Attorneys’ fees: When will you or your client be on the hook? 2018 Advanced patent law institute Daralyn Durie – Durie Tangri LLP Julie Holloway – Latham & Watkins llp

Bases for Awarding Attorneys’ Fees Federal Rule of Civil Procedure Rule 11 35 U.S.C § 285 – Exceptional Case 28 U.S.C § 1927 2018 Advanced Patent Law Institute

Rule 11(b) By presenting to the court a pleading, written motion, or other … an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information. 2018 Advanced Patent Law Institute

Eon-Net LP and Zimmerman v. Flagstar Bancor, 653 F. 3d 1314 (Fed. Cir Federal Circuit upheld Rule 11 sanctions imposed on Eon- Net and counsel Zimmerman Zimmerman reviewed public information, generated claim chart Presuit investigation “requires counsel to perform an objective evaluation of the claim terms” Specification excluded accused web-based document processing 2018 Advanced Patent Law Institute

“Exceptional Case” Under Section 285 35 U.S. C. § 285: The court in exceptional cases may award reasonable attorney fees to the prevailing party. 2018 Advanced Patent Law Institute

Brooks Furniture v. Dutailier Int’l 393 F. 3d 1378, 1381 (Fed. Cir A case is “exceptional” “only when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct…misconduct during litigation, vexatious or unjustified litigation, conduct that violates Rule 11” or “if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” 2018 Advanced Patent Law Institute

Eon-Net LP and Zimmerman v. Flagstar Bancor, 653 F. 3d 1314 (Fed. Cir Federal Circuit upheld Section 285 attorneys’ fees Eon-Net engaged in litigation misconduct, e.g. document destruction, conflicting testimony and declarations Eon-Net’s claim construction and infringement position “objectively baseless” Settlement pattern indicative of bad faith, improper purpose – extract nuisance value settlement 2018 Advanced Patent Law Institute

Octane Fitness v. Icon Health 134 S. Ct. 1749, 1756 (2014) “[A]n ‘exceptional case’ is simply one 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.” Rejected benchmark of “sanctionable conduct,” applied “totality of the circumstances” test 2018 Advanced Patent Law Institute

Impact of Octane Fitness Number of fee requests has roughly doubled Grant rate has more than doubled, to about 30% Most Section 285 motions filed by defendants Plaintiffs typically prevail on Section 285 only if: Infringement is found to be willful, or Defendant defaults 2018 Advanced Patent Law Institute

Inventor Holdings v. Bed Bath & Beyond 876 F.3d 1372 (Fed. Cir. 2017) PTO records indicated plaintiff did not own patents Plaintiff repeatedly promised, and failed, to provide proof of ownership, even after discovery Court dismissed with prejudice, found exceptional case based on “untruthful testimony [and a] pattern of obfuscation and bad faith” Defendant “prevailed”: dismissal for lack of standing is “tantamount to a judgment on the merits” 2018 Advanced Patent Law Institute

Typical Factors in Exceptional Case Inadequate pre-suit diligence by patentee Infringement, including claim construction Alice Ownership/Standing License 2018 Advanced Patent Law Institute

Typical Factors in Exceptional Case (cont’d) Evidence of bad faith: Pattern of forcing nuisance-value settlements Bad conduct of litigation, such as failure to participate in discovery, false testimony/ declarations, cavalier treatment of obligations Willfulness, inequitable conduct 2018 Advanced Patent Law Institute

28 U.S. Code § 1927 Counsel’s liability for excessive costs Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct. 2018 Advanced Patent Law Institute

Gust v. AlphaCap Ventures Appeal No. 2017-2414 (Fed. Cir. 2018) District Court awarded fees against client under § 285 because: Claims ineligible under Alice Plaintiff opposed transfer from E.D. Tex. to S.D.N.Y. Plaintiff settled related cases for small amounts District Court held lawyers jointly and severally liable for entire fee award under § 1927 2018 Advanced Patent Law Institute

Gust v. AlphaCap Ventures Appeal No. 2017-2414 (Fed. Cir. 2018) Federal Circuit reversed: Fees under § 1927 are awarded for multiplying proceedings, not filing a complaint, which is governed by Rule 11 § 101 jurisprudence too unsettled to support award of fees Transfer opposition was legally permissible Settlement decisions are made by clients, not lawyers 2018 Advanced Patent Law Institute