Patent litigation is typically quite an expensive proposition, particularly since parties must generally pay their own attorney fees. That said, district courts may award fees to the prevailing party “in exceptional cases” under 35 USC § 285, which under the Supreme Court’s Octane standard can include those where the plaintiff’s case was substantively weak or was litigated in an “unreasonable manner”. However, the Federal Circuit has now held that district courts may not award fees for those incurred in related validity challenges before the Patent Trial and Appeal Board (PTAB). In its precedential decision in Dragon Intellectual Property v. Dish Network, a majority of the appellate court ruled that fees are not available under § 285 for IPRs, even those filed over patents asserted in parallel district court litigation, because such proceedings are “voluntary”. The decision prompted a pointed dissent from Southern District of California Judge Cathy Ann Bencivengo, sitting here by designation.

Prior Litigation: Multiple Trips to the Federal Circuit and Back

Plaintiff Dragon Intellectual Property LLC filed the litigation below against Dish Network (1:13-cv-02066) back in December 2013, alongside nine other complaints also filed in the District of Delaware that same day against Apple, AT&T, Charter Communications, Comcast, Cox, Sirius XM (in which Liberty Media later acquired a majority interest), and Verizon. At issue in all ten complaints was a single patent (5,930,444) broadly related to the simultaneous viewing of previously recorded content while the content continues to be recorded.

As the court would later observe, this litigation—in particular, the cases against Dish and Sirius XM (SXM)—had “a long and complicated history, despite never making it to the summary judgment stage”. Soon after Dragon filed its complaints, counsel for Dish and SXM sent a letter to Dragon’s counsel at Freitas Angell & Weinberg LLP in which they argued that those companies’ accused products (DVR receivers and satellite radios, respectively) could not infringe: They explained that the products “continuously record from the time viewing or listening begins”, whereas the asserted claims “required that a recording be initiated when the record key was pressed” (as later summarized by the court). Crucially, the defendants’ counsel also pointed out that the applicants for the ‘444 patent “had disclaimed coverage of ‘continuous recording devices’” during prosecution. Yet Dragon pushed forward, merely amending its infringement contentions. Dish then filed an IPR against the patent in late 2014, prompting all ten defendants to seek stays—but the court only granted those motions for Dish and SXM, after the latter sought joinder for an IPR petition of its own.

While those cases were stayed, the others moved through claim construction. In September 2015, District Judge Richard G. Andrews ruled decisively for the defendants in construing key claim language (including the terms “broadcast program information”, “record key”, and “to begin a recording by initiating storage of the broadcast program information in said memory unit”), agreeing that “the applicants clearly and unequivocally disclaimed continuous recording devices”—and observing that he had “only once seen a clearer case of prosecution disclaimer”. Two months later, in November 2015, the plaintiff’s counsel with Freitas Angell & Weinberg was allowed to withdraw from the case. In April 2016, Dragon and all ten defendants stipulated to noninfringement based on the court’s construction. Meanwhile, that same June, the PTAB invalidated the asserted claims from the ‘444 patent, a decision that the Federal Circuit affirmed in November 2017.

Dish’s and SXM’s resulting motions for attorney fees, and an intertwined set of appeals, resulted in another seven years of litigation. In September 2018, Judge Andrews vacated the prior judgments of noninfringement as moot in light of the affirmed PTAB invalidity ruling but retained jurisdiction to address attorney fees. That November, Judge Andrews then denied the two defendants’ attorney fee motions, ruling that because the infringement rulings had been mooted, the companies were not “prevailing parties” under Section 285 (though remarking that he would have otherwise sanctioned the plaintiff on that basis). Judge Andrews also rejected Dish’s request for fees from plaintiff’s counsel under 28 USC § 1927, finding that the defendant had not shown that Dragon’s attorneys had “multiplie[d] the [district court] proceedings . . . unreasonably and vexatiously” as required by the statute.

In 2020, the Federal Circuit reversed and remanded that attorney fee decision with respect to § 285, holding that the companies were in fact prevailing parties because they had successfully invalidated the asserted claims through their IPRs. Though the court did not resolve the issue of whether fees were available for the IPRs themselves, it also remarked that it “s[aw] no basis in the Patent Act for awarding fees under § 285 for work incurred in inter partes review proceedings that [Defendants] voluntarily undertook”.  

The Lower Court’s Attorney Fee Decision

On remand, Judge Andrews adopted the recommendation of Magistrate Judge (now District Judge) Jennifer L. Hall to partially grant the attorney fee motions. While he found that the district court litigation was exceptional due to the “clear” prosecution history disclaimer, defense counsel’s notices of noninfringement, and publicly available information confirming as such, granting fees stemming from the district court litigation on that basis, he “agree[d]” with the Federal Circuit’s “dicta” observation that § 285 does not permit fee awards related to IPR.

In support of this decision, Judge Andrews repeated multiple points made by Judge Hall, including her finding that the statute does not explicitly provide for such fees. Judge Andrews also agreed that IPRs are not “cases” under § 285, rejecting the defendants’ interpretation of the Federal Circuit’s 2014 decision from Therasense v. Becton as allegedly requiring a more “holistic” definition of a case that includes IPRs—pointing out that the appellate court had subsequently clarified that it was “clearly only referring to district court and appellate court proceedings” (quoting Amneal Pharmaceuticals v. Almirall, 2020). Additionally, Judge Andrews distinguished the present circumstances from those in another case cited by the defendants, PPG Industries v. Celanese Polymer Specialties, that allowed recovery of fees related to USPTO reissue proceedings, characterizing those proceedings as “not optional”. Nor did the one-year statutory time bar (giving one year from the date of service of a district court complaint to file an IPR) render IPR “mandatory”, per Judge Andrews, who cited statements from the defendants that they chose IPR over a district court validity challenge due to the former’s cost-effectiveness.

