Attorney Fees For Post-Grant Patent Challenge Proceedings Before The USPTO May Be Recoverable In Exceptional Cases Under 35 U.S.C. § 285

Parties accused of patent infringement are turning more and more to post-grant challenge proceedings at the United States Patent and Trademark Office ("USPTO") as a faster and cheaper means for invalidating the asserted claims. A recent federal district court order indicates that the fees and costs associated with such proceedings may be recoverable if the underlying infringement suit is declared "exceptional" under 35 U.S.C. § 285.

On August 19, 2015, the United States District Court of the Southern District of California awarded defendant Southwest Airlines Co. nearly $400,000 in attorney fees and costs related to an inter partes reexamination of U.S. Patent No. 6,738,770 (the "'770 patent"). Order Granting Def'ts Application for Fees and Costs, Deep Sky Software, Inc. v. Southwest Airlines Co., Case No. 10-cv-1234-CAB, Dkt. No. 49 (S.D. Cal. Aug. 19, 2015). Southwest was sued for infringement of the '770 patent in June 2010 by patent owner Deep Sky. Southwest filed a request for inter partes reexamination in April 2011, and the parties jointly moved for a stay pending the outcome of the reexamination, to which the court agreed. The reexamination concluded in December 2014, with all of the asserted claims of the '770 patent found invalid by the Patent Trial and Appeal Board.

The court previously declared the case exceptional under § 285 on June 1, 2015. Order Granting Def'ts Mot. to find this an "Exceptional Case," Deep Sky Software, Inc. v. Southwest Airlines Co., Case No. 10-cv-1234-CAB, Dkt. No. 44 (S.D. Cal. June 1, 2015). During the '770 patent reexamination proceedings, the patent owner submitted a declaration by the inventor to attempt to establish that the conception and reduction to practice of the invention had predated a potentially invalidating reference. As part of the declaration, the inventor stated that "[a] key moment" in the development of the invention "occurred when [Deep Sky] purchased the Flexgrid product in 1999, as this provided tools enabling further development." The examiner in reexamination found that the Flexgrid product, a software program, itself disclosed the claimed subject matter of the '770 patent and indicated that the inventor did not in fact invent the claimed invention. Importantly, the content of the Flexgrid product was never disclosed to the USPTO during the initial prosecution of the patent, and was never disclosed by Deep Sky to Southwest during the district court proceedings.

The court declared...