On January 22 2016 the Federal Circuit issued its opinion in Lumen View Technology LLC v Findthebest.com, Inc, addressing the award of enhanced attorneys' fees to a defendant. The court held that the district court had properly found the case to be exceptional, but improperly awarded enhanced attorneys' fees on the grounds of an expedited district court schedule and deterrence of plaintiff misconduct, as those factors were unrelated to the suitability of compensation of defendant's attorneys.
Non-practising entity (NPE) Lumen View Technology LLC was the exclusive licensee of US Patent 8,069,073 (the ''073 patent'), directed to a method for facilitating bilateral and multilateral decision-making using the preference data of two or more parties. Findthebest.com, Inc (FTB) operated a website with a feature entitled 'AssistMe' that provided personalised product and service recommendations based on the preference data of one party.
The district court granted FTB's motion for judgment on the pleadings, holding that the claims of the '073 patent were invalid for failure to claim patent eligible subject matter under 35 USC § 101. The district court then held that the case was exceptional under the totality of circumstances test outlined in Octane Fitness, LLC v ICON Health & Fitness, Inc.(1) The court found that the suit was frivolous and objectively unreasonable because the claims required (even under Lumen View's own construction) using preference data of two or more parties and even "the most basic" pre-suit investigation would have shown that FTB's accused feature used the preference data of only one party. In addition, the court found that Lumen View's motivation for filing suit was to extract a nuisance settlement from FTB, and that Lumen View's "predatory strategy" of baseless litigation showed the need for deterrence.
The district court awarded attorneys' fees with an enhancement of the lodestar amount by a multiplier of two. In its decision awarding enhanced fees, the district court cited several factors that were previously addressed in its exceptionality finding, including:
- the need to deter Lumen View's predatory strategy;
- Lumen View's desire to extract a nuisance settlement and threats to make the litigation expensive; and
- the frivolous nature of the claims.
The court also noted that the lodestar was uncharacteristically low due to the expeditious resolution of the case, and that FTB would have reasonably incurred significantly greater fees if the court had adopted Lumen View's proposed schedule.
The Federal Circuit panel affirmed the district court's holding that the case was exceptional, noting that even if Lumen View's conduct was "not quite sanctionable", the court had reasonably determined that the case was exceptional, especially since the infringement allegations were ill-supported under Lumen View's own claim construction. However, the court vacated and remanded as to the attorneys' fee award, finding that the district court had failed to provide a proper rationale to justify enhancing the attorneys' fee awarded by a multiplier of two. The court held that the expedited district court schedule was subsumed within the lodestar calculation and was not a basis for enhancing attorneys' fees. As to deterrence, the court held that although deterrence may be a consideration when determining whether to award attorneys' fees, it is not an appropriate consideration in determining the amount of reasonable attorneys' fees, which should be based primarily on the lodestar method.
Attorneys' fees and enhancements remain hot topics, and decisions on these issues continually affect the balance of power between NPEs and their targets. It will be interesting to see how the Supreme Court decides Halo Electronics, Inc v Pulse Electronics, Inc and Stryker Corp v Zimmer, Inc later in 2016, when it will address the question of whether the more flexible framework for deciding the attorneys' fees question – as outlined in its 2014 decisions in Octane Fitness and Highmark Inc v Allcare Health Mgmt. Sys, Inc(2) – should be applied to the issues of wilful infringement and enhanced damages.
For further information on this topic please contact Michael P Sandonato or Natalie D Lieber at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100) or email (email@example.com or firstname.lastname@example.org). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.
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