Affirming a district court decision, the US Court of Appeals for the Federal Circuit held that a litigant may be deemed a prevailing party if it receives a dismissal with prejudice against the plaintiff, even if it did not receive favorable judgment on the merits regarding the underlying patent litigation. Raniere v. Microsoft Corp., Case Nos. 17-1400; -1401 (Fed. Cir., Apr. 18, 2018) (O’Malley, J).

Keith Raniere sued AT&T Corporation and Microsoft Corporation asserting ownership of several patents. Raniere and other investors transferred the patents at issue to Global Technologies, Inc., (GTI) in 1995. GTI was administratively dissolved in 1996. In December 2014, Raniere executed a document asserting sole ownership over the patents and purportedly transferring the patents from GTI to himself. Raniere then initiated patent infringement litigation against the defendants.

Microsoft argued that Raniere did not own the patents and moved to dismiss the case for lack of standing. Despite representations that ownership of the patents transferred from the dissolved entity to Raniere, Raniere was unable to present evidence demonstrating proof of ownership. As the district court found, Raniere also provided “wholly incredible and untruthful” testimony regarding his ownership rights. After providing Raniere with several opportunities to cure his standing defect, the district court granted Microsoft’s and AT&T’s renewed motion to dismiss, and dismissed the case with prejudice. The district court found that a dismissal with prejudice was warranted because Raniere’s conduct “demonstrated a clear history of delay and contumacious conduct.” Raniere appealed and, in an earlier iteration of this case before the Federal Circuit, the Court summarily affirmed the merits dismissal.

While the appeal was pending, the district court also awarded attorneys’ fees and costs to the defendants after finding that a dismissal with prejudice sufficiently altered the relationship between the parties to trigger “prevailing party status” under 35 USC § 285. Again Raniere appealed, and the Federal Circuit, reviewing the award under an abuse of discretion standard, again affirmed the award of attorneys’ fees and costs.

In reaching its holding, the Federal Circuit cited a 2016 Supreme Court of the United States decision (CRST Van Expedited. v. EEOC) for the proposition that the relevant inquiry was “not limited to whether a defendant prevailed on the merits, but also considers whether the district court’s decision—‘a judicially sanctioned change in the legal relationship of the parties’—effects or rebuffs a plaintiff’s attempt to effect a ‘material alteration in the legal relationship between the parties.’” And, even if a judgment on the merits was appropriate, a dismissal with prejudice for lack of standing, especially after Raniere was given multiple opportunities to try to cure, was equivalent to a decision on the merits because it provided full adjudication. The Federal Circuit further reasoned that the district court did not err in finding the case “exceptional” to trigger the fee-shifting provisions. The plaintiff’s own behavior increased the defendants’ costs through “a pattern of obfuscation and bad faith” intended to “vexatiously multiply” the litigation proceedings. Thus, the district court made a “well-reasoned determination” to award fees and costs for the defendants.