In Deep Sky Software, Inc. v. Southwest Airlines Co., Defendant Southwest Airlines ("Southwest") sought its fees and costs following the successfulinter partes review of the patent-in-suit, which resulted in all of the asserted claims being invalidated. Among the fees and costs Southwest sought were those related to the filing and prosecution of its IPR petition. Undaunted by the absence of other district court rulings awarding such fees, the district court nonetheless awarded Southwest nearly $400,000 in attorneys' fees and costs, most of which was related to the IPR proceeding.
In its order the Court provided the following summary of the procedural history of the case:
On June 9, 2010, the plaintiff filed its complaint here against Southwest for infringement of U.S. Patent No. 6,738,770 (the "'770 Patent"). In April 2011, defendant filed a request for inter partes reexamination of the '770 Patent in the United States Patent & Trademark Office ("PTO"). The parties then jointly moved to stay this case, stating that a stay "has the potential to greatly reduce issues central to the litigation" and could prevent the court "from having to expend any judicial resources on this case." The court granted the parties' joint motion and stayed the case. On January 9, 2015, the parties notified the court that reexamination had concluded and that all asserted claims of the '770 Patent had been found invalid. The court thus lifted the stay, and defendant filed a motion to find this an "exceptional case," such that defendant would be entitled to attorney fees. 35 U.S.C. § 285. The court granted defendant's motion, and defendant then filed its pending application for fees.
The Court began its analysis by concluding that the rates of the Southwest's attorneys (ranging from $270 per hour for associates with eight years of experience to $625 for partners having 20 years of experience) were reasonable and noted that the plaintiff did not challenge the reasonableness of these rates. However, among other things, the plaintiff challenged "all expenses incurred during reexamination" of the patent-in-suit.
On the issue of whether the plaintiff could recover, as a prevailing party in an exceptional case, fees for an IPR proceedings when the case was stayed pending such proceedings, the Court found that there were few decisions on the subject. In addition, the few decisions were split. As a result, the Court looked Federal Circuit precedent on the subject of recovering attorneys' fees:
The Federal Circuit "interpret[s] attorney fees to include those sums that the prevailing party incurs in the preparation for and performance of legal services related to the suit." Cent. Soya Co. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983) (emphasis added). Here, the legal services counsel performed for defendant during reexamination of the '770 Patent were related to this suit. Reexamination was initiated during and in reaction to plaintiff's action here. Further, the PTO's cancellation of the asserted '770 Patent claims on grounds of invalidity disposed of plaintiff's complaint here and made defendant the prevailing party. Thus, just as the parties envisioned when they jointly moved to stay this case, the reexamination proceedings essentially substituted for work that would otherwise have been done before this court. See PPG Indus., Inc., 840 F.2d at 1569 (the prevailing party was "entitled to reasonable attorney fees based upon the premise that the reissue proceedings substituted for the district court litigation on all issues considered by the PTO and the Board."). Thus, under the unique circumstances of this case, defendant may recover fees for the reexamination proceedings.
Consequently, the Court awarded Southwest its attorneys' fees related to the concurrent IPR proceedings that ultimately resulted in the PTAB finding that the patent-in-suit was invalid.
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Notably, the authority cited by the district court in support of the attorneys' fees award did not involve IPR proceedings. As such, this decision -- awarding a defendant its attorneys' fees related to a concurrent IPR proceeding - is somewhat unique and, at this time, does not reflect a trend. Also, this decision did not identify or discuss the facts that ultimately led the court to find the case exceptional. Presumably, it was based on more than the fact that the PTAB invalidated the patents in an IPR proceeding.
Deep Sky Software, Inc. v. Southwest Airlines Co., Case No. 3-10-cv-01234 (CASD Aug. 19, 2015), Dkt. 49 (Bencivengo, J.)