Bad Acts And Actors Never Die; They Simply Lose Their Appeal

• Published date: 05 October 2021
• Subject Matter: Anti-trust/Competition Law, Intellectual Property, Litigation, Mediation & Arbitration, Antitrust, EU Competition , Patent, Trials & Appeals & Compensation
• Law Firm: Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
• Author: Ms Kyu Yun Kim, Misook Kim, Sneha Nyshadham, Adriana L. Burgy, Stacy Lewis and Thomas L. Irving

Inequitable conduct not only wipes out the entire patent, but it may also spawn all kinds of other lawsuits, as discussed in the Energy Heating and Chandler cases below. This is also true for attorneys. That is, it may further result in disciplinary actions before the state bar and, if applicable, the USPTO Office of Enrollment and Discipline.

I. Energy Heating, LLC v. Heat On-The-Fly, LLC, Case No. 4:13-cv-10

Holding: On Jan. 14, 2016, the District Court of North Dakota ordered, inter alia, $75,000 in damages for intentional tortious conduct of Heat On-The-Fly ("HOTF") and held U.S. Pat. No. 8,171,993 ("the '993 patent") unenforceable for inequitable conduct. On Mar. 16, 2016, the district court judge denied motions for a declaration that the case was exceptional and for an award of attorney fees. On May 4, 2018, on appeal, the Federal Circuit upheld the finding of unenforceability of the '993 patent due to inequitable conduct but vacated and remanded the denial of attorney fees, in particular for reconsideration of the question of whether the case is exceptional within the meaning of 35 U.S.C. ' 285, which provides the basis for an award of attorney fees. Energy Heating, LLC v. Heat On-The-Fly, LLC, 889 F.3d 1291 (Fed. Cir. 2018). On remand, the presiding judge found this case exceptional under 35 U.S.C. '285. On June 15, 2020, the district court judge adopted magistrate judge's report and recommendation awarding attorney fees totaling about $5M.¹

Issue: Does a finding of inequitable conduct mandate an award of attorney fees?

Decision: The short answer is no while in this case, the district court on remand found the case exceptional and determined an award was appropriate. 2019 U.S. Dist. LEXIS 238396. 35 U.S.C. ' 285 provides the basis for an award of attorney fees in a patent case, stating "The court in exceptional cases may award attorney fees to a prevailing party."

The district court on remand noted that under the applicable law, an "exceptional case" is: (1) "one that stands out from others with respect to the substantive strength of a party's litigation position (considering both the governing law and the facts of the case)" or (2) one that was litigated in "an unreasonable manner." Id. at *15 (citing Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014)).

First, the district court acknowledged that "[a] finding of inequitable conduct does not mandate a finding of exceptionality, though both before and since Octane...