A case was not “exceptional” under 35 U.S.C. § 285 where the Plaintiff’s expert examined and relied on the defendants’ patents for an infringement analysis, which the defendant claimed were embodied by the accused products.

Checkpoint Sys. Inc. v. All-Tag Sec. S.A., No. 2012-1085 (Fed. Cir. Mar. 25, 2013).

Plaintiff Checkpoint Systems, Inc. sued defendant All-Tag Security S.A. and its related subsidiaries in the United States District Court for the Eastern District of Pennsylvania for infringement of U.S. Patent No. 4,876,555 (the “'555 patent”), directed to anti-shoplifting “resonance” tags. A jury found the ’555 Patent not infringed, invalid, and unenforceable. The district court entered judgment on the verdict, and held the case “exceptional” under 35 U.S.C. § 285, awarding the defendants approximately $6.6 million in attorney fees, costs, and interest. The plaintiff appealed the only award of attorney fees, and the Federal Circuit reversed the award.

On appeal, the Federal Circuit reversed. The Federal Circuit reaffirmed the general rule, called the “American Rule,” which is that each side shall normally bear its litigation burdens. Section 285 permits compensation for the prevailing for the costs incurred during the litigation where “it would be grossly unjust, based on the baselessness of the suit . . . to require it to bear its own costs.” Checkpoint Sys. Inc. v. All-Tag Sec. S.A., No. 2012-1085, at *8 (Fed. Cir. Mar. 25, 2013) (quoting Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1309-10 n.1 (Fed. Cir. 2012)). However, absent misconduct in the course of litigation, sanctions may be imposed only if two separate criteria are met: (1) the litigation is brought in subjective bad faith; and (2) the litigation is objectively baseless. Id. at 9. To be objectively baseless, “the infringement allegations must be such that no reasonable litigant could reasonably expect success on the merits.” Id. (quoting Dominant Semiconductors Sdn. Bhd. V. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008)).

Examining the district court’s decision de novo, the Federal Circuit found that there was no subjective bad faith, and that the litigation was not objectively baseless. Contrary to the district court’s opinion, the Federal Circuit found that the plaintiff’s expert examination of and reliance on the defendants’ patents, which the defendant claimed were embodied by the accused products, was sufficient basis to bring and continue litigation for infringement. The reliance, therefore, was not “objectively baseless,” and the case was not exceptional under section 285.

A copy of the opinion can be found here.