Unreasonable conduct during litigation can result in an award of attorneys’ fees despite the existence of an objectively reasonable case on the merits

Following an infringement suit over patents related to soybeans genetically engineered to resist herbicide, the district court awarded attorneys’ fees to the accused infringer under 35 U.S.C. § 285. In finding an exceptional case, the district court noted that the patentee’s litigation position was directly contradicted by numerous statements from its own witnesses. The Federal Circuit affirmed, finding that the district court had not abused its discretion.

The patentee licensed the patents-in-suit to M.S. Technologies, which sublicensed them to Dow Agrosciences (DOW)—the accused infringer. When Dow expressed its intent to commercialize the soybeans, the patentee sued claiming that commercialization rights were not granted to Dow under its sublicense because the license issued to M.S. Technologies did not contain them. Because the parties agreed that English law governed the original license, the district court was required to consider the parties’ understanding of the licensing agreement. The district court found that the patentee’s executives made contemporaneous statements and later gave deposition testimony that directly contradicted the patentee’s argument that the license granted to M.S. Technologies did not include commercialization rights. Ultimately, the district court determined that had the patentee done “any due diligence, it would have learned that no witness supported [the patentee’s] construction of the Agreement and this case should never have been filed.” The district court also found fault with the patentee’s decision to seek a preliminary injunction in light of the witness testimony that contradicted its claims.

On appeal, the Federal Circuit noted that under the Supreme Court’s decisions in Octane Fitness and Highmark Inc, a party must establish an exceptional case by a preponderance of the evidence and the appellate court can only reverse the district court’s determination if it finds an abuse of discretion. The Federal Circuit rejected the patentee’s argument that the district court abused its discretion by finding an exceptional case because the patentee had an objectively reasonable case on the merits. The Federal Circuit noted that the Supreme Court rejected such a rigid approach in Octane Fitness. Instead, the district court is permitted to take a holistic and equitable approach and may consider factors such as the litigant’s unreasonableness in litigating the case. Because the district court found that the patentee’s conduct in litigating the case in the face of evidence that contradicted its reading of the licensing agreement was objectively unreasonable, the Federal Circuit found that the district court appropriately considered the totality of the circumstances and affirmed the award of attorneys’ fees.