Litigation Misconduct And A Vexatious Litigation Strategy Can Justify Awarding Attorneys’ Fees For An Entire Case, Without Assertion Of Bad Faith Or Objectively Baseless Claims

In Monolithic Power Systems, Inc. v. O2 Micro International Ltd., No. 12-1221 (Fed. Cir. Aug. 13, 2013), the Federal Circuit held that litigation misconduct and a vexatious litigation strategy, without assertion of bad faith or objectively baseless claims, sufficed for a finding that the case was exceptional and for awarding attorneys' fees.

Monolithic Power Systems, Inc. ("MPS") and O2 Micro International Ltd. ("O2 Micro") sell integrated circuit products that control LCD and LED lighting. ASUSTeK Computer, Inc. and ASUSTeK Computer International (collectively "ASUSTeK") are MPS customers. In four previous patent cases involving infringement claims by O2 Micro, MPS and/or its customers obtained judgments of noninfringement or invalidity against O2 Micro, or O2 Micro stipulated to dismissal and covenanted not to sue.

In this case, MPS filed for DJ against O2 Micro with respect to four related O2 Micro patents: U.S. Patent Nos. 6,856,519; 6,809,938; 6,900,993; and 7,120,035 (collectively "the '519 patent family"). After O2 Micro alleged infringement of three members of the '519 patent family and U.S. Patent No. 7,417,382 ("the '382 patent") in an ITC action against MPS and its customers, MPS amended its DJ complaint to include the '382 patent, and O2 Micro counterclaimed for infringement. The parties agreed that the ITC discovery would apply in the district court action.

O2 Micro subsequently covenanted not to sue for infringement of the '519 patent family, and withdrew its assertion of the '519 patent family from both the district court and ITC proceedings. MPS and ASUSTeK obtained summary adjudication regarding the '382 patent's invention date that exposed the '382 patent to the same prior art used to invalidate a related patent in an earlier case. The district court also concluded that O2 Micro had proffered false testimony about the invention date. After a court-appointed expert concluded that all claims of the '382 patent were invalid and MPS and ASUSTeK had filed their pretrial submissions, O2 Micro covenanted not to sue on the '382 patent and obtained dismissal of all claims. But the district court found the case to be exceptional due to O2 Micro's vexatious litigation strategy, litigation misconduct, and unprofessional behavior, and awarded attorneys' fees for the entire case ($8,419,429), including fees incurred for ITC discovery for use in this case. O2 Micro appealed.

On appeal, the Federal Circuit first addressed whether the case...