Addressing the issue of attorneys’ fees in connection with exceptional cases under 35 USC § 285, the US Court of Appeals for the Federal Circuit affirmed the district court’s determination that a case was exceptional based on plaintiff’s inadequate pre-suit investigation of infringement, even though infringement had not been adjudicated, and affirmed the district court’s $1.3 million attorneys’ fee award. ThermoLife Int’l LLC v. GNC Corp., Case Nos. 18-1657, -1666 (Fed. Cir. May 1, 2019) (Taranto, J).

ThermoLife, the exclusive licensee of four patents owned by Leland Stanford Junior University, brought a total of 81 infringement suits, including suits against Hi-Tech and Vital, by identifying specific products and relying on the product labels and advertisements to support its allegations. The four patents cover methods and compositions involving certain amino acids to be ingested to enhance vascular function and physical performance. During the litigation, the parties agreed to “phased discovery” that was initially limited to issues concerning standing, claim construction, and patent invalidity and/or unenforceability, with issues unique to each defendant to proceed only if necessary (namely, infringement and damages).

The district court so bifurcated the proceedings, and a bench trial on invalidity proceeded with Hi-Tech, Vital and a trio of companies from the GNC family as defendants (all other defendants having settled). The district court held all asserted claims invalid. Thereafter, Hi-Tech and Vital (but not the GNC entities) moved for attorneys’ fees under § 285, making two main arguments for exceptionality:

Plaintiffs did not conduct an adequate pre-suit investigation into infringement. Plaintiffs filed many suits without adequate investigation, simply trying to extract nuisance-value settlements.

The district court agreed and awarded $1.3 million in attorneys’ fees under § 285. ThermoLife and Stanford appealed the exceptional case determination.

The Federal Circuit affirmed, explaining that the district court did not abuse its discretion in finding the case exceptional although the basis for alleging infringement was not fully adjudicated or litigated on the merits. Noting that this was an unusual but not legally impermissible attorneys’ fee case, the Court emphasized “the wide latitude district courts have to refuse to add to the burdens of litigation by opening up issues that have not been litigated but are asserted as bases for a fee award.”

The Federal Circuit rebuffed plaintiffs’ argument that they were denied procedural rights, noting that plaintiffs did not request a hearing and had an opportunity to meet the contentions made in the fees motion. Although a party seeking fees under an exceptional case assertion should provide early notice—a factor not met here—the Court concluded that such notice is not rigidly required, particularly in circumstances where discovery as to party-specific issues is postponed.

The Federal Circuit found no abuse of discretion in the district court’s determination that there had been inadequate pre-filing investigation. The Court explained that there was no reversible error in the district court’s emphasis on any particular claim since ThermoLife had not argued that its infringement case was stronger for any other claim. The Court also found that the district court correctly determined that according to the claim it analyzed, infringement would require application of 1 gram (or more) of L-arginine, since (as the district court determined based on the record) that was the “amount sufficient to enhance” certain metabolic processes recited in the claim. The Court agreed that ThermoLife was properly charged with knowledge of this minimum dosage but failed to apply it in its pre-suit investigation, and that it was therefore not an abuse of discretion to find that investigation was inadequate.

In support of its conclusion, the Federal Circuit noted that the record included no evidence of ThermoLife testing any of the accused products. As the Court observed, while testing of an accused product is not always required as part of pre-suit investigation, the district court did not err in determining that here, where all of the accused products were publicly available, there was no reasonable substitute for testing since the record showed that the tests to determine ingredient amounts were “simple.” Finally, the Federal Circuit found no reversible error in the district court’s “pattern of misconduct” determination because it was tied to the finding that plaintiffs failed to conduct an adequate pre-suit investigation into infringement.