United States: On Appeal, No Fee Shifting Credit For LevelUp

In a recent patent appeal involving a Boston-based mobile payment startup, the Court of Appeals for the Federal Circuit signaled its reluctance to disturb district courts' discretion in fee shifting decisions. The Federal Circuit affirmed, without a written opinion, the District of Massachusetts' decision denying LevelUp an award of attorneys' fees, even though LevelUp had won summary judgment of non-infringement at the initial pleading stage of the litigation. The litigation was against an individual plaintiff named Jack Barron.

LevelUp won the district court patent case on a summary judgment motion made before the initial scheduling conference and before the commencement of any discovery. The summary judgment ruling was based on the district court's finding that under its construction of the patent claim limitation, "transaction terminal," neither the consumer's mobile phone nor the LevelUp scanner operates as a "transaction terminal." LevelUp markets a mobile app that allows consumers to store credit or debit card information, and to initiate payments at participating merchants by displaying a QR code on the consumer's mobile phone. Upon a scan of the QR code, the LevelUp system tracks loyalty program participation and any merchant-offered rewards prior to charging the consumer's credit or debit card.

The district court's fees opinion noted that the case was "unusual" because LevelUp sought and received summary judgment prior to any scheduling conference or discovery. The district court nevertheless denied LevelUp's motion for attorneys' fees, reasoning that although Barron's patent infringement claims were without merit, they were "not so far-fetched that no reasonable patent-holder would file suit." The district court took the view that "[t]he technology involved in LevelUp's mobile app is reasonably similar to that described in" Barron's patent.

LevelUp argued in its Federal Circuit appeal that the district court should be overturned because the case was unique. LevelUp pointed out that its winning motion for summary judgment was "virtually unopposed" as Barron, "did not dispute any asserted facts, did not offer any evidence, did not seek any discovery, and did not dispute LevelUp's proposed claim construction."

Barron for his part told the Federal Circuit that he saw the summary judgment process, "as an opportunity to conserve judicial resources and expedite the claim" by having the district court resolve the threshold claim construction issue before the case proceeded to discovery. And so according to Barron, he did not dispute LevelUp's proffered facts in the interests of such judicial efficiency. Barron, however, did not offer the district court any alternative claim construction for "transaction terminal" and instead argued that a variety of different devices can be used as a transaction terminal.

In the end, the Federal Circuit affirmed the district court's opinion denying fee shifting, apparently seeing no need to disturb the court's reasoning that while the case was "unusual," it was not an exceptional case warranting fee-shifting under the Supreme Court's 2014 opinion in Octane Fitness, LLC v. ICON Health & Fitness, Inc.

Of note is that the Octane Fitness opinion relaxed the standards under which a district court may award attorneys' fees to a prevailing party, allowing district courts to use their discretion in deciding the issue on a case by case basis, based on the totality of the circumstances. And while many commentators viewed Octane Fitness as meaning that awards of attorneys' fees would be less susceptible to reversal on appeal, the LevelUp case demonstrates that the same can be said of fee shifting denials.

The case is Jack Barron v. SCVNGR, Inc. d/b/a LevelUp, Case No. 2015-1596, in the U.S. Court of Appeals for the Federal Circuit.

On Appeal, No Fee Shifting Credit for LevelUp

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