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Attorneys' Fees Award Vacated as Arguments On Significant Part of Litigation Not Frivolous

Thursday, June 13, 2013
By Tony Dutra

A $250,000 award of attorneys' fees was vacated by the U.S. Court of Appeals for the Federal Circuit June 7 in a nonprecedential opinion (Precision Links Inc. v. USA Products Group Inc., Fed. Cir., No. 2012-1461, 6/7/13, unpub).

Though the court agreed with many points the lower court made in finding the litigation an “exceptional case” under 35 U.S.C. §285, it ruled that the patent owner's arguments as to one of the patent claims asserted were not frivolous. 

Patent Asserted Against Home Depot

Precision Links Inc. owns a patent (U.S. Patent No. 5,673,464) on a tie-down strap for cargo in transport. Home Depot U.S.A. Inc. sells a tie-down strap made by USA Products Group Inc.

Precision filed a patent infringement lawsuit against Home Depot and USA Products in the U.S. District Court for the Western District of North Carolina. Judge Martin Reidinger adopted claim term constructions proposed by the defendants and subsequently entered summary judgment of noninfringement.

Precision's appeal was untimely and the Federal Circuit dismissed it. The district court rejected Precision's motions for relief in a manner that would allow it to revive its appeal.

USA Products then moved for attorneys' fees under Section 285--“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” Reidinger granted the award, and Precision appealed that decision. 

Half of Complaint Not Frivolous

Judge William C. Bryson distinguished the reasonableness of Precision's infringement charge as to Claim 1 of the '464 patent from its allegations as to Claims 6 and 8.

The court rejected two of the reasons underlying the district court's award to the extent it was based on the Claim 1 infringement complaint:

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  • The appeals court held that Precision's claim construction argument was not frivolous. The question had to do with a required distortion of one strap to allow another to pass through an opening. The court faulted the district court for overreliance on a dictionary definition of “dimensioned” that barred the kind of distortion proposed by Precision's construction of the claim. 
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  • Precision's pre-filing investigation of the alleged infringement was not inadequate, the court said, under the assumption that its claim construction was reasonable. “A simple examination of the accused product was sufficient to show that, under Precision's proposed claim construction, the accused product would infringe claim 1.” 


Claims 6 and 8, however, required Precision to argue that USA Products or Home Depot was liable for indirect infringement. However, the court said, “Precision never identified any act by the defendants that would constitute contributory infringement or infringement by inducement, and it never identified any evidence that any third party had engaged in infringing conduct at the behest of the defendants.” 

But Yes to Litigation Misconduct

The appeals court also agreed with the lower court on two points of litigation misconduct.

First, the court agreed that Precision's request for a preliminary injunction was frivolous because it was “based in large part on the theory that the accused straps were manufactured of an inferior material and posed a threat of malfunction.” That was pure speculation, the court said.

Further, Precision's actions after the Federal Circuit dismissed its first appeal were also frivolous, the court said. “Precision offered no plausible basis on which the district court could have granted it relief sufficient to resuscitate its appeal.”

Because of the reversal as to Claim 1, the court vacated the fee award. It gave remand instructions to reconsider whether the case was exceptional, given that “the allegations as to claim 1 played a significant part in the litigation before the district court.”

Judges Timothy B. Dyk and Jimmie V. Reyna joined the opinion.

James M. Harrington of Concord, N.C., represented Precision Links. Jason M. Gonder of Haynes and Boone of San Jose, Calif., represented USA Products.

 

Text is available at http://www.bloomberglaw.com/public/document/Precision_Links_Inc_v_USA_Products_Group_Docket_No_1201461_Fed_Ci.

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