Tuesday, August 18, 2009

No Legal Fees For You (in a Patent Case)

The Federal Circuit’s decision last week in a patent appeal points out the difficulty that a prevailing defendant has in obtaining reimbursement for its attorneys’ fees. The tale is often told. Plaintiff sues defendant for patent infringement. The defendant must defend itself, often at considerable expense. At the claim construction hearing, the court rules that the plaintiff’s patent claims are too narrow or limited and do not apply to the conduct engaged in by the defendant. Of course, the defendant was certain all along that the plaintiff's case lacked merit. And the defendant is delighted to win, but wants reimbursement for its significant legal expenses. The plaintiff, seeking to avoid liability for defendant’s legal fees, moves to dismiss all of its claims with prejudice. The court grants the motion to dismiss and the defendant receives no fees.

In last week’s decision, the Federal Circuit discussed the limited availability of attorney fee reimbursement to a prevailing defendant in a patent infringement case. The court explained that the circumstances permitting an award of fees is extremely narrow. Reimbursement for legal fees in a patent case is available only when:

  • There has been inequitable conduct practiced by a party before the PTO
  • There has been litigation misconduct practiced by a party or counsel in the infringement case
  • There has been a finding in the infringement case that one party or its counsel has engaged in vexatious, unjustified or bad faith litigation
  • The plaintiff’s lawsuit is found to have been frivolous
  • The defendant’s infringement is found to have been willful

Merely winning a patent case is not enough to justify a fee award. There must be something more in the litigation besides the bringing of a lawsuit by a plaintiff and the victory by the defendant. The something more must involve one of the limited bad acts described above. Note that these bad acts go to the heart of the integrity of the judicial proceeding. As such, an award of legal fees in a patent case can be viewed not as a reward for victory but as a punishment for inequitable conduct.

Unfortunately, in patent litigation, the prevailing defendant may end up with the thrill of victory, but with the agony of a large legal bill.

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