Attorneys’ Fee Award Cannot Be Enhanced to Deter Misconduct
Lumen View Technology, LLC v. Findthebest.com, Inc.
Addressing whether deterrence can play a role in an attorneys’ fee award under § 285, the U.S. Court of Appeals for the Federal Circuit held that once a case is deemed exceptional, § 285 only authorizes an award of reasonable fees, but does not permit enhancement to deter future conduct. However, there are other avenues a court may use to award further fees (i.e., Rule 11) if deterrence is the goal.Lumen View Technology, LLC v. Findthebest.com, Inc., Case Nos. 15-1275, -1325 (Fed. Cir., Jan. 22, 2016) (Lourie, J.).
Lumen is the exclusive licensee to a patent directed to a method for facilitating bilateral and multilateral decision-making. On several occasions after Lumen filed suit, Findthebest.com (FTB) informed Lumen that its product did not use a bilateral or multilateral preference matching process. After the district court granted FTB’s Rule 12(c) motion finding the claims invalid as unpatentable subject matter under 35 U.S.C. § 101, it went onto find Lumen’s case frivolous and objectively unreasonable. The district court awarded FTB attorneys’ fees under § 285, noting that the “most basic pre-suit investigation” would have shown that FTB did not infringe the asserted claims and that Lumen’s motivation for filing the suit was to extract a nuisance settlement. The district court also noted that Lumen’s “predatory strategy of baseless litigation showed the need for deterrence.” The district court went on to explain that it was the specific circumstances of the case and the district court’s proactive case management that led to an expeditious resolution on the merits and resulted in an “extremely low lodestar” amount of attorneys’ fees, but that had it accepted Lumen View’s proposed schedule, FTB would have incurred significantly greater fees. Thus the district court concluded that the lodestar amount alone would be “insufficient” to deter Lumen and accordingly enhanced the lodestar figure by a multiplier of two. Lumen appealed.
The Federal Circuit found that the facts of the case were sufficient to determine that the lawsuit was indeed baseless and affirmed the district court’s finding that the case was exceptional under § 285.
However, in reviewing the amount of fees awarded, the Federal Circuit explained that deterrence should be considered in determiningwhether to award fees, but is “not an appropriate consideration in determining the amount of a reasonable fee award.” Rather, § 285 specifies that once an exceptional case is found, “reasonable attorney fees” should be awarded. The lodestar method is intended to yield “a presumptively reasonable attorney fee amount.” Adjustments to the lodestar should only be made in situations where the prevailing party’s attorneys’ performance or conduct “somehow is not factored into the lodestar calculation.” The Court explained that neither the fact that FTB incurred a lower than expected amount of fees nor the goal of deterring Lumen’s future conduct were relevant to an enhancement of the lodestar and that the district court did not properly justify the attorneys’ fee award. Thus, the Court vacated the award and remanded for a recalculation of fees. However, in doing so the Court noted that “there may be other issues open for consideration relating to attorney conduct,” including Rule 11 or other statutes, authorizing an award of attorneys’ fees to FTB.
Practice Note: When requesting fees a prevailing party should arm the court with as many options for justifying the award as possible, including § 285, Rule 11, 28 U.S.C. § 1927 and (as always) the court’s “inherent powers.”