Federal Circuit Rules Trial Court Abused Discretion by Not Awarding Attorney Fees

In AdjustaCam v. Newegg, No. 2016-1882 (Fed. Cir. July 5, 2017), the Federal Circuit reversed the denial of attorney fees based on the Octane Fitness standard, determining that the trial court had abused its discretion by not awarding fees.

AdjustaCam (a subsidiary of NPE Acacia Research) had sued Newegg for infringement of U.S. Patent No. 5,855,343 (“the ’343 patent”), which issued in 1999 and is entitled “Camera Clip.” The Markman hearing interpreting the claims in this case had interpreted a limitation of the claims, “rotatably attached,” to mean that each of the camera and support frame would have to rotate around a single axis. Newegg’s allegedly infringing product made use of a ball-and-socket joint, and as such the interpretation necessarily excluded Newegg’s product. AdjustaCam continued to pursue the case.

Newegg moved to dismiss the case with prejudice on the grounds that AdjustaCam’s infringement allegations were objectively baseless, and also demanded attorney’s fees. The court denied the motion and Newegg appealed. While the appeal was pending, the Supreme Court decided Octane Fitness, which clarified the standard for obtaining fees. The Federal Circuit remanded the case in order for the trial court to determine whether it was an “exceptional case” under the new standard.

The trial court reassigned the case to a new judge, who determined that the case was not “exceptional.” The Federal Circuit reversed this, finding that the District Court abused its discretion by failing to evaluate whether the case was exceptional based on the totality of the circumstances. Specifically, the Federal Circuit found that the evidence submitted by AdjustaCam showed that its lawsuit was baseless, that AdjustaCam failed to advance any arguments as to why Newegg’s products could be considered to infringe the claims as interpreted by the Markman order, and that AdjustaCam litigated the case in an “unreasonable manner.” Specifically, AdjustaCam had made “repeated use of after-the-fact declarations,” served a new expert report on Newegg the day of that expert’s deposition, filed a supplemental declaration without disclosing it as new on appeal, and had a pattern of filing cases against multiple defendants in order to settle for less than the cost of litigation.