Reasonable Reliance On Pretrial Party Admissions Cannot Lead To A Subsequent Finding That A Litigation Is Exceptional Under 35 U.S.C. § 285

In Checkpoint Systems, Inc. v. All-Tag Security S.A., No. 12-1085 (Fed. Cir. Mar. 25, 2013), the Federal Circuit reversed the district court's exceptional case finding and award of attorneys' fees with costs and interest to the defendants under 35 U.S.C. § 285.

Plaintiff Checkpoint Systems, Inc. (“Checkpoint”) manufactures “resonance tags,” electronic antishoplifting devices placed on goods. Checkpoint sued Belgian corporation All-Tag Security S.A., All-Tag Security Americas, Inc. (its American affiliate), and Sensormatic Electronics Corporation (an All-Tag customer) (collectively “All-Tag”) for infringement of U.S. Patent No. 4,876,555 (“the '555 patent”). At issue between the parties was whether All-Tag's resonance tags contained a claimed “throughhole,” defined in the '555 patent abstract as a “continuous hole” in a dielectric layer sandwiched between two conducting layers. During discovery, Checkpoint asked All-Tag to admit that the accused products contained such a throughhole. All-Tag responded only that its tags were made “generally in accordance with” its U.S. Patent No. 5,187,466 and a pending patent application that later issued as U.S. Patent No. 7,023,343 (collectively “the All-Tag patents”).

Checkpoint's expert witness tested a roll of All-Tag resonance tags acquired from an All-Tag customer, and testified that tags produced in accordance with the All-Tag patents would have contained a throughhole and would have infringed the '555 patent. All-Tag moved to exclude the expert's testimony, arguing that his infringement opinion was fatally flawed because the tags he examined were made by All-Tag Security A.G. in Switzerland, and were not the current accused tags made by All-Tag Security S.A. in Belgium. Although All-Tag had moved its manufacturing operations from Switzerland to Belgium in 1994, the Belgian company resumed making resonance tags on the exact same factory equipment within approximately a week of the move. Accordingly, the district court denied All-Tag's motion and permitted the expert to testify, and further denied JMOL motions by All-Tag on the issue at the end of both sides' evidentiary presentations.

After trial, the jury returned a verdict in favor of All-Tag, finding that the '555 patent was not infringed, invalid, and unenforceable. All-Tag then moved for attorneys' fees under 35 U.S.C. § 285, arguing that the case qualified asexceptional under the statute because Checkpoint and its expert allegedly never...