January 10, 2020Client Alert

Past Litigation Conduct and the Deterrence of Future Abusive Litigation are Proper Factors in Establishing an “Exceptional Case”

The Court of Appeals for the Federal Circuit (CAFC) recently upheld a determination that a patent litigation suit brought by a non-practicing entity (referred by some as a “troll”) against two alleged infringers was “exceptional” under 35 U.S.C. § 285 for which attorney fees may be awarded. Blackbird Tech LLC v. Health in Motion LLC, Appeal No. 2018-2393 (Fed. Cir. Dec. 16, 2019). In the decision, the CAFC considered, among other things, the plaintiff’s history of troll-like lawsuits.   

In October 2016, Plaintiff-Appellant Blackbird Tech LLC (Blackbird) sued Defendant-Appellees Health in Motion LLC and Leisure Fitness Equipment LLC for infringement of U.S. Patent No. 6,705,976, relating to exercise equipment. Blackbird offered the Appellees multiple settlements, each being less than the previous. Appellees declined each offer contending Blackbird’s infringement allegations lacked merit and Blackbird would likely be ordered to pay Appellees’ attorney fees. After Appellees filed a motion for summary judgement in May 2018, Blackbird filed a notice of voluntary dismissal with prejudice, executed a covenant not to sue, and filed a motion to dismiss for lack of subject matter jurisdiction, without notice to Appellees. In June 2018, the District Court dismissed Blackbird’s claims with prejudice, denied Blackbird’s Motion to Dismiss, and authorized Appellees to seek to recover their costs, expenses, and/or attorney fees. The subsequent motion for attorney fees and expenses filed by Appellees requesting more than $350,000 in attorney fees and expenses was granted by the District Court, which Blackbird appealed.

Under 35 U.S.C. § 285, “a court in exceptional cases may award reasonable attorney fees to the prevailing party.”  Under Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014), an “exceptional” case is one that stands out from others with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in a case-by-case exercise of their discretion, considering the totality of the circumstances.

The CAFC upheld the District Court’s determination that Blackbird’s case against Appellees is exceptional within the meaning of § 285 and Octane Fitness. First, the CAFC agreed with the District Court that Blackbird’s litigation position was “meritless” and “frivolous” because Blackbird raised flawed claim construction and infringement contentions. Second, the CAFC upheld the District Court’s determination that Blackbird litigated the case in an unreasonable manner because Blackbird made multiple settlement demands that were far less than the anticipated cost of defense (i.e., nuisance value settlements), unreasonably delayed producing documents, withheld documents, and completely failed to produce documents. In addition, the CAFC agreed that Blackbird unreasonably filed a notice of dismissal, covenant not to sue, and motion to dismiss on the day Appellees’ motion for summary judgment was to be decided and without first notifying Appellees’ counsel. Finally, the CAFC upheld the District Court’s determination that granting a fee award was warranted in this case to defer future abusive litigation, noting that “Blackbird is an entity owned and controlled entirely by attorneys … whose business model consists of purchasing patents and monetizing them ‘through litigation,’” and has filed over 110 lawsuits since its inception in 2014, none of which have been decided on the merits in favor of Blackbird.

Under Blackbird, attorney fees, costs, and expenses can be awarded to an alleged infringer upon a showing of a frivolous lawsuit, unreasonable litigation practices, and a history of troll-like litigation practices.

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