Federal Circuit No. 2014-1820

The Federal Circuit held that an agreement concerning the amount of attorney's fee that a defendant would owe a plaintiff may not be enforceable if the ground for finding the case exceptional under 35 U.S.C. § 285 changed and the scope of liability had been reduced. 

Integrated Technology Corporation (ITC) sued Rudolf Technologies for infringing its patent on an inspection equipment for probe cards. After being sued, Rudolf Technologies modified the design of its product in attempt to avoid infringement. However, ITC argued that the redesigned product still infringed its patent under the doctrine of equivalents. 

In the initial trial, the district court held that the original design infringed but found the infringement was not willful.  As to the redesign, the court found the redesign product infringed and the infringement to be willful. The court further found the case was to be exceptional under § 285. Following this finding, ITC and Rudolf signed an agreement stating that Rudolph would not contest the reasonableness of ITC’s requested fee award of $3.25 million.  The district court accepted the agreement and awarded the stipulated amount to ITC.

 In a first appeal by Rudolph, the Federal Circuit upheld the district court's decision regarding the original design. However, the Federal Circuit reversed the decision for the redesign and concluded the redesigned product did not infringe. The Federal Circuit then remanded the attorney’s fee ruling because the ground for finding the case exceptional relied on the vacated willfulness determination.  

On remand, the district court held that the case was exceptional on new grounds. Some of the reasons for finding the case exceptional included Rudolf hiding its infringement for many years and Rudolf providing false discovery responses. The district court also revived the fee agreement.  Rudolf appealed, and the case was in front of the Federal Circuit for the second time. The issues to be decided by the Federal Circuit were whether the district court abused its discretion to find the case exceptional, and whether the fee agreement should be effective.

 The Federal Circuit court upheld the district court's decision in finding the case exceptional. However, the Federal Circuit reversed the district court's decision on the fee agreement. The Federal Circuit pointed out that a significant portion of the original decision has been reversed, and therefore the scope of Rudolf's liability has changed. The Federal Circuit also held that the agreement was for ITC to not contest the reasonableness of the dollar amount of the fee request, not the extent of ITC’s liability for attorney fees. Therefore, the Federal Circuit held that the attorney's fee agreement was not effective, and ordered the district court to award reasonable attorneys' fees in proportion to Rudolph's misconduct.