Federal Circuit Reverses District Court Order Holding Plaintiff Counsel Jointly and Severally Liable for Fees Imposed on NPE

September 30, 2018

The Federal Circuit has reversed a district court order holding an NPE’s counsel jointly and severally liable for an “exceptional case” sanction against its client (2017-2414). District Judge Denise Cote granted a 35 USC Section 285 motion brought by Gust against AlphaCap Ventures LLC, awarding $492K in attorney fees (and $15K in costs) for asserting patents that the plaintiff should have known, after Alice, were patent-ineligibly drawn to the abstract idea of “crowdfunding”. The court identified an “unsavory” motivation (“to extract a nuisance settlement from Gust on the theory that Gust would rather pay an unjustified albeit minimal license fee than bear the costs of the threatened expensive litigation in a distant venue”) for AlphaCap’s behavior, which included abusive litigation tactics that the fee award is meant to deter. Judge Cote held San Francisco-based Gutride Safier LLP jointly and severally liable with AlphaCap under 35 USC Section 1926, but the Federal Circuit reversed, ruling that the district court abused its discretion by ascribing “bad faith” to litigation counsel for client decisions.

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