On Monday, February 14, 2022 (Happy Valentine’s Day!), SoCal IP Law Group partner Jonathan Pearce will present on several patent and trademark cases involving “exceptional case” determinations. Our firm has handled a few litigation matters involving potential or actual exceptional cases recently. As a result, we have some experience in these determinations and thought them a suitable topic for an MCLE discussion.
The Exceptional Case Standard
All relevant exceptional cases depend from Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014) (available here). The thrust of the Octane Fitness decision was ICON’s assertion of a patent claims against Octane Fitness. Octane Fitness won on summary judgment of non-infringement and sought attorney’s fees under 35 U.S.C. 285, but the district court and the Federal Circuit both found under the relevant Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (2005) standard that ICON’s case was neither “objectively baseless” nor “brought in subjective bad faith.” both elements were required to be proven by clear and convincing evidence to award attorney’s fees in a case as “exceptional” under 35 U.S.C. 285.
In 2014, the Supreme Court reversed Brooks, lowering the standard to merely require a case that “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” The district courts should consider the “totality of the circumstances” rather than the “unduly rigid” application of Brooks. Further, clear and convincing evidence is not required, merely preponderance of the evidence. The Supreme Court then remanded the case for further consideration.
This standard is rightly viewed as a bit “loose” and to a considerable degree up to the discretion of the district court judge. This standard offers the judge the ability to weigh the totality of the case, determine whether or not one of the parties was operating in a manner outside the normal bounds of typical litigation practice and, if so, to appropriately set a punishment for those acts. In practice, these motions generate more work for the parties, the judge, and the judge’s clerks and are for that reason alone often disfavored. In view of most parties operating in a reasonable manner, the flexibility of the judge’s discretion, and the added work involved, these motions are often filed, but remain rarely granted.
Soar Tools – A Recent Patent Decision Applying Octane
One very recent district court decision lays out an example of an Octane Fitness exceptional case in the patent context. This was is Soar Tools, LLC v. Mesquite Oil Tools, Inc., No. 5:19-cv-243-H (N.D. Tex. February 8, 2022) (available here). In this case, the lawsuit was dismissed after several attempts at amendment of the complaint. The first amendment in particular was necessitated because the plaintiff attached the wrong photographs of the accused products to the complaint and demand letter. After being notified of this issue at the demand stage and the complaint stage, Soar refused to amend its complaint and forced Mesquite to file and win a motion to dismiss.
The court viewed this behavior as demonstrative of an inadequate pre-suit investigation. As a result, the court partially granted Mesquite’s attorney’s fees motion for Soar’s conduct prior to the court’s first dismissal order. The decision is interesting because it emphasizes the “totality of the circumstances” as required under Octane. Still, as most district courts do, the judge here considers the Brooks factors of the “substantive strength of the party’s litigation position” and the “unreasonable manner of litigation” as relevant to the attorney’s fees / totality of the circumstances analysis. Regarding the unreasonable manner of litigation, the court emphasized that Soar’s counsel had repeatedly misrepresented the relationship between Soar and a related third party.
Here, the court granted Mesquite fees of $107,000.
The Same Octane Standard Applies in the Trademark Context
Octane’s more flexible standard was later applied to trademark cases in the 9th Circuit in Sunearth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016) (available here). This case is quite short, merely adopting Octane Fitness in the trademark context and returning the case to the district court. But, the thrust is that the same totality of the circumstances determination for attorney’s fees applies in trademark cases.