CAFC Reiterates ‘Exceptional Case’ Awards Don’t Apply to IPRs

The U.S. Court of Appeals for the Federal Circuit (CAFC) on Monday affirmed a district court decision awarding attorney fees and costs to Nextremity Solutions, Inc. for an infringement suit brought against it by Extremity Medical, LLC, but denying attorney fees and costs for the successful parallel inter partes review proceeding (IPR) Nextremity pursued. The opinion was authored by Judge Lourie.

After Extremity sued Nextremity in the U.S. District Court for the District of Delaware, the action was stayed pending an IPR brought by Nextremity that ultimately invalidated the claims of Extremity’s U.S. Patent 8,303,589, covering orthopedic implant devices. Nextremity moved to recover fees and costs for both proceedings and the district court awarded $52,573for the district court litigation but denied the requested $343,660.86 of attorney fees and costs for the IPR proceeding.

The district court found that Nextremity could not recover fees and costs for the IPR under Dragon Intell. Prop. LLC v. DISH Network L.L.C, and the CAFC agreed. There, the Federal Circuit held that 35 U.S.C. § 285, which provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party,” does not apply to a “voluntarily undertaken parallel IPR proceeding[].”

Nextremity argued that “the ‘rigid rule’ from Dragon conflicts with the Supreme Court case of Sullivan v. Hudson, 490 U.S. 877 (1989),” which said that “where administrative proceedings are intimately tied to the resolution of the judicial action and necessary to the attainment of the results Congress sought to promote by providing for fees, they should be considered part and parcel of the action for which fees may be awarded.”

But the CAFC said that language was taken out of context as Sullivan involved a “mandatory administrative proceeding on remand from a district court.” Sullivan applies only to a narrow class of administrative proceedings and “[t]he fact that the IPR may have downstream effects on district court litigation does not convert it into a proceeding ‘intimately tied’ to the district court case under Sullivan.” Nextremity also argued that the district court’s denial of fees conflicted with Section 285’s mandate that a “holistic, equitable approach’ that must consider the ‘totality of circumstances’ in determining whether a case is ‘exceptional’” be taken, but the CAFC said that the district court took such an approach “in the case before it.” Extending Section 285 exceptionality to IPR proceedings would be to expect district courts to evaluate proceedings in which they had no involvement, added the opinion.

As to Extremity’s cross-appeal of the award of attorney fees and costs for the district court litigation, the CAFC found it was proper due to Extremity’s lack of pre-litigation investigation, failure to defend the relevant claim before the Board, and failure to present substantive arguments during the district court litigation. The CAFC rejected Extremity’s arguments that the court erred in shifting the burden of proof or improperly weighing evidence. “Viewed together, the record reflects more than ordinary litigation weakness; it supports the district court’s conclusion that Extremity’s litigating position ‘stands out’ from typical patent disputes in which parties advance and defend colorable validity theories,” wrote the court.

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Author: billperry
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