December 18, 2019
Since the Supreme Court decided Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), motions for attorneys’ fees under 35 U.S.C. § 285 have become increasingly common under the new more relaxed standard for demonstrating an “exceptional case.” In roughly this same time period, post-issuance challenges such as IPRs have also became a key strategy for many patent infringement defendants.
These developments have led to an interesting and important question: can a defendant who prevails in litigation and who proves an “exceptional” case recover the fees it incurred in connection with an IPR that proceeded parallel to the litigation? The developing consensus in district courts appears to be that such fees can be recovered under certain circumstances, but the specific legal test remains uncertain. The Federal Circuit has not yet addressed the issue.
Although there are several tests that district courts have applied, the ones with the most support appear to be that IPR fees may be recovered: (1) where the IPR essentially replaces the litigation or plays a central role in determining the outcome of the litigation, or (2) where the litigation was the “but for” cause of the IPR.
As to the first category, the argument is largely based on a few older (i.e. pre-IPR) Federal Circuit cases relating to reexaminations and other PTO proceedings. See, e.g., PPG Indus. v. Celanese Polymer Specialties Co., 840 F.2d 1565 (Fed. Cir. 1988) (fees can be awarded where “reissue proceedings substituted for the district court litigation on all issues considered by the PTO and the Board”). Some courts have construed these cases to support awarding IPR fees where the IPR replaced the litigation or played a central role in resolving it. See, e.g., Emed Techs. Corp. v. Repro-Med Sys., Inc., 2019 U.S. Dist. LEXIS 196994 (S.D.N.Y. 2019); Am. Vehicular Scis. LLC v. Autoliv, Inc., 2019 U.S. Dist. LEXIS 168714 (E.D. Mich. 2019).
Thus, where a case is stayed in favor of an IPR or resolved on the grounds raised in the IPR, recovery of IPR fees could be appropriate. However, this test could result in the denial of IPR fees if, as in the Emed case, the litigation gets resolved on claim construction and non-infringement arguments rather than invalidity. In such cases, the IPR did not play a central role in resolving the case, so no IPR fees can be recovered.
As to the second test, some cases have relied upon Fox v. Vice, 563 U.S. 826, 836 (2011), a Supreme Court case that applied a “but for” causation standard for attorneys’ fees under non-patent federal statutes (fees under 42 U.S.C. § 1988). At least two district courts have applied this standard to patent litigations and 35 U.S.C. § 285. See, e.g., Munchkin, Inc. v. Luv N’ Care, Ltd., 2018 U.S. Dist. LEXIS 223150 (C.D. Cal. 2018); My Health, Inc. v. ALR Techs, Inc., 2017 U.S. Dist. LEXIS 209273, *21 (E.D. Tex. 2017). Under this rationale, fees for most or all IPRs triggered by an infringement case could be recovered, regardless of whether the case was stayed or resolved on grounds not addressed in the IPR.
Thus, prevailing defendants should carefully consider whether they can recover their IPR fees. The argument for recovery is likely strongest where the district court case is stayed (i.e., the IPR replaces the litigation) or where the IPR is central to resolution of the litigation. But there are also recovery arguments if the IPR would not have been filed “but for” the allegation of infringement, which is likely the situation for many litigation related IPRs. Of course, any prevailing party must also prove the case is “exceptional,” and must establish the reasonable amount for any requested IPR fees.
At some point, the Federal Circuit will likely resolve the issue recovery of IPR fees under Section 285, though frequent settlement of “exceptional” cases could mean the Court is not squarely presented with the issue for some time.
Author: Jason A. Crotty