The US Court of Appeals for the Federal Circuit affirmed a district court’s denial of attorneys’ fees, finding that the district court did not abuse its discretion in concluding that a medical device company’s failure to notify the opposing party of its invalidity position until filing its fees motion weighed against awarding attorneys’ fees under 35 USC § 285. Stone Basket Innovations, LLC v. Cook Medical, LLC, Case No. 16-2696 (Fed. Cir., June 11, 2018) (Wallach, J).

In May 2015, Stone Basket sued Cook Medical for patent infringement. By October 2015, Cook Medical had served its invalidity contentions, and by January 2016 it had deposed the patent’s inventor, who conceded that there was “nothing novel about” a key limitation in the patent. In March 2016, Cook Medical petitioned for inter partes review (IPR) of all claims of the asserted patent. Following institution, Stone Basket requested an adverse judgment in the IPR proceeding, and all claims of the patent were canceled. Stone Basket then successfully moved to dismiss the district court case with prejudice.

Following the dismissal, Cook Medical filed a motion under § 285 of the Patent Act for attorneys’ fees, arguing that Stone Basket’s litigation position was exceptional in view of its alleged substantive weakness and Stone Basket’s pattern of vexatious litigation. Up until this point, Cook Medical had not notified Stone Basket of the exceptionality or frivolousness of its case. The district court denied the motion, finding that none of the evidence put forth by Cook Medical warranted such fees. Cook Medical appealed.

On appeal, Cook Medical argued that the invalidity contentions it filed with the district court should have put Stone Basket on notice that its patent was invalid as obvious. The Federal Circuit disagreed, finding that the contentions “fall short of notifying Stone [Basket]” of the invalidity of the patent. The Court found that Cook Medical’s invalidity contentions failed to put Stone Basket on “clear notice” of the asserted patent’s invalidity because they merely listed 32 references, along with a blanket statement of obviousness and “inconsistent and unilluminating” claim charts. The Court also found that the inventor’s testimony that a single claim limitation was known in the prior art did not make the case exceptional because patentability is considered by evaluating the claim as a whole.

The Federal Circuit also found that the district court did not err by factoring in Cook Medical’s litigation conduct, emphasizing that Cook Medical’s failure to provide early notice of its assertion of frivolousness weighed against finding the case exceptional. The Court cited a March 2018 ruling on attorneys’ fees by the US District Court for the Central District of California in Aten Int’l Co. v. Uniclass Tech., which held that a “party cannot simply hide under a rock, quietly documenting all the ways it’s been wronged, so that it can march out its parade of horribles after all is said and done.” While the Federal Circuit did not cite any precedent for this notice requirement, the Court found “this reasoning both persuasive and applicable to this case.”

Practice Note: While § 285 does not expressly require notice, this case suggests that such notice to both the opposing party and the court will be an important aspect in determining whether a case is exceptional.