Federal Circuit Vacates and Remands District Court’s Fee Award Due to Consideration of Irrelevant 'Red Flags'

November 5, 2024

Reading Time : 3 min

The Federal Circuit vacated a district court’s fee award because the district court considered certain information that was not relevant to the question of whether plaintiff’s case was exceptional. Specifically, the Federal Circuit held that only those “red flags” that related to the successful Section 101 defense, which served as the basis for the district court’s grant of summary judgment, could be used to show the case was fatally flawed.   

Plaintiff sued several defendants, including DISH, for infringement of patents generally related to digital data compression. Defendants moved to dismiss, arguing that the asserted claims were not directed to patentable subject matter under 35 U.S.C. § 101. The district court denied that motion, explaining it would consider invalidity arguments after claim construction. In so doing, the court noted that other district courts upheld similar claims in the face of similar Section 101 arguments. By the time the district court returned to invalidity arguments, only one patent remained in dispute against DISH. 

On summary judgment, the district court found the asserted claims of that patent ineligible, a decision affirmed by the Federal Circuit. While that appeal was pending, the district court granted DISH’s motion for attorneys’ fees. The district court found the case against DISH exceptional due to six “red flags” that it believed should have signaled to plaintiff that its case was fatally flawed. Those red flags included (1) a district court decision holding similar claims of a related patent ineligible, (2) a Federal Circuit decision holding unrelated claims ineligible, (3) a PTAB decision invalidating similar claims of a related patent for obviousness (4) a reexamination finding claims of the patent at issue invalid as obvious and anticipated, (5) a notice letter sent by DISH to plaintiff, and (6) DISH’s expert’s opinions.

On appeal, the Federal Circuit explained that the district court failed to properly weigh each “red flag,” including because some of the so-called “red flags” were irrelevant. Regarding the first red flag, the Section 101 decision holding similar, related claims ineligible, the Federal Circuit agreed with the district court that it should have been a significant red flag to plaintiff to reconsider the eligibility of its asserted claims. The Federal Circuit disagreed, however, with the district court’s reliance on decisions from the Federal Circuit and PTAB regarding unrelated claims or other areas of the patent statute. Indeed, the Federal Circuit’s prior decision was related to different technology. Absent further explanation, such as a chart comparing the claims of the patents side by side, such a case did not necessarily inform the plaintiff that its case was meritless. According to the court, those decisions should not have been considered red flags. Similarly, the Board’s decisions applied different legal standards and did not include sufficient information to determine whether the claims of the patent at issue failed under Section 101. That is, the Board’s finding that an element existed in the prior art in the course of an obviousness analysis is not the same as a finding that an element was conventional in the art—or that the invention is a non-conventional arrangement of conventional pieces—as required under Section 101.  Similarly, related ex-parte reexaminations used a different claim construction that was determined under a different claim construction standard, and the district court failed to explain how the reexamination decisions supported a finding of exceptionality.  

Finally, the last two “red flags,” without more, did not show that this was an exceptional case. DISH’s “notice letter” included only two short paragraphs addressing the ineligibility of the relevant claims, and these paragraphs were filled with conclusory statements. It did not provide sufficient analysis to put plaintiff on notice that its arguments were so meritless as to amount to an exceptional case. The Federal Circuit also cautioned that if such notice letters were sufficient to trigger an exceptional case finding, then every party would send such letters early in litigation to ensure entitlement to attorneys’ fees.   

Similarly, DISH’s expert witness provided ordinary, typical expert opinions with which plaintiff’s expert disagreed. While DISH’s expert may have been more persuasive, his opinions were not sufficient to put plaintiff on notice that its claims were meritless.

Practice Tip: Although subject to an abuse of discretion standard, attorneys’ fees awards may be reversed on appeal where the basis for the award is disconnected from the merits of the relevant issue or not adequately explained by the district court. Thus, to support a motion for fees based on an exceptional case finding, a party should connect its grounds for the award directly to decisions in its favor in the case. And a party opposing a fee motion should identify any grounds cited by the moving party that were irrelevant to the outcome or that were insufficiently explained by the other party or the district court.

Realtime Adaptive Streaming L.L.C. v. Sling TV, L.L.C. et al., C.A. No. 2023-1035 (Fed. Cir. Aug. 23, 2024).

