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Precision Links Inc. v. USA Products Group, Inc.

United States District Court, W.D. North Carolina, Charlotte Division

June 24, 2014

PRECISION LINKS INCORPORATED, Plaintiff,
v.
USA PRODUCTS GROUP, INC. and HOME DEPOT U.S.A., INC., Defendants.

MEMORANDUM OF DECISION AND ORDER

MARTIN REIDINGER, District Judge.

THIS MATTER is before the Court on remand from the United States Court of Appeals for the Federal Circuit, 527 F.Appx. 852 (Fed. Cir. 2013), and the parties' supplemental briefing [Docs. 125, 126].

I. PROCEDURAL BACKGROUND

This is an action for patent infringement involving U.S. Patent No. 5, 673, 464 ("the 464 Patent" or "the Patent"). By an Order entered July 14, 2011, the Court found that "Plaintiff's infringement claim was objectively baseless and subjectively lacking in good faith" and that "several instances of Plaintiff's conduct in this litigation were so vexatious and unjustified so as to warrant the imposition of fees in this case." [Doc. 99 at 18]. Based on these findings, the Court concluded that this case is "exceptional" within the meaning of 35 U.S.C. § 285 and granted the Defendants' motion for an award of attorneys' fees and costs incurred in defending this litigation. [Id. at 22]. The Court subsequently awarded the Defendants $250, 395.00 in attorneys' fees, as well as an award of pre-judgment interest, post-judgment interest, and costs. [Doc. 113].

The Plaintiff appealed the award of fees. On June 7, 2013, the Court of Appeals for the Federal Circuit vacated the fee award. Precision Links Inc. v. USA Products Group, Inc., 527 F.Appx. 852 (Fed. Cir. 2013). While the Federal Circuit sustained most of this Court's findings, it disagreed with the rulings that the Plaintiff's infringement contention under Claim 1 was objectively baseless and that the Claim 1 infringement allegations were brought in bad faith. Id. at 855. Because the allegations as to Claim 1 "played a significant part in the litigation" in this Court's exceptional case determination, the Federal Circuit vacated the attorney fee award and remanded this case for consideration of "the specific types of conduct" that the Federal Circuit identified as potentially supporting a fee order. Id. at 858. The Federal Circuit instructed that "[o]n remand, the district court should determine whether it continues to regard this case as exceptional and deserving of an attorney fee award in light of our holding that Precision's infringement allegations as to claim 1 were not frivolous. If so, it should determine what award amount is appropriate for the remaining conduct." Id. at 858-59.

Following the entry of the mandate on August 2, 2013 [Doc. 123], this Court ordered the parties to submit supplemental briefs addressing the issues identified in the Federal Circuit's Order. [Doc. 124]. The parties filed their supplemental briefs on September 11, 2013. [Docs. 125, 126].

Having been fully briefed, this matter is now ripe for determination.

II. DISCUSSION

The Patent Act provides that a district court may award reasonable attorneys' fees to the prevailing party "in exceptional cases." 35 U.S.C. § 285. The purpose of § 285 is not to punish the plaintiff for bringing an infringement claim but rather "to compensate a defendant for attorneys' fees it should not have been forced to incur." Kilopass Tech., Inc. v. Sidense Corp., 738 F.3d 1302, 1313 (Fed. Cir. 2013).

Until recently, an award of attorneys' fees under § 285 required a finding of "some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions." Brooks Furniture Mfg., Inc. v. Dutailer Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). Absent a finding of misconduct during the patent litigation or prosecution, an award of attorneys' fees was appropriate under § 285 "only if both (1) the litigation [was] brought in subjective bad faith, and (2) the litigation [was] objectively baseless." Id. (citing Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60-61 (1993)). The party seeking an award of attorneys' fees under § 285 was required to establish the "exceptional" nature of the case by clear and convincing evidence. Id. at 1382. On appeal, a district court's determination of objective baselessness was reviewed without deference, and any factual findings underlying a determination of subjective bad faith were reviewed for clear error. See Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1309-10 (Fed. Cir. 2012). It was under these standards that the Federal Circuit vacated the fee award in the present case and remanded for further consideration. See Precision Links, 527 F.Appx. at 854-55.

While this matter has been pending, however, the United States Supreme Court overruled the entire Brooks Furniture framework, concluding that the Federal Circuit's standards as enunciated therein are "unduly rigid" and "impermissibly encumber[ ] the statutory grant of discretion to district courts." Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749, 1755 (2014). Under the new standard announced by the Supreme Court, the exceptional case analysis "begins and ends with the text of § 285, " a statutory provision which the Court noted "is patently clear" and "imposes one and only one constraint on district courts' discretion to award attorneys' fees in patent litigation: The power is reserved for exceptional' cases." Octane Fitness, 134 S.Ct. at 1755-56. Because "exceptional" is not defined by the Patent Act, the Court construed the term in accordance with its plain and ordinary meaning. See id. (noting that "exceptional" is commonly defined as "uncommon, rare, or not ordinary") (citation and internal quotation marks omitted). Based on this commonly understood meaning, the Court held "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." Id. at 1756. The Court further rejected a clear and convincing evidentiary standard, holding that the determination of exceptionality is "a simple discretionary inquiry, " imposing no specific evidentiary burden. Id. at 1758. Rather, the determination must be made on a case-by-case basis, with consideration of "the totality of the circumstances." Id. at 1756. In another opinion issued the same day, the Supreme Court reiterated that the exceptionality determination is a matter of discretion and therefore is to be reviewed only for an abuse of discretion on appeal. Highmark, Inc. v. Allcare Health Mgmt. Sys., 134 S.Ct. 1744, 1748 (2014).

The Court is now tasked with re-evaluating its exceptional case determination in light of the directives from the Federal Circuit, as well as the new analytical framework announced by the Supreme Court in Octane Fitness and Highmark.[1]

Upon careful consideration of the totality of the circumstances, the Court concludes that this matter is an exceptional case. First, considering both the governing law and the facts of the case, the Plaintiff's litigating position with respect to Claims 6 and 8 was clearly frivolous and objectively baseless. See Precision Links, 527 F.Appx. at 857. As the Supreme Court noted in Octane Fitness, "a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award." 134 S.Ct. at 1757.

Additionally, the Court finds that this case "stands out from others" with respect to the unreasonable manner in which the case was litigated. Id. at 1756. First, the Plaintiff sought a preliminary injunction based in large part on a theory that the accused straps were manufactured of an inferior material and posed a threat of malfunction and potential injury to consumers. The Plaintiff sought to enjoin the Defendants from selling the allegedly inferior straps because of the risk of injury and the potential for consumers to mistake the straps for the Plaintiff's product. This Court previously concluded that this theory was frivolous, and the Federal Circuit affirmed. See ...


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