Judge Andrews also adopted Judge Hall’s recommendation to deny the defendant’s request for fees from Dragon’s former litigation counsel. Specifically, he held that the defendants were wrong to argue that the recommendation’s proposed rule, by “allowing recovery of fees from the parties, not attorneys”, would overlook and even contravene Octane, which they characterized as establishing that the “one and only one” constraint on the discretion to award attorney fees is that they may only do so in “exceptional cases”. Not so, held Judge Andrews: As also concluded by Judge Hall, he held that Octane “addressed the question of when fees may be awarded, not from whom they may be recovered . . . I see nothing in [Octane] that authorizes attorney liability for a fee award”. Generally, he explained, courts “presume that ‘when a fee-shifting statute does not explicitly permit a fee award against counsel, it prohibits it. In short, silence does not equal consent’” (citation omitted). This conclusion is further bolstered, he explained, by pre-Octane Federal Circuit caselaw, as well as post-Octane district court rulings, that have applied the same approach.

The Federal Circuit Doubles Down: No Attorney Fees for IPR Under § 285

The Federal Circuit issued its ruling on appeal on May 20, with the majority opinion written by Chief Judge Kimberly Moore and joined by Circuit Judge Kara Farnandez Stoll. The majority began by upholding the district court’s exceptionality determination—finding no error in the district court’s reliance “on its prior adjudication of prosecution disclaimer during claim construction”, and declining to accept Dragon’s argument that the vacatur of the infringement ruling also required the reversal of the underlying claim construction order.

Turning to the issue of fees stemming from IPRs, the majority rejected the appellants’ argument that those PTAB proceedings were “part and parcel” of the case. Rather, the majority characterized the appellants as having “voluntarily pursued parallel proceedings” before the Board, citing certain advantages of IPR versus bringing invalidity claims in district court—including a lower statutorily mandated evidentiary standard and the relative speed of IPR. Noting the dissent’s objection to characterizing IPRs as voluntary, the court nonetheless underscored that the “[a]ppellants were not compelled to argue invalidity before the Board”, observing that the eight other defendants opted not to do so and instead “litigate[d] in district court”.

Here, the majority agreed with the district court’s characterization of the aforementioned caselaw. In particular, the majority held that its position was consistent with PPG Industries, concluding (as did Judge Andrews) that the reissue proceedings there under consideration were “not optional” because the plaintiff initiated them—thus requiring the defendants “to perform before the Board ‘precisely the same type of work’ the defendant would have performed at trial, so the defendant ‘had no other option available’” (citing PPG Industries). The majority additionally rejected the appellants’ argument that Judge Andrews has misinterpreted Amneal in concluding that IPRs are not “cases” under § 285, approvingly reiterating that case’s language limiting Therasense to district court proceedings and appeals. Also, the majority found that it was irrelevant, albeit true, that Amneal dealt with an IPR filed before a district court action had been initiated, as opposed to the present circumstances (an IPR following a district court suit).

More broadly, the majority held that treating IPRs as “cases” under § 285 would be inconsistent with the Supreme Court’s 2014 Highmark decision, a companion ruling to Octane that established that appellate courts must show deference to a district court’s exceptionality finding: A “district court is particularly well-positioned to determine whether a case before it is exceptional because it ‘lives with the case over a prolonged period of time’” (quoting Highmark), whereas including IPR proceedings would require district courts to “evaluat[e] the exceptionality of arguments, conduct, and behavior in a proceeding in which they had no involvement”.

Additionally, the majority affirmed Judge Andrews’s holding “that liability for attorneys’ fees awarded under § 285 does not extend to counsel”. The majority found “support for this conclusion” in the fact that § 285 is silent on this issue, where as other statutes are not: It observed that § 1927, as mentioned above, explicitly contemplates fee awards against attorneys who “unreasonably and vexatiously” multiply the proceedings; and that Federal Rule of Civil Procedure 11 “expressly allows the court to impose monetary sanctions on attorneys and law firms, which can include ‘all of the reasonable attorney’s fees and other expenses’ incurred as a result of sanctionable conduct”.

Judge Bencivengo’s Dissent

District Judge Bencivengo, sitting by designation as mentioned above, dissented from the portion of the majority decision providing that § 285 does not allow attorney fees based on IPR proceedings. Judge Bencivengo challenged two underlying conclusions by the majority: She argued that the IPR was not “voluntary” because the appellants were compelled to contest validity in response to the plaintiff’s “meritless” infringement suits, and chose to do so before the PTAB as is their right. She also disagreed with the majority’s characterization of the IPR here as a “parallel” proceeding, noting that the district court had stayed the case before it (so the IPR substituted for that part of the district court litigation). As a result of the foregoing, and because the IPR would not have been initiated but for the plaintiff’s filing of infringement litigation, Judge Bencivengo argued that a district judge should have the discretion to award “all reasonable fees incurred by the prevailing defendant, including fees incurred in an IPR that resolved any invalidity defenses that were required to be asserted in response to the baseless complaint” (emphasis in original).