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Attorneys Fees in Defense of Patent Infringement – Exceptional Case Fees

The Federal Circuit in Old Reliable Wholesale, Inc. v. Cornell Corp., Case No. 2010-1247 (Fed. Cir. March 16, 2011) (available here) reversed the trial court’s ruling that attorneys fees be assessed against patent owner Old Reliable and in favor of the accused infringer, Cornell Corp. See Cornell Corp. at .Unless a party engages in litigation misconduct, sanctions should only be imposed on the patentee if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless. See slip opn. pg. 8 and Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). The “objectively baseless” standard under 35 U.S.C. section 285 is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for willful infringement. See 35 U.S.C. section 284 and In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc); iLOR, LLC v. Google, Inc., Nos. 2010-1117, 2010-1172, 2011 U.S. App. LEXIS 516, at *11 (Fed. Cir. Jan. 11, 2011).

Objective baselessness does not depend upon the state of mind of the targeted party but instead depends upon “an objective assessment of the merits” of the challenged claims and defenses. See pg. 8 and iLOR, 2011 U.S. App. LEXIS 516, at *12. Proof of objective baselessness must be established with clear and convincing evidence. pg. 7.

Unless the Patentee asserts an argument or claim in the litigation “so unreasonable that no reasonable litigant could believe it would succeed,” it cannot be deemed objectively baseless for purposes of awarding attorney fees under section 285. See pg. 8, and Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008).

In Old Reliable, the inventor at his deposition testified that an earlier version of the patented product did the same thing as his invention. Since the Patentee pressed forward with the litigation after the deposition, the trial court determined that the patent was invalid and there was no reasonable basis to go forward from the inventor’s sworn testimony. The Federal Circuit stated that the initial position of the USPTO that would have confirmed patentability of the invention over the earlier version of the product established that an argument could be made by Patentee Old Reliable and thus it had a reasonable basis for going forward with the trial.

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