeal

On appeal to the CAFC, FMC argued the court should turn away from the abuse-of-discretion standard and alternatively apply de novo review to the decision. To support this argument, FMC cited the Supreme Court case Highmark. v. Allcare, which determined the abuse-of-discretion review standard. In the case, the Supreme Court wrote, “the district court ‘is better positioned’ to decide whether a case is exceptional . . . because it lives with the case over a prolonged period of time.”

FMC said that the assignment of a new judge in 2021 following the original judge’s retirement disqualified the district court from exercising discretion in determining whether the case is exceptional.

However, the appeals court did not agree with this argument. The CAFC wrote, “FMC overlooks the substantial body of law in which appellate courts have consistently reviewed successor judges’ decisions on discretionary issues for abuse of discretion.”

The appeals court also pointed out that FMC did not object to a new judge being assigned to the case at the time the change was made. The court additionally rejected FMC’s argument that OneSubsea’s case was entirely objectively baseless.

In conclusion, the court ruled, “we hold that FMC has shown no error in the district court’s discretionary decision that OSS did not present an exceptional case to the district court.”

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