The Court of Appeals for the Federal Circuit, in a case involving patent infringement, trademark infringement, and violations of an unfair trade practices act, ruled that an award of attorneys fees under the Patent Act, 35 U.S.C. § 285, and the Lanham Act, 15 U.S.C. § 1117(a), should be analyzed in an identical manner in accordance with the Supreme Court case of Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014)(“an ‘exceptional’ case is simply 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 …, considering the totality of the circumstances”). Romag Fasteners, Inc. v. Fossil, Inc., Case No. 2016-1115 (Fed. Cir. Aug. 9, 2017) (Available Here).
Romag Fasteners (“Romag”) owns the ’126 patent for magnetic snap fasteners, which it sells under its registered trademark, ROMAG. Romag sued Fossil and various retailers for, inter alia, patent infringement, trademark infringement, and violation of the Connecticut Unfair Trade Practices Act (“CUTPA”). ROMAG magnetic snaps are used on handbags manufactured and distributed by Fossil. In 2010, a batch of Fossil handbags appeared to contain counterfeit ROMAG magnetic snaps, which led Romag to sue Fossil. The district court granted fees under the Patent Act, 35 U.S.C. § 285, and the CUTPA but not under the federal trademark act, the Lanham Act, 15 U.S.C. § 1117(a). Romag appealed the award.
Under the Patent Act and the Lanham Act, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285; 15 U.S.C. § 1117(a). In Octane Fitness, the Supreme Court held that under 35 U.S.C. § 285, “an ‘exceptional’ case is simply 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 …, considering the totality of the circumstances.” 134 S. Ct. at 1756.
Applying the Octane standard, the district court found that Romag was entitled to attorney’s fees under § 285 of the Patent Act because Fossil did not “withdraw [anticipation and obviousness] defenses with prejudice until after trial,” and because Fossil’s “patent invalidity defense of indefiniteness bordered on frivolous.” The district court also found that Fossil’s non-infringement position (as opposed to its invalidity position) was not “so frivolous or groundless as to justify an award of fees.” Finally, the district court declined to consider Romag’s conduct as part of the totality of circumstances because it had already penalized Romag for the timing of Romag’s infringement suit and Romag’s misconduct during an earlier TRO injunction proceeding.
The district court cited a split in appellate court decisions in its ruling. The district court found that “in the absence of bad faith, fraud, or willfulness on part of the defendants, [the] case is not ‘exceptional’ within the meaning of the Lanham Act and plaintiff is not entitled to recover its reasonable attorney’s fees.” See Louis Vuitton Malletier S.A. v. LY USA, Inc., 676 F.3d 83, 111 (2d Cir. 2012). The district court here concluded that although this “case is ‘exceptional’ under the more lenient Patent Act standard announced in Octane Fitness, it d[id] not find that Defendant acted fraudulently or in bad faith [under the Louis Vuitton standard] … with respect to trademark infringement.”
The Federal Circuit noted that since Octane was decided, the Third, Fourth, Fifth, Sixth, and Ninth Circuits have all held that the Octane “Court was sending a clear message that it was defining ‘exceptional’ not just for the fee provision in the Patent Act, but for the fee provision in the Lanham Act as well.” The Federal Circuit held that in determining a fee award, the trial courts should apply the same standard to both patent and trademark litigation.
The Federal Circuit then analyzed the fee award on the patent side. Fees may be awarded under 35 U.S.C. § 285 if a party’s arguments are objectively unreasonable or if the case was litigated in bad faith. Octane, 134 S. Ct. at 1756; Nova Chem. Corp. (Canada) v. Dow Chems. Co., 856 F.3d 1012, 1016–17 (Fed. Cir. 2017). Whether a case is exceptional is viewed under the totality of the circumstances of the case, Octane, 134 S. Ct. at 1756. The district court’s decision is reviewed under an abuse of discretion standard. Highmark, 134 S. Ct. at 1749. “However, we are obligated to find an abuse of discretion if a district court ‘based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.’ Cooter, 496 U.S. at 405. We conclude that the district court here made several errors.”
In response to Romag’s patent infringement allegation, Fossil initially presented invalidity defenses of anticipation and obviousness. Fossil subsequently decided to not continue to pursue these defenses, as the patent infringement claim damages amount was relatively small. The pre-trial conference record showed that Fossil withdrew those defenses, however the district court held that Fossil failed to withdraw its anticipation and obviousness invalidity defenses until after the close of evidence. The district court erroneously relied upon this error in its award of fees and this was misleading and contradicted by the record. Also the Federal Circuit stated: “we note that the district court made no finding that Fossil’s defenses of anticipation and obviousness were objectively unreasonable.”
In response to Romag’s patent infringement allegation, Fossil also presented the invalidity defense of indefiniteness, arguing that the ’126 patent’s claim term “rotatable” was indefinite because the patent does not specify the “degree of force necessary to rotate.” Fossil presented expert witness testimony on this point at the Markman claim construction hearing, which was not adopted by the district court. The Federal Circuit stated that a failed patent does not so frivolous as to support a fee award.
In response to Romag’s patent and trademark infringement allegations, Fossil presented a
non-infringement defense, where it asserted that the batch of magnetic snaps at issue were in fact genuine ROMAG snaps. This defense, coupled with some supporting evidence, was also not frivolous.
As for the bad litigation behavior of the parties, the Federal Circuit cited Power Mosfet Technologies, LLC v. Siemens AG, 378 F.3d 1396 (Fed. Cir. 2004), which affirmed a district court’s denial of § 285 fees “because all of the parties had conducted themselves without the decorum required when practicing before a federal court . . . and credited each of the parties with some share of the bad behavior.” Id. at 1415.
District court properly evaluated ‘the substantive strength of a party’s litigating position.’ 134 S. Ct. at 1756. Per the Federal Circuit: “Based on this finding, we see no error in the district court’s refusal to consider this issue as an adverse factor in the totality of circumstances, because ‘[a] party’s position on issues of law ultimately need not be correct for them to not ‘stand[ ] out,’ or be found reasonable.’ SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015) (alteration in original). It is not relevant that Fossil’s non-infringement defense may have been weak, if it did not rise to the level of being objectively unreasonable. See Univ. of Utah v. Max-Planck-Gesellschaft zur Foerderung der Wissenschaften e.V., 851 F.3d 1317, 1323 (Fed. Cir. 2017).”