Monolithic Power Systems, Inc. v. O2 Micro International Ltd.

Addressing an award of attorneys’ fees for not only the underlying district court litigation but also a related U.S. International Trade Commission (ITC) investigation, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s exceptional case finding pursuant to 35 U.S.C. § 285 and the award of attorneys’ fees and costs in light of “vexatious litigation strategy, litigation misconduct and unprofessional behavior.” Monolithic Power Systems, Inc. v. O2 Micro International Ltd., Case No. 12-1221 (Fed. Cir., Aug. 13, 2013) (Prost, J.)

O2 Micro International and Monolithic Power Systems (MPS) are competitors in the market for integrated circuit products related to LCD and LED lighting, and have a significant history of litigation. In the case under appeal, MPS filed a declaratory judgment lawsuit asserting invalidity and non-infringement of four O2 Micro patents, and later added a fifth. After the filing of that complaint, but before service, O2 Micro filed a complaint in the ITC asserting that MPS and one of its customers imported goods infringing four of those five patents. O2 Micro later withdrew its assertions relating to all but one of the five patents and covenanted not to sue MPS or its customers. The district court found that O2 Micro had committed litigation misconduct, concluded that the case was “exceptional” under § 285 and justified an award of attorneys’ fees to MPS. O2 Micro appealed.

The Federal Circuit agreed with the district court that O2 Micro committed litigation misconduct. In particular, to avoid prior art, O2 Micro provided evidence and testimony regarding the date of invention of the patent-in-suit, relying on a 1998 date stamped on certain schematics showing the claimed invention. O2 Micro provided witnesses and declarations stating that the date was auto-generated by the schematics software, but MPS provided an expert report showing that the date was entered manually. When confronted with this evidence, O2 Micro provided a convoluted response to an interrogatory that “obfuscated the fact that [the inventor] had added the date.” O2 Micro also filed “baseless motions,” including a motion to strike MPS’s expert report and a motion for summary adjudication of the schematics’ authenticity and a 1998 conception date.

The Federal Circuit also agreed with the district court’s characterization of O2 Micro’s overall litigation strategy as vexatious. In several instances, including the case at issue, O2 Micro had sued MPS customers, putting MPS in a position where it had to file a declaratory judgment lawsuit, only to have O2 Micro covenant not to sue and dismiss the case after substantial litigation had taken place.

The Federal Circuit noted that many forms of misconduct can support a district court’s finding that a case is exceptional under § 285. Only in those situations where there is no finding of litigation misconduct or inequitable conduct before the U.S. Patent and Trademark Office are showings of both “bad faith” and “objectively baseless” litigation required. In this case, the Federal Circuit agreed that O2 Micro’s litigation misconduct alone justified an award of attorneys’ fees for the entire litigation, including for the ITC investigation. Thus, no inquiry into whether O2 Micro acted in bad faith or whether its positions were objectively baseless was required.

The Federal Circuit noted that the district court did not abuse its discretion in granting costs for discovery in the ITC proceedings reasonably related to the issues in the district court case because the parties agreed to make such discovery available for use in the district court case.