HOW MUCH PATENTEE BAD FAITH IS NEEDED TO RECOVER ATTORNEY FEES IN PATENT INFRINGEMENT LITIGATION -
HAS THERE BEEN A CHANGE IN REQUIREMENTS?

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35 USC Section 285 provides that in "exceptional circumstances" a court "may" award attorney fees to the prevailing party.

In 2005, the Federal Circuit in Brooks Furniture v. Dutalier Intern'l, 393 F.3d 1378, 1381 (Fed. Cir. 2005) reiterated that:

A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions. . . . Absent misconduct in conduct of the litigation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.

Further, because of the presumption that the assertion of infringement is made in good faith, conduct that makes a case exceptional must be established by clear and convincing evidence. Id. at 1382.

The court pointed out that "[b]ringing an infringement action does not become unreasonable in terms of '285 if the infringement can reasonably be disputed. Infringement is often difficult to determine, and a patentee's ultimately incorrect view of how a court will find does not of itself establish bad faith." Id. at 1384.

In Brooks, the patentee's pre-litigation investigation included an internal analysis by marketing staff and designers, infringement opinions by Canadian and United States patent attorneys, and evaluations by two independent experts. The Federal Circuit found an absence of bad faith.

In 2013, the Federal Circuit in Kilopass v. Sidsense, 2013 U.S. App. LEXIS 25671 seemed to reach a less than consistent conclusion based on somewhat similar facts.

One well-respected law firm initially advised the patentee that there was infringement but later changed its position, while another well-respected law firm advised that there was infringement; however, the work of the second law firm was terminated before its analysis was completed. An internal engineering investigation found infringement. The district court denied an award of attorney fees.

The Federal Circuit pointed out that "actual knowledge of objective baselessness" by the patentee was not required, and that "subjective bad faith only requires proof that the ‘lack of objective foundation for the claim "was either known or so obvious that it should have been known" by the party asserting the claim.'" That inquiry is based on the totality of the circumstances. According to the Federal Circuit, the district court erred in its analysis of bad faith because it only focused on "subjective factors."

As the Federal Circuit explained, "[s]ubjective bad faith is difficult to prove directly, essentially requiring the discovery of a smoking gun, and evidence of a lack of subjective bad faith is easy to provide." Importantly:

The primacy of objective evidence over assertions of subjective good faith or lack of knowledge is well established in our §285 case law. The totality of the circumstances does include an evaluation of subjective good faith, but mostly as a negative. If a smoking gun is found, revealing that a patentee knew that he had no chance of winning a lawsuit, then subjective bad faith is easily shown. But one's misguided belief, based on zealousness rather than reason, is simply not sufficient by itself to show that a case is not exceptional in light of objective evidence that a patentee has pressed meritless claims. Thus, we have observed that, where "the patentee is manifestly unreasonable in assessing infringement, while continuing to assert infringement in court, an inference is proper of bad faith."

The Federal Circuit remanded the case back to the district court with instructions to give "particular attention" to the "objective merits" of the patentee's claims and "other objective evidence indicative of bad faith."

CONCLUSION
Kilopass suggests that obtaining opinions of counsel and/or experts is
no longer sufficient evidence of good faith by a patentee. Or perhaps Kilopass is factually limited to a situation indicative of something less than "clean" opinions of non-infringement. One law firm changed its opinion on infringement. The work of the second law firm was terminated before it completed its analysis.

Nevertheless, even in view of Kilopass, it remains prudent to obtain opinions of counsel and/or experts prior to initiating a patent infringement suit.

©2013 Michael Shimokaji
The contents of this article represent the opinions of the author and not those of the author's law firm or clients.

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