Share This Insight

Previous Entries

IP Newsflash

November 5, 2024

The Federal Circuit vacated a district court’s fee award because the district court considered certain information that was not relevant to the question of whether plaintiff’s case was exceptional. Specifically, the Federal Circuit held that only those “red flags” that related to the successful Section 101 defense, which served as the basis for the district court’s grant of summary judgment, could be used to show the case was fatally flawed.   

...

Read More

IP Newsflash

November 1, 2024

The Federal Circuit’s decision in Kyocera Senco Industrial Tools Inc. v. International Trade Commission articulated a bright-line test for patent expert admissibility: to testify from the perspective of a “person of ordinary skill in the art” (POSITA), the expert must at least meet the definition of a POSITA for the patents-in-suit. Absent that level of skill, Kyocera holds that the witness’s testimony is not sufficiently reliable or relevant enough to be relied on by a fact-finder.

...

Read More

IP Newsflash

October 29, 2024

The PTAB denied a petitioner’s motion to compel routine discovery that sought information from a parallel ITC investigation for alleged inconsistent positions taken by patent owner in the IPR. The board found that patent owner had not taken inconsistent positions but warned patent owner that it had an ongoing duty to produce any information inconsistent with arguments made during the present IPR, even if that information related to arguments patent owner had dropped at the ITC.

...

Read More

IP Newsflash

October 11, 2024

The Central District of California ruled that the heightened pleading standard of Federal Rule of Civil Procedure 9(b) applies to all three prongs of a false patent marking claim, including the third prong, competitive injury. In doing so, took a clear stand on an issue with a nationwide split among district courts.

...

Read More

IP Newsflash

October 10, 2024

In a patent case containing a variety of federal and state law claims, the District of Massachusetts retained supplemental jurisdiction over the state law claims even after all the federal law claims were dismissed.

...

Read More

IP Newsflash

October 3, 2024

The Federal Circuit recently upheld the USPTO’s authority under the estoppel provision 37 C.F.R. § 42.73(d)(3)(i) to prohibit a patent owner from obtaining patent claims that are not patentably distinct from claims previously declared unpatentable in inter partes review (IPR) proceedings. However, the court clarified that the regulation applies only to new claims or amended claims, not previously issued claims.

...

Read More

IP Newsflash

September 27, 2024

In Kyocera Senco Industrial Tools Inc. v. International Trade Commission, the Federal Circuit held that an expert must meet the definition of a “person of ordinary skill in the art” of the asserted patents in order to opine on infringement, among other issues. This new bright-line test and the underlying rationale, however, raised several new questions regarding expert admissibility. SeeFederal Circuit: Narrow Definition of Skill in the Art Dooms Expert’s Testimony” and “Grappling With A Bright-Line Patent Expert Admissibility Test.” The Federal Circuit recently addressed one of those questions, namely whether an expert must have acquired the requisite level of skill as of the time of the invention or whether it is sufficient for an expert to acquire that knowledge at a later date.

...

Read More

IP Newsflash

September 23, 2024

The Director of the USPTO initiated sua sponte review of a PTAB panel’s decision to impose sanctions based on patentee’s conduct during IPR proceedings. The PTAB cancelled all of patentee’s claims, including those not unpatentable on the merits, after finding that patentee deliberately withheld data relevant to the patentability of the claims at issue. In her review, the Director addressed which regulations are implicated upon a party’s misconduct during AIA proceedings and addressed whether entry of judgment in the trial was an appropriate sanction.

...

Read More

© 2024 Akin Gump Strauss Hauer & Feld LLP. All rights reserved. Attorney advertising. This document is distributed for informational use only; it does not constitute legal advice and should not be used as such. Prior results do not guarantee a similar outcome. Akin is the practicing name of Akin Gump LLP, a New York limited liability partnership authorized and regulated by the Solicitors Regulation Authority under number 267321. A list of the partners is available for inspection at Eighth Floor, Ten Bishops Square, London E1 6EG. For more information about Akin Gump LLP, Akin Gump Strauss Hauer & Feld LLP and other associated entities under which the Akin Gump network operates worldwide, please see our Legal Notices page.