United States: District Court Did Not Err In Denying Attorneys’ Fees For Appeal And Remand Proceedings That Were Not Independently Exceptional

In Therasense, Inc. v. Becton, Dickinson & Co., No. 12-1504 (Fed. Cir. Mar. 12, 2014), the Federal Circuit affirmed the district court's determination that a party was not entitled to additional attorneys' fees for appeal or remand proceedings, fees for seeking attorneys' fees, prejudgment interest on fees, or postjudgment interest on fees from the time the district court originally deemed the case exceptional to when the district court reinstated its award of attorneys' fees.

Becton, Dickinson and Company ("Becton") sued Therasense, Inc. (now known as Abbott Diabetes Care, Inc.) and Abbott Laboratories (collectively "Abbott"), seeking DJ of noninfringement of U.S. Patent Nos. 6,143,164 ("the '164 patent") and 6,592,745 ("the '745 patent") by Becton's blood glucose test strips.  In response, Abbott sued Becton and its supplier, Nova Biomedical Corporation ("Nova"), for infringement of the '164 patent, the '745 patent, and U.S. Patent No. 5,820,551 ("the '551 patent").

The district court granted SJ of noninfringement with respect to the '164 and '745 patents, found nearly all asserted claims of the '745 patent invalid for anticipation, determined that claims 1-4 of the '551 patent were invalid as obvious, and determined that the '551 patent was unenforceable for inequitable conduct.  The district court awarded attorneys' fees to Becton and Nova under 35 U.S.C. § 285 with payment due "following the exhaustion of all appeals . . . regarding the validity and unenforceability of the '551 patent, if the Court's inequitable conduct judgment is upheld on appeal."  Slip op. at 3 (citation omitted).

During the appeal of the inequitable conduct determination, the Federal Circuit altered the standard for inequitable conduct, and the en banc Court vacated the district court's finding and remanded for further proceedings and vacated the original fee award.  On remand, the district court again concluded that the '551 patent was unenforceable for inequitable conduct.  Becton and Nova then moved to supplement the fee award with appellate and remand fees, fees spent seeking additional fees, prejudgment interest on fees, and postjudgment interest calculated from the date the district court originally deemed the case to be exceptional.  The district court reinstated its original fee award and added postjudgment interest from the date of the reinstatement, but denied the motion for additional fees and interest in all other respects.  Becton and Nova appealed the denial of additional fees.

On appeal, the Federal Circuit affirmed the district court's determination that Becton and Nova were not entitled to additional fees, fees on fees, prejudgment interest, or postjudgment interest accruing prior to the reinstatement date of the fee award.

"The law provides for appellate and remand fees where those stages of litigation are deemed independently exceptional within the meaning of § 285 . . . .  [T]he mere act of pursuing appellate review—available as a matter of right and frequently necessary to preserve future rights of appeal—by itself [does not ] suggest an abuse of the legal system."  Slip op. at 6-7.

The Federal Circuit first rejected Becton and Nova's contention that they were entitled to itemized fees for appeal and remand proceedings.  The Court stated that although civil litigation includes numerous phases, it "should be viewed more as an 'inclusive whole' rather than as a piecemeal process when analyzing fee-shifting under § 285."  Id. at 5 (quoting Comm'r, INS v. Jean, 496 U.S. 154, 161-62 (1990)).  The Court observed that § 285 does not bar the trial court from awarding attorneys' fees for the entire case, including subsequent appeals.  The Court observed, however, that the district court's fee order expressly contemplated an appeal and awarded fees only if the district court's inequitable conduct judgment was upheld on appeal.  The Federal Circuit determined that because it had previously vacated the inequitable conduct judgment, the original fee award was vacated by its own terms.  Therefore, the Court held that the district court did not err in denying Becton and Nova's motion to additional fees predicated on the vacated award.

The Court also rejected Becton and Nova's alternative argument that Abbott's appeal and petition for rehearing en banc independently qualified as exceptional circumstances for awarding fees.  The Court first noted that Becton and Nova did not present any evidence of bad faith by Abbott.  Rather, the Court explained that a dissent and the Court's en banc decision demonstrated that Abbott's appeal was not frivolous because Abbott prevailed on the appeal and vacated the underlying inequitable conduct determination.  Thus, even if Abbott's appeal had been frivolous, Becton and Nova were not "prevailing" parties in the appeal for the award of attorneys' fees.  The Court held that the district court did not abuse its discretion in declining to award fees for the appeal, rehearing, and remand proceedings.

The Federal Circuit next rejected Becton and Nova's argument that they were entitled to fees for pursuing additional fees and for the appeal regarding fees.  The Court explained that the "law provides for appellate and remand fees where those stages of litigation are deemed independently exceptional within the meaning of § 285," and that a district court has broad discretion in awarding fees and setting the amounts of fees.  Id. at 6.  The Court noted that the district court specifically declined to find that the appeal was exceptional under § 285.  The Court explained that fees on fees are excludable and that no award of fees is automatic.  Therefore, the Court affirmed the district court's denial of fees for pursuing the fee award.

Next, the Federal Circuit held that the district court did not err in awarding postjudgment interest only from the date the fee award was reinstated.  Because the original fee award was vacated, the Court held that the proper award for postjudgment interest ran from the date the award was reinstated.  Finally, the Court held that the district court did not err in denying prejudgment interest.  Accordingly, the Court affirmed the district court's fee determinations.

Judge Dyk dissented-in-part.  Judge Dyk stated that the district court had applied an incorrect standard for awarding fees because it concluded that it could not award attorneys' fees for appeal unless the appeal was independently exceptional.  Like the majority, Judge Dyk noted that litigations should be viewed as a whole, not as discrete parts, for fee awards.  For this reason, Judge Dyk stated that he would have remanded to the district court to reconsider appellate fees under the correct standard.  Judge Dyk also stated that Becton and Nova were prevailing parties on the appeal under § 285 because the Court had affirmed both the invalidity and noninfringement determinations.  Regarding fees for fees, Judge Dyk stated that because Becton and Nova's fee petitions were successful, the "district court was required to allow fees to secure those fees."  Dyk Dissent-in-Part at 4.  Judge Dyk agreed with the majority regarding pre- and postjudgment interest.

Judges:  Rader (author), Newman, Dyk (dissenting-in-part)

[Appealed from N.D. Cal., Judge Alsup]

This article previously appeared in Last Month at the Federal Circuit, April 2014.

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