Anyone practicing patent litigation knows that attorney’s fees motions at least seem more prevalent than ever for a number of reasons, topped by the fact that district court judges continue to actually award fees by declaring cases exceptional ever more routinely. Spurred by the perceived ease in getting fees awarded, prevailing parties in patent cases continue to file fees motions, both for their perceived deterrent effect against future challengers as well as to simply recoup what they can from what is often an unwilling, aggravating, and expensive foray into the clutches of the legal system. In short, fees motions are a part of modern patent practice, even for those practitioners who would like to see their volume reduced.
Some common scenarios for when an attorney’s fees motion can be expected include cases that: 1) get bounced before they really take flight, leading to a credible argument that the plaintiff should have known better (e.g. Alice motions that are not close calls), 2) go to decision on summary judgment where the losing party has persisted in advancing a rejected argument, such as pressing forward despite an unfavorable claim construction, or, 3) exhibit clear litigation misconduct by the losing party over the course of a case that resolves at trial, or even earlier, (e.g. taking actions designed to increase the cost burden on the opposing party, or where there is demonstrated discovery shenanigans). In truth, the range of situations that have led to attorney’s fees motions in patent cases has broadened. With the usual differences in responses nationwide by district court judges, who have seen their workloads in terms of handling disputes widened by the recent developments. As with all things patent, however, it is the Federal Circuit’s proclamations on issues that give direction to the courts, counsel, and litigants — particularly in fast-changing areas of patent practice. Put another way, in the current environment, when the Federal Circuit issues a precedential decision concerning attorney’s fees, attention must be paid.
Last week, the Federal Circuit issued just such a precedential decision in a long-running competitor IP battle over spill-proof cups for toddlers, Munchkin, Inc. v. Luv N’Care Ltd. et al., case no. 2019-1454. The procedural history tracks that of many modern patent cases. After some maneuvering in district court, an IPR (affirmed in a separate CAFC appeal) invalidated the claims of Munchkin’s patent, leading to Munchkin dismissing its pending infringement claims. Luv N’Care then moved for fees, with the district court “finding the case to be ‘exceptional based on LNC’s arguments in its fee motion that the trademark and trade dress infringement claims were substantively weak, and that Munchkin should have been aware of the substantive weakness of its patent’s validity.” Munchkin appealed, arguing that the district court never really considered the strength and weakness of the merits of Munchkin’s various claims, rendering a grant of fees both unsupported and incorrect.
In its decision awarding fees, the district court found that Munchkin’s trademark, trade dress, and patent claims were all “substantively weak.” Included in the fee award were Luv N’Care’s “attorney’s fees for litigating the IPR… and its associated appeal.” That component was based on the idea that the IPR was a direct result of Munchkin’s decision to initiate litigation, coupled with the fact that the issues in the IPR were not duplicative of those reached in the pending court case. All told, it was a $1 million-plus bill that Munchkin faced for choosing to assert its rights. Thankfully for Munchkin, the Federal Circuit reversed the grant of attorney’s fees — effectively wiping out Munchkin’s liability.
More importantly for other existing and potential litigants, the decision in Munchkin reiterated that attorney’s fees in patent cases are reserved for “exceptional” — rather than just losing — cases. Acknowledging that it usually defers to exceptional case findings made by district courts, the Federal Circuit in Munchkin still expressed concern that Luv N’Care “failed to make the detailed, fact-based analysis of Munchkin’s litigating positions to establish they were wholly lacking in merit.” On the patent claim, for example, the Federal Circuit noted that Munchkin had received a favorable claim construction ruling, which formed the basis for its validity position in both the IPR and court case. Further, the Federal Circuit refused to find fault with Munchkin for continuing to press the district court case while the IPR was pending. Nor was it willing to endorse a rule where a patent owner would face a “§ 285 fee award in a patent suit anytime its patent is canceled in a co-pending IPR proceeding, without any consideration of the relative strength of the patent owner’s legal theories, claim construction arguments, or proffered evidence in defense of the patent.” In short, those hoping for attorney’s fees in patent cases are reminded that they should consider and make a real evidentiary showing that the case itself is exceptional, considering all the circumstances.
Ultimately, the decision in Munchkin is at least a caution to district courts and winning parties that an award of fees in patent cases must be based on evidence, rather than logical shortcuts or a results-oriented analysis. The Federal Circuit’s call for more rigor in attorney’s fees determinations is a necessary corrective to the growing perception that all patent litigation musn’t end unless an attorney’s fees motion is also adjudicated. For now, at least, the Federal Circuit has served notice that the word “exceptional” still carries weight, compelling a prevailing party to substantiate any fees request. In Munchkin, Luv N’Care’s presentation didn’t meet that burden. As a result, there is joy in Munchkinland, despite Munchkin’s otherwise total loss in the case.
Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.