In a patent infringement action, the district court granted defendants' motion for summary judgment based on the on sale bar and dismissed plaintiff's claims with prejudice. Defendants then requested that the district court find the case exceptional due plaintiff's litigation misconduct. Based on that misconduct, the district court found that the case was exceptional. Defendants then moved for an award of $800,000 in attorneys' fees.
The district court noted under 35 U.S.C. § 285, it may in exceptional cases award reasonable attorneys' fees to the prevailing party. To do so, the court must first determine that there is clear and convincing evidence that the case is exceptional and then the court must exercise its discretion in determining whether an award of fees is justified. The district court also noted that "[l]itigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285" but "[i]n cases deemed exceptional only on the basis of litigation misconduct, however, the amount of the award must bear some relation to the extension of the misconduct."
The district court then listed the ground upon which it had found the case exceptional, i.e., that the plaintiff failed to produce important documents, including documents that eventually proved fatal to plaintiff's patent. This misconduct occurred even though the district court had specifically ordered the plaintiff to produce the documents in its possession and these documents were in plaintiff's possession. In addition, the district court "found that plaintiff committed litigation misconduct by falsely alleging that no license agreement existed regarding" the patent-in-suit.
Defendants sought attorneys' fees for the time period from which plaintiff failed to produce the documents through the award of the judgment, asserting that had the documents been produced when ordered they would have filed the summary judgment motion immediately and instead they were forced to engage in prolonged discovery, trial preparation and motion practice.
In awarding defendants $800,000 in fees, the district court stated that "plaintiff continues to misunderstand the severity of its misconduct. Plaintiff sued Defendants for patent infringement. Throughout the duration of the suit, Plaintiff had in its possession documents which ultimately invalidated the patent it was alleging to be infringed. Plaintiff has yet to produce these documents. Defendants were only able to discovery them through a combination of extreme diligence and good fortune. The duration of this lawsuit would have been significantly shorter had Plaintiff turned over the pertinent documents when it was ordered to do so. The evidence indicates that Plaintiff either willfully withheld the documents, or else it never bothered to locate the documents. Either way, Plaintiff's misconduct directly caused Defendants to incur hundreds of thousands [of[ dollars in ultimately unnecessary fees."
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The case is a strong reminder of the importance of candor with the court and the opposing parties. Here, the plaintiff filed a patent infringement action and maintained that action even though it had documents in its possession that invalidated its own patent. In doing it, it violated court orders to produce the documents and was sanctioned for this misconduct.