The patentee appealed from the district court’s finding that the case was “exceptional” under 35 USC § 285 and awarding attorney’s fees and costs to the alleged infringer. Just before the alleged infringer had served its complaint seeking declaratory judgment of non-infringement and invalidity on the patentee, the patentee filed a complaint with the ITC against the alleged infringer alleging that the alleged infringer’s imports infringed four of its patents. Afterwards, in the district court proceeding, the patentee counterclaimed for infringement, and both the district court and ITC proceedings proceeded in parallel fashion. After substantial discovery had occurred and substantial resources expended, the patentee granted the alleged infringer a covenant not to sue and moved to dismiss the lawsuit. The alleged infringer moved for attorney fees and costs pursuant to 35 U.S.C § 285, which the district court granted citing the patentee’s “vexatious litigation strategy, litigation misconduct, and unprofessional behavior.” The patentee appealed.

First, the Federal Circuit found that the district court applied the correct standard, disagreeing with the patentee’s argument that sanctions under 35 U.S.C § 285 may only be imposed when there is evidence that the losing party brought the objectively baseless litigation in bad faith. Instead, the court found that as a general matter, many forms of misconduct can support an exceptional case finding, including vexatious litigation, a frivolous suit, unprofessional behavior, or otherwise unjustified litigation.

Next, the patentee argued that the court made its finding in error because the patentee’s defeat of summary judgment of non-infringement constituted evidence sufficient to overcome any assertion that its claims were made in bad faith. The court disagreed, stating that litigation misconduct and unprofessional behavior are sufficient by themselves to make a case exceptional. Additionally, the record provided ample evidence of bad faith. Over a decade of litigation demonstrated several instances in which the patentee sued the alleged infringer’s customers to prompt the alleged infringer to file declaratory judgments. In each case, the patentee withdrew its claims and granted covenants not to sue after substantial litigation had already taken place.

Finally, it was not an abuse of discretion for the court to award full attorney fees that resulted from the district court litigation and the ITC litigation, because the patentee’s misconduct was so widespread, and the ITC’s discovery applied to the district court as well.

A copy of the opinion can be found here.