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Federal Circuit Awards Attorney Fees to the Defendant Following Dismissal of Lawsuit by Plaintiff

The Federal Circuit affirmed a district court award of over $360,000 in costs and attorneys’ fees against a non-practicing entity, citing the need “to deter future abusive litigation.”

In October 2016, Blackbird sued Health in Motion (HIM) for infringing U.S. Patent No. 6,705,976 (“the ‘976 patent”) related to exercise equipment.  Blackbird is a non-practicing entity whose business model includes buying and licensing patents. 

In June 2017, Blackbird offered to settle its case against HIM for $80,000.  HIM declined, arguing that Blackbird’s infringement allegations lacked merit.  HIM asserted that there was a strong likelihood that Blackbird would be ordered to pay their attorney fees, and countered with a settlement offer that included Blackbird making a payment of $120,000.  Blackbird refused the settlement offer.  Over the next 19 months, Blackbird made several decreasing settlement offers. The last settlement offer in May 2018 was a “walk-away” settlement, whereby HIM would receive a free license to Blackbird’s patent and the case would be dismissed.  HIM continued to refuse.  Blackbird then filed a notice of voluntary dismissal with prejudice, executed a covenant not to sue, and filed a motion to dismiss for lack of subject matter jurisdiction, arguing that a case or controversy no longer exists.  The District Court dismissed Blackbird’s claims with prejudice and denied the motion to dismiss.  HIM then filed a motion for costs and attorney fees totaling over $360,000.  The District Court granted the motion for the total requested.   

The Federal Circuit affirmed the award of costs and attorney fees in the requested amount based on 35 U.S.C. § 285, which states a “court in exceptional cases may award reasonable attorney fees to the prevailing party.”  In Octane Fitness, the Supreme Court interpreted an “exceptional case” as 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.” 572 U.S. 545, 554 (2014).  Based on this standard, the District Court found that (1) Blackbird’s litigation position was “meritless” and “frivolous”; (2) that the case was litigated in an unreasonable manner; and (3) that the fees were warranted “to deter future abusive litigation.” Id. at 554.

The Federal Circuit affirmed that Blackbird had a weak substantive position and that “the exercise of even a modicum of due diligence by Blackbird, as part of a pre-suit investigation, would have revealed the weaknesses in its litigation position.” The Federal Circuit also affirmed that the case was litigated in an unreasonable manner.  In doing so, the Federal Circuit made clear that low settlement offers may be considered when determining bad faith and exceptional cases, citing Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314 (Fed. Cir. 2011) (patentee had “acted in bad faith by exploiting the high cost to defend complex litigation to extract a nuisance value settlement”).  Further, the Federal Circuit affirmed that Blackbird unreasonably delayed producing documents, noting that Blackbird waited until the pretrial submission deadline to file a notice of dismissal without first giving notice to opposing counsel.  Finally, the Federal Circuit held that the District Court did not abuse its discretion in considering the need to deter future abusive litigation.  According to the Federal Circuit, Blackbird is an entity owned and controlled entirely by attorneys.  The entity makes money by purchasing, licensing and/or asserting patents. Notably, Blackbird has filed over 100 infringement lawsuits since 2014, none of which have reached a final decision on the merits.

The Federal Circuit held that the District Court did not abuse its discretion in concluding that Blackbird’s case against HIM is “exceptional” within the meaning of 35 U.S.C. § 285 and warrants the award of costs and attorney fees to the defendants.

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About this Author

Kenneth Jenkins, Mintz Levin Law Firm, San Diego, Intellectual Property Law Attorney

Ken is an intellectual property attorney who is highly regarded for his patent prosecution and counseling work for life sciences, chemical, and energy technology companies. He helps companies and research institutions secure patents on strategic innovations and manage patent portfolios. He has extensive experience in patenting a wide range of bioscience and chemical technologies involving antibody therapeutics, small molecule modulators, diagnostics, pharmaceutical formulations, stem cell therapies, nanotechnologies, and oil recovery technologies, among others. He also...

Gali Steinberg-Tatman Patent Lawyer Mintz

Gali is an intellectual property attorney with a PhD in organic chemistry. She has prepared and prosecuted patent applications throughout the world. Gali has obtained patent protection in areas including biotechnology, chemistry, and pharmaceuticals. She has developed and managed patent portfolios for clients ranging from individual inventors and start-up and mid-sized companies to global pharmaceutical and biotechnology leaders, and has advised clients on IP issues including patentability and validity assessments, freedom-to-operate analysis, and patent strategy. 

Prior to joining Mintz, Gali was an intellectual property associate in the San Diego office of an international law firm. Before she earned her law degree, she was a senior scientist at Illumina, a global biotechnology company. She has over 20 years of experience in multistep organic synthesis, medicinal chemistry, and modern analytical techniques.

Her research expertise spans synthetic/medicinal chemistry, biochemistry, and biophysics. 

Gali was a post-doctoral fellow in the Department of Medicinal Chemistry and Molecular Pharmacology at Purdue University and in the Department of Chemistry and Biochemistry at Arizona State University. She earned both her MS and PhD degrees at the Weizmann Institute of Science in Israel, and focused her studies on the synthesis and spectroscopic properties of rhodopsins and bacteriorhodopsins.

Gali has authored numerous scientific papers in journals such as Nature, Proceedings of the National Academy of Sciences USA, and the Journal of Medicinal Chemistry. She holds two patents.