Some Causal Nexus Required To Keep Patent-Shifting Fee Awards Compensatory, Rather Than Punitive, In Nature.
In re Rembrandt Technologies LP Patent Litig., No. 2017-1784 (Fed. Cir. Aug. 15, 2018) (precedential) involved a situation where patent infringement plaintiffs lost their claims against dozens of defendants (mainly cable companies, cable equipment manufacturers, and broadcast networks) relating to nine different patents after a Markman hearing and some post-resolution settlement arrangements on some of the patent claims. Defendants moved to recover attorney’s fees against plaintiffs on the theory that the patent litigation was “exceptional” so as to justify patent fee-shifting under 35 U.S.C. §285. The district court found the case was exceptional and awarded more than $51 million in fees to the various defendants (the huge bulk of which they asked for), prompting an appeal by plaintiffs to the Federal Circuit Court of Appeals.
The Federal Circuit vacated the fee awards and remanded, based on the fact that the district judge did not adequately and satisfactorily explain the fee award with respect to the “nexus requirement”—namely, the connection between the fees awarded and plaintiffs’ misconduct.
It, however, did affirm the exceptional case finding—which is judged under the deferential abuse of discretion standard—based on the district judge’s findings that plaintiffs (1) improperly compensated fact witnesses, (2) failed to prevent document spoliation, and (3) prosecuted revived patents which they should have known were unenforceable.
But, on the amount of fees awarded (just about all of the defense requests)—despite an abuse of discretion standard still applying—the Federal Circuit did not believe the “nexus requirement” was adequately explained, resulting in a decision that the award be vacated and that the fee requests be looked at again. Fees in this area must be compensatory, not punitive in nature. Also, this was not the run-of-the-mill patent case involving a couple of patents and a small number of parties, but a case concerning nine patents and dozens of defendants. A “re-do” was in order.
BLOG “LIKE IT” QUOTE FROM OPINION: As the Supreme Court recently explained in Goodyear Tire & Rubber Co. v. Haeger, 137 S.Ct. 1178 (2017), “‘[t]he essential goal’ in shifting fees’ is ‘to do rough justice, not to achieve auditing perfection.’” Id. at 1187 (quoting Fox v. Vice, 563 U.S. 826, 838 (2011)).
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