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Dish and SXM denied IPR-related fees under 35 U.S.C. Sec. 285
In the continuing fight between Dragon IP and the cable and broadband media industry, Magistrate Hall recently ruled that even when there is an exceptional case, defendants cannot cover attorneys' fees for IPRs under 35 U.S.C. 285. See Dragon Intellectual Property LLC v. DISH Network LLC, 1-13-cv-02066-233 (D..Del. Aug. 16, 2021). "[M]y conclusion that fees incurred in IPR proceedings are not recoverable in this litigation is also consistent with, if not required by," Supreme Court precedent. Id. at *15. The dispute between Dish and Dragon has raised, and clarified, several important issues regarding the awarding of attorneys' fees under 35 U.S.C. § 285.
Procedural vacatur of judgment does not preclude a fee award
Last year, the Federal Circuit ruled that Dish and SXM remained "the prevailing parties" in their dispute with Dragon, even though their non-infringement win had been vacated in light of defendants' successful IPRs. Dragon Intell. Prop., LLC v. Dish Network LLC, 956 F.3d 1358, 1362 (Fed. Cir. 2020). The District Court had entered a stipulated judgement of non-infringement, after a claim construction ruling that undercut Dragon's theory of infringement. Dragon Intellectual Property LLC v. DISH Network LLC, 1-13-cv-02066-115 (D.Del. Apr. 22, 2016).
"I have only once seen a clearer case of prosecution disclaimer. The Patent and Trademark Office rejected the patent six times based on...the Sata reference...applicants repeatedly distinguished Sata on the basis that Sata records continuously, and the claimed device does not begin recording until the user..." presses a key. Dragon Intellectual Property LLC v. DISH Network LLC, 1-13-cv-02066-101 (D.Del. Sept. 9, 2015).
However, the Defendants were also successfull in killing the asserted claims of the patent-in-suit before the PTAB. The Federal Circuit affirmed the PTAB's ruling of unpatentability, and dismissed plaintiff's appeal of the non-infringement judgment as moot. Dragon Intellectual Property LLC v. DISH Network LLC, 711 F.App'x 993, 700 F.App'x 1005 (Fed. Cir. 2017). Before ruling on the pending motions for attorneys' fees, Judge Andrews vacated the judgments of non-infringement as moot. Having vacated the underlying judgment, he then found that absent a judgment, the defendants were no longer the "prevailing party," and thus could not be awarded attorneys fees. The plaintiff argued that it distinguished cases finding a prevailing party without a supporting judgment based on the fact that the judgement-at-issue in this case had been vacated.
The Federal Circuit took umbrage at plaintiff's position, and reversed:
[S]uch a distinction elevates form over substance and is inconsistent with the reasoning set forth in B.E. Technology. See 940 F.3d at 679 (holding that the distinction between a dismissal for mootness and a dismissal for lack of standing does not warrant a different result). The judgment of noninfringement was vacated only because the Appellants successfully invalidated the asserted claims in a parallel inter partes review proceeding, rendering moot Dragon's infringement action. If anything, Appellants' success in obtaining a judgment of noninfringement, although later vacated in view of Appellants' success in invalidating the asserted claims, further supports holding that they are prevailing parties.
Dragon Intell. Prop., LLC v. Dish Network LLC, 956 F.3d 1358, 1362 (Fed. Cir. 2020). Thus, Defendants' win at the PTAB, and subsequent vacatur of their non-infringement win was found to favor a ruling that they were the prevailing party.
Fees cannot be awarded for proceedings before the PTAB
On remand, the fees question was put to Magistrate Judge Hall had little difficulty finding an excpetional case:
"I conclude that the totality of the particular circumstances here makes these cases stand out from others with respect to Dragon’s substantive litigating position: the disclaimer is very clear; it precludes a finding of infringement by any of the defendants’ accused products; the information demonstrating non-infringement by the accused products was available to Dragon prior to filing the suit; the defendants also put Dragon on notice of the issue after the complaints were filed; and Dragon nevertheless continued to litigate."
Dragon Intellectual Property LLC v. DISH Network LLC, 1-13-cv-02066-233 at *13 (D..Del. Aug. 16, 2021). Finding that PTAB proceedings are "optional," and following precedent finding that appeals from the Board of Patent Appeals were not "cases" within the meaning of the statute, she concluded that a fee award could not include attorney fees relating to the IPRs. Id. citing Amneal Pharms. LLC v. Almirall, LLC, 960 F.3d 1368, 1371-72 (Fed. Cir. 2020).
The question of whether or not a district court may, in an exceptional case, award attorney fees incurred in litigating in a related IPR proceeding was raised in the Realtime v. Netflix case that was argued before the Federal Circuit on February 8, 2021. See Realtime Adaptive Streaming v. Netflix, Inc., No. 21-1484. If the Federal Circuit decides in favor of Netflix, there may still be room for prevailing parties in exceptional cases to seek fees from closely related IPRs. In a 1988 decision, the Federal Circuit held that attorney fees incurred in a reissue proceeding before the USPTO could be recoverable where the proceedings before the Patent Office substituted for the district court litigation on the issues considered. PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565, 1569 (Fed. Cir. 1988).
A Pyrric Victory
Dish and SXM pointed out in their briefing that they were unlikely to collect fees from Dragon. Dragon's corporate status was listed as "Cease Good Standing" due to the non-payment of taxes, and Defendants argued that they should be permitted to collect fees from counsel, because it was counsel who was responsible for the exceptional litigation behavior in representing an under-capitalized company. Because the Court had previoulsy found that allegations of unreasonable or vexatious litigation failed to meet the exacting standards for an award under 28 U.S.C. § 1927, and recognizing that awards under 28 U.S.C. § 285 do not generally extend to counsel, Magistrate Hall recommended against assessing any fee award against plaintiff's counsel .