The US Court of Appeals for the Federal Circuit found that the district court did not abuse its discretion in awarding fees to the prevailing defendant in a suit brought in equity seeking to have a patent infringement judgment in favor of the patent owner/defendant set aside. Nova Chems. Corp. v. Dow Chem. Co., Case No. 16-1576 (Fed. Cir., May 11, 2017) (Prost, CJ).

This case relates to an alleged standing defect. In 2005, Dow brought an infringement action against Nova that resulted in a 2010 judgment against Nova for $61 million. That judgment ultimately became final, and Nova paid it. The case continued through a supplemental damages phase, and during discovery in that phase, Nova discovered new testimony by Dow’s tax counsel in an unrelated litigation allegedly showing that Dow did not own the patents-in-suit, negating their standing. Nova alleged that Dow’s counsel defrauded the Court both in misrepresenting Dow’s ownership and in proffering expert testimony that contradicted the expert’s testimony in another case. By the time Nova discovered this evidence, the one-year bar for filing a Rule 60 motion to have a judgment set aside for lack of standing had passed, so Nova filed a separate action in equity to have the judgment set aside.

The district court dismissed that suit at the pleading stage, holding that Dow’s actions did not rise to the level of a “grave miscarriage of justice” necessary to set aside the judgment. The district court found that the tax counsel’s testimony was not sufficient to overcome the assignment documents Dow submitted in the first litigation that demonstrated ownership, and found that the expert’s statements, although “arguably inconsistent,” did not plausibly rise to the level of perjury. Following the dismissal, the district court awarded attorneys’ fees to Dow, finding the case exceptional for both the weakness of the litigating positions and the manner in which it was litigated. Nova appealed.

On review, the Federal Circuit upheld the district court finding regarding the weakness of Nova’s positions and did not reach the manner in which Nova litigated the case. The Court made two points in finding that Nova’s positions were exceptionally weak. First, it clarified that there was and is no per se rule that actions to set aside patent judgments in equity give rise to an exceptional case merely because they require the plaintiff to carry such a high burden. Instead, the Court focused on Nova’s positions in this specific case. Second, the Federal Circuit explained that when judging the exceptionality of similar cases, the strength of the positions should be compared to all patent infringement cases, not just those seeking to set aside a judgment in equity.