By: Sharon Urias, Esq.
Attorney fee awards in patent cases are not easily obtained—particularly not one to the tune of $51 million!
As a general rule, litigants are responsible for paying their own attorney fees, regardless of whether they win or lose. This often is referred to as the “American Rule.” The Patent Act provides an exception to this rule, allowing a court to award attorney fees to the prevailing party in “exceptional” cases (for example, cases in which a party litigates in an unreasonable manner).
This week, in Rembrandt Technologies, LP v. Comcast of Florida/Pennsylvania, LP et al. , the Federal Circuit made public a ruling that it issued under seal on July 27 affirming a Delaware district court’s order awarding attorney fees to the prevailing party defendants based on the “exceptional” provision of the Patent Act, but reversing the amount of the $51 million award.
The Federal Court affirmed the finding of “exceptionality” based on the district court’s findings that Rembrandt improperly compensated fact witnesses, engaged in “widespread document spoliation over a number of years” and Rembrandt should have known that some of the patents at issue in the case (referred to in the case as the “revived patents”) were unenforceable.
Despite the “witness inducements” and extensive spoliation of evidence, the Federal Court was persuaded by Rembrandt’s arguments on appeal that its alleged misconduct did not affect all aspects of the case and that there was no “causal connection” between the misconduct and the fees awarded. According to the Court, although the case involved nine patents and dozens of defendants, the misconduct affected only some patents asserted against some defendants. The Court therefore remanded the case to the Delaware district court for a determination of a “causal connection” between the misconduct and the fee award, stating that “[w]hat the district court did here—award all fees with no explanation whatsoever of a causal connection—was not enough.”
It will be interesting to see what the Delaware court ultimately awards the prevailing parties. This case has been ongoing for several years and although the alleged misconduct does not involve all of the patents, undoubtedly the defendants will take the position that the misconduct permeated the entire case and that the district court should find a causal connection between Rembrandt’s actions and the $51 million fee award. Rembrandt, on the other hand, may argue that the fee award should be reduced proportionately to the number of patents affected by the claimed misconduct. However it turns out, we can expect the district court to issue extensive fact findings to support its decision.
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