Federal Circuit Affirms Attorney’s Fees Award for “Weak” Litigation Position
The Federal Circuit has affirmed a federal district court’s award of attorneys' fees to a defendant in a patent infringement case because of the “substantive weakness” of the patent owner’s litigation position.
Hawk Technology Systems, LLC owns U.S. Patent No. 10,499,091, which relates to viewing multiple videos simultaneously.
Hawk is a “non-practicing entity” (“NPE”). NPE’s are sometimes called “patent trolls.”
As the Electronic Frontier Foundation explained,
Hawk Technology LLC doesn’t just sue small businesses (although it does do that)—it has sued school districts, municipal stadiums, and non-profit hospitals. Hawk Tech has filed more than 200 federal lawsuits over the last nine years, mostly against small entities. Even after the expiration of its primary patent, RE43,462, in 2014, Hawk continued filing lawsuits on it right up until 2020.
Hawk sued Castle Retail, LLC, alleging patent infringement. Castle owns three supermarkets in Memphis and has a security surveillance system with multiple camera images that Hawk claimed infringed its patents.
Castle moved to dismiss Hawk’s complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the ’091 patent is patent-ineligible under 35 U.S.C. § 101.
The district court ruled that the ’091 patent is directed to the abstract idea of video storage and display and that nothing in the claims transformed that idea into patent-eligible subject matter. The district court then granted Castle’s motion to dismiss Hawk’s complaint.
Castle then moved the district court for attorney fees under 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent authority.
The district court awarded Castle attorney fees under 35 U.S.C. § 285,1 reasoning that “[t]he substantive weakness of [Hawk’s] litigation position in the instant case weigh[ed] in favor of an exceptional case determination.”
The district court found that while the ’091 patent was presumptively valid, it was “demonstrably weak on its face.”
As the Federal Circuit explained,
The [district] court ruled that once Castle filed its motion to dismiss, “it should have been abundantly clear to a reasonable party that [Hawk’s] case was exceptionally weak.” … The district court further observed that Hawk’s “boilerplate” complaint showed that it “clearly failed to engage in reasonable pre-suit investigation.” … The district court observed that Hawk had filed and settled hundreds of patent suits, including numerous suits involving the same patent, and that Hawk’s settlement negotiation conduct was “impolite and unprofessional.”
However, the district court denied the motion for attorney fees under 28 U.S.C. § 1927 and its inherent authority.
Hawk argued on appeal that:
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the district court abused its discretion in awarding Castle attorney fees because the court sealed “nearly the entirety of the briefing and exhibits related to” the fees motion, thereby prejudicing Hawk’s ability to defend against Castle’s motion; and
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the district court abused its discretion in finding that this case is “exceptional” under 35 U.S.C. § 285.
The Federal Circuit concluded that Hawk forfeited the first issue by failing to raise it before the district court.
As for the second issue, the Federal Circuit explained that
Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285 (emphasis added). The Supreme Court has explained that an exceptional case “is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
A Section 285 inquiry is generally “rooted in factual determinations.” District courts have discretion to award attorney fees and consider the totality of the circumstances when making that determination.
Here, the district court determined the case was exceptional under the totality of the circumstances, including because:
- Hawk’s “pattern of engaging in frivolous patent lawsuits... weighed in favor of an exceptional case determination.”
- the ’091 patent was “demonstrably weak on its face”; and
- Hawk’s settlement negotiation conduct was “impolite and unprofessional.”
The district court considered the “brief and boilerplate” nature of Hawk’s complaint, and the fact that it lacked “particularized allegations” against Castle.
The district court also considered the “vast number of patent suits Hawk had filed” (including numerous suits involving the ’091 patent) and the average settlement amounts in those lawsuits.
Based on these considerations, said the Federal Circuit, the district court found Hawk to have engaged in a pattern of frivolous patent litigation and considered this to be one factor “weighing in favor of an exceptional case determination.”
The court noted that
[A] pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under § 285.
As for Hawk’s NPE status, the Federal Circuit noted that
The district court also found that Hawk was a nonpracticing entity and suggested that such entities may proceed in patent litigation with little business risk. … Were this generalization the basis for the district court’s exceptional case finding or its pattern of frivolous filings finding, that would be erroneous. We read the district court’s opinion, however, as relying on specific evidence of Hawk’s filing of prior suits for the purpose of obtaining settlements as opposed to relying on Hawk’s status as a practicing or non-practicing entity.
Hawk argued that the district court abused its discretion by attributing the “impolite and unprofessional” litigation conduct of Hawk’s lawyers to Hawk.
The Federal Circuit agreed with Castle that this argument was without merit, saying that the district court had relied on emails sent from Hawk’s counsel to Castle’s counsel as evidencing Hawk’s unreasonable litigation conduct.
For example, Hawk’s counsel conveyed Hawk’s position that it would pursue other members of a grocer association to which Castle belonged.
Thus, the Federal Circuit concluded that the district court did not abuse its discretion in determining, under the totality of the circumstances, that the case was exceptional under Section 285.
