PTAB Success a Relevant Consideration Under 35 U.S.C. § 285

After Octane Fitness, district courts “may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances,” looking at substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated.

As one recent decision makes clear, not only can a successful PTAB trial aid a litigation fee dispute, but the PTAB fees themselves may be recoverable.

In Munchkin, Inc. v. Luv N’ Care, Ltd. and Admar International, Inc., (here) the defendants (LNC) moved for an award of attorneys’ fees for plaintiff Munchkin’s “exceptional” conduct under 35 U.S.C. § 285 of the Patent Act. The court found Munchkin’s patent infringement claim to be “exceptional” under the totality of the circumstances.

While addressing several other circumstances militating in favor of an award of fees, the Court explained that the plaintiff was aware that the defendant relied on the prior art cited in its invalidity contentions in its petition for IPR, and that the defendant even amended its invalidity contentions to add two additional prior art products. Citing these facts, the court found that “[d]espite these red flag warnings and its duty to continually assess its patent infringement claim, Munchkin was objectively unreasonable in persisting in all out litigation.” Munchkin fought defendant’s motion to stay pending the outcome of the IPR, failed to explore settlement before or after the IPR decision, appealed the PTAB’s decision, and sought a voluntary dismissal when the stayed case was reopened (to avoid a final judgment). As a result, the court ruled that the patent litigation claim was exceptional, as “Munchkin’s doggedness in the face of almost certain defeat was unreasonable and makes this case stand out from other cases. A reasonable patentee would have settled this case.”

With respect to whether or not the defendant could recover fees for the actual PTAB proceedings themselves, the plaintiff argued that the IPR/Federal Circuit proceedings “did not occur in this case,” thus barring the award of fees for those proceedings, the Court denied this claim, finding that “[b]ut for the filing of the patent infringement claim in this case,” defendant would not have incurred those fees. Plaintiff also argued the IPR was duplicative, but the Court found that it had “never addressed validity issues in its claim construction ruling,” and that the claim construction ruling and the IPR addressed mutually distinct issues.

Thus, while PTAB developments alone are not be enough to justify a fee award, pushing the envelope too far in other repsects may stick overly aggressive plaintiffs with a large PTAB bill to boot.