Upholding an award of attorney fees, a panel of the U.S. Court of Appeals for the Federal Circuit held that an appellant, a patent owner, could not avoid such an award by asserting that its exclusive licensee (Evident) lacked standing to bring an infringement claim in the first instance. Evident Corp. v. Church & Dwight Co., Inc., Case Nos. 03-1514, 04-1137 and 04-1213 (Fed. Cir., Feb. 22, 2005) (Lourie, J.).
Inventors Rudy, Denholtz and Denholtz, filed a continuation-in-part (CIP) application covering formulas for toothpaste. During the course of prosecution of the CIP application, the inventors and three others formed Peroxydent Group, a New Jersey partnership, to which the inventors assigned all rights to any patent issuing from the application. Subsequently, three members of Peroxydent formed Evident Corporation. In turn, Peroxydent licensed rights under any patent issuing from the CIP application exclusively to Evident, reserving for itself only a right of first refusal to file an infringement action. Three months later, the CIP issued as U.S. Pat. No. 4,971, 782 (the `782 patent).
Armed with the `782 patent, Evident sued Church & Dwight Co. and Colgate-Palmolive Company, for infringement. The defendants filed a declaratory judgment counterclaim and joined Peroxydent as a third-party defendant. After finding the patent unenforceable due to inequitable conduct, the district court determined the case was exceptional and awarded attorney fees to Church & Dwight.
Evident and Peroxydent appealed the attorney fee award arguing that Evident lacked standing to bring the suit in the first instance and that the district court abused its discretion by holding appellants joint and severally liable for the attorney fees award.
The issue of whether Evident had proper standing to have filed suit was raised by Peroxydent, the patent owner, for the first time on appeal. Though the Court briefly discussed constitutional standing requirements, the issue centered around whether the presence of Peroxydent as a third-party defendant satisfied the standing requirement, which (in most instances) compel a patent owner to be joined when its exclusive licensee files an infringement action. Prima Tek II v. A-Roo Co. The panel agreed that the standing had been met, as Peroxydent had been brought into the suit from the start throught the counterclaim and had participated fully. Thus, the Court concluded that Peroxydent’s initial status as third-party defendant did not matter in terms of standing.
Furthermore, the Court found that the district court did not clearly err in finding the case exceptional given the inequitable conduct involved (failure by Peroxydent to cite known material prior art). Nor did the Federal Circuit think that district court improperly exercise its discretion in awarding attorney fees or in holding Peroxydent and Evident jointly and severally liable. Noting that Peroxydent shared counsel with Evident throughout all stages of the litigation and appeal and that there was no clear division between Peroxydent and Evident in terms of the arguments presented by each, the Court, citing to principles of agency and partnership, held that the district court did not abuse its discretion in making the award joint and several.
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