First published in LES Insights
A Connecticut court recently declared a case "exceptional" under the Patent Act and awarded a prevailing plaintiff its attorney fees, finding that the defendants' continued pursuit of patent-invalidity defenses was an attempt to prolong litigation and exponentially increase plaintiff's cost and risk of maintaining the suit. The court determined that the defendants pursued a near-frivolous indefiniteness defense, which was dismissed on summary judgment. Further, despite presenting no evidence at trial to support its remaining invalidity defenses, the defendants maintained their patent expert on their witness list throughout trial and did not formally withdraw those defenses until after trial. The court also sought to deter defendants with deep pockets from driving up litigation costs and strong-arming plaintiffs into relinquishing their claims, particularly where, as here, the plaintiff risked its principal business asset to garner only a small damages award.
The Supreme Court recently clarified the standard for awarding attorney fees under 28 U.S.C. § 285 of the Patent Act, which provides that a "court in exceptional cases may award reasonable attorney fees to the prevailing party." Under the new standard, an "exceptional" case is one that "stands out from others with respect to the substantive strength of a party's litigation position . . . or the unreasonable manner in which the case was litigated." District courts make this determination on a case-by-case basis by considering the totality of the circumstances. While much of the discussion regarding the effect of loosening the standard for the award of attorney fees has focused on plaintiffs and so-called "patent trolls," in Romag Fasteners, Inc. v. Fossil, Inc.,1 the United States District Court for the District of Connecticut exercised discretion under the clarified standard to award fees against a defendant in a patent infringement litigation. There, the court declared the case "exceptional," finding that the defendants'continued pursuit of patent-invalidity defenses was an attempt to prolong litigation and exponentially increase plaintiff's cost and risk of maintaining the suit.
Plaintiff Romag sued various defendants for infringement of its patent relating to snap fasteners. The jury found some of the defendants liable for patent infringement and awarded Romag a reasonable royalty totaling $66,372.75. Romag then moved for an award of approximately $3 million in attorney fees and costs under various laws, including the Patent Act.
The Romag Decision
Arguing for an "exceptional" case under the Patent Act, Romag contended that defendants' continued pursuit of meritless invalidity defenses was an attempt to intimidate Romag into relinquishing its infringement claims. The defendants first argued that the success of their indefiniteness defense depended on how the court construed the claims. Thus, the defendants contended, they were justified in asserting indefiniteness on summary judgment because the court had not yet construed the claims. Second, by announcing their intent not to pursue their remaining invalidity defenses at the pretrial conference, the defendants argued that Romag did not have to present counter-evidence at trial. The court rejected the defendants' positions and agreed with Romag. Regarding the defendants' indefiniteness defense on summary judgment, the court noted that the previous judge assigned to the case dismissed this defense as a "woefully inadequate showing." The defense, the court found, therefore "bordered on frivolous." And while the court acknowledged that during the pretrial conference the defendants announced their intention not to pursue other invalidity defenses, the court emphasized that they did not formally withdraw those defenses until after trial. The defendants also kept their patent expert on their witness list throughout trial. It was therefore foreseeable, the court reasoned, that Romag would expend additional effort to present evidence at trial to counter those invalidity defenses, especially given that the patent-in-suit was Romag's principal business asset. Additionally, the court found, this case raised special concerns about compensation and deterrence of patent infringement. Here, the defendants' infringing snap fasteners represented a small fraction of its costs and profits, while plaintiff's snap-fastener patent was its primary business asset. Thus, according to the court, there is a risk that similar plaintiffs could be discouraged from bringing small monetary claims that are nonetheless vital to the survival of their businesses where defendants, as here, aggressively pursue invalidity defenses in an attempt to prolong litigation and drastically increase the cost and risk of pursuing a lawsuit. Under the totality of the circumstances, the court declared the case "exceptional" and awarded Romag its reasonable attorney fees.
Strategy and Conclusion
This case illustrates how courts can assess the strength of litigation positions and the reasonableness of litigation conduct to determine whether to award attorney fees under the Patent Act. It particularly highlights the risks in aggressively pursuing objectively weak litigation positions, particularly where such conduct might be viewed merely as an attempt to increase costs and intimidate a party into relinquishing its claims or agreeing to a less favorable settlement. Finally, it also demonstrates that despite the recent focus on awarding fees for the bringing of frivolous lawsuits by plaintiffs, defendants also must be cognizant of the possibility of having fees awarded against them for raising unreasonable defenses.