While the Supreme Court’s decisions in Octane Fitness, LLC v. ICON Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc. significantly relaxed the standard for awarding attorney fees under 35 U.S.C. § 285, a recent decision by the Federal Circuit provides a reminder of the limits to a district court’s discretion. In Checkpoint Systems, Inc. v. All-Tag Security S.A., the Federal Circuit found that the district court abused its discretion in awarding fees to All-Tag because Checkpoint’s conduct relied upon by the district court did not render the case exceptional.
- The Checkpoint decision is instructive on the bounds of an exceptional case under Octane and Highmark, in particular because the Federal Circuit reversed the district court under the highly-deferential abuse of discretion standard of review.
- The decision reaffirms that a reasonable infringement position pursued with reasonable litigation tactics, even though ultimately unsuccessful, is not an exceptional case under § 285.
At trial, the jury found that Checkpoint’s patent was not infringed, invalid, and unenforceable. The district court also found the case to be exceptional under § 285 and awarded fees to All-Tag. During the first appeal, the Federal Circuit affirmed the judgement entered on the jury’s verdict, but reversed the fee award (applying the then-applicable Brooks Furniture Mfg. standard). The Supreme Court then granted certiorari, vacated, and remanded in light of Octane and Highmark.
On remand, the district court again awarded fees, relying on, in its view, Checkpoint’s improper purpose for bringing suit and insufficient pre-filing investigation. Checkpoint then appealed the fee award for a second time.
No Improper Purpose for Bringing Suit
Regarding motivation, the district court viewed Checkpoint’s lawsuits against other companies, its market share, and its acquiring of competitors as evidence of an improper motive to protect its own competitive advantage. The Federal Circuit, however, disagreed. According to the Court, there was no showing of harassment or abuse in any of the litigations. Checkpoint merely seeking to enforce the statutory right to exclude provided by its patent did not make its purpose improper or the case exceptional.
Sufficient Pre-filing Diligence
With respect to Checkpoint’s pre-filing diligence, Checkpoint’s expert had examined products All-Tag produced in Switzerland, while All-Tag produced the accused products in Belgium. Checkpoint’s expert also made factual assumptions about the accused products based on two of All-Tag’s patents. The district court found that the expert’s reliance on the products produced in Switzerland and the manufacturing processes described in All-Tag’s patents was insufficient and supported finding the fee award. The Federal Circuit again disagreed, noting that All-Tag did not claim the accused products were different from the products produced in Switzerland, and All-Tag’s own witnesses testified that the patents alone provide an accurate description of the process of the making the accused products.
Thus, the Federal Circuit found that the record showed Checkpoint’s infringement case was reasonable and it was not brought in bad faith or pursued with abusive tactics. Accordingly, the case did not stand out from others, as Octane and Highmark require for finding a case exceptional and awarding fees.