On January 22, 2016, the Federal Circuit issued its opinion in Lumen View Technology LLC v. Findthebest.com, Inc., addressing the award of enhanced attorney fees to a defendant. The Court held that the district court had properly found the case to be exceptional, but improperly awarded enhanced attorney fees on the grounds of an expedited district court schedule and deterrence of plaintiff misconduct, as those factors were unrelated to the suitability of compensation of defendant’s attorneys.

Background

Non-practicing entity (“NPE”) Lumen View Technology LLC (“Lumen View”) is the exclusive licensee of U.S. Patent 8,069,073 (“the ’073 patent”), directed to a method for facilitating bilateral and multilateral decisionmaking using the preference data of two or more parties. Findthebest.com, Inc. (“FTB”) operated a website with a feature entitled “AssistMe” that provided personalized product and service recommendations based on the preference data of one party.

The district court granted FTB’s motion for judgement on the pleadings, holding that the claims of the ’073 patent are invalid for failure to claim patent eligible subject matter under 35 U.S.C. § 101. The district court then held that the case was exceptional under the totality of circumstances test outlined in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014). The court found that the suit was frivolous and objectively unreasonable because the claims require (even under Lumen View’s own construction) using preference data of two or more parties and even “the most basic” pre-suit investigation would have shown that FTB’s accused feature used the preference data of only one party. In addition, the court found that Lumen View’s motivation for filing suit was to extract a nuisance settlement from FTB, and that Lumen View’s “predatory strategy” of baseless litigation showed the need for deterrence.

The district court awarded attorney fees with an enhancement of the lodestar amount by a multiplier of two. In its decision awarding enhanced fees, the district court cited several factors that were previously addressed in its exceptionality finding, including the need to deter Lumen View’s predatory strategy, Lumen View’s desire to extract a nuisance settlement and threats to make the litigation expensive, and the frivolous nature of the claims. The court also noted that the lodestar was uncharacteristically low due to the expeditious resolution of the case, and that FTB would have reasonably incurred significantly greater fees if the court had adopted Lumen View’s proposed schedule.

Federal Circuit Opinion

The Federal Circuit panel affirmed the district court’s holding that the case was exceptional, noting that even if Lumen View’s conduct was “not quite sanctionable,” the court reasonably determined that the case was exceptional, especially since the infringement allegations were ill-supported under Lumen View’s own claim construction. But the Court vacated and remanded as to the attorney fee award, finding that the district court failed to provide a proper rationale to justify enhancing the attorney fee awarded by a multiplier of two. The Court held that the expedited district court schedule was subsumed within the lodestar calculation and was not a basis for enhancing attorney fees. As to deterrence, the Court held that although deterrence may be a consideration when determining whether to award attorney fees, it is not an appropriate consideration in determining the amount of a reasonable attorney fee, which should be based primarily on the lodestar method.

Attorney fees and enhancements remain hot topics, and decisions on these issues continually impact the balance of power between NPEs and their targets. It will be interesting to see how the Supreme Court decides Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc., later this year, when it will address the question of whether the more flexible framework for deciding the attorney fee question, as outlined in its 2014 decisions in Octane Fitness and Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744 (2014), should be applied to the issues of willful infringement and enhanced damages.