Deterrence Not Factor in Setting Fees Award Size: Fed. Cir.

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By Peter Leung

Jan. 22 — Deterrence is not an appropriate factor to consider when determining the size of a reasonable attorneys' fees award under Section 285 of the Patent Act, ruled the U.S. Court of Appeals for the Federal Circuit (Lumen View Tech. LLC v. Findthebest.com, Inc., Fed. Cir., 2015-1275, 1/22/16).

In a precedential decision issued on Jan. 22 that may make it harder to obtain larger attorneys' fees awards from so-called serial plaintiffs, the Federal Circuit found that, though the district court did not abuse its discretion in awarding fees to prevailing defendant Findthebest.com Inc. (FTB), it improperly enlarged the award on the grounds that the plaintiff's conduct must be deterred.

Lumen View had sued FTB for infringing U.S. Patent No. 8,069,073. The district court granted FTB's motion for judgment on the pleadings, finding that Lumen View's patent was abstract and, thus, ineligible subject matter.

It then awarded attorneys' fees to FTB under Section 285 of the Patent Act, which allows for attorneys' fees awards to prevailing parties in exceptional cases. It found that this case was exceptional because even the most basic pre-suit investigation would have showed that FTB's product was not covered by Lumen View's patent. This was because the accused FTB product provided product recommendations based on the preferences of a single party, while the patent covered only a method using data from multiple parties.

The district court also enhanced the award beyond the standard “lodestar” amount for attorneys' fees awards, which is a reasonable hourly rate multiplied by a reasonable number of hours needed to litigate a particular type of case. The court said that the enhanced award was necessary to deter “the plaintiff's predatory strategy.” It explained that, because the court was particularly efficient in resolving this case, the standard lodestar amount was uncharacteristically low and, thus, could not deter the plaintiff from similar conduct. It also pointed to the frivolous nature of the plaintiff's claims, as well as the plaintiff's threats to make litigation expensive for the defendant, as reasons for enhancing the award amount.

The Federal Circuit vacated the award amount. It explained that, though courts may adjust and enhance attorneys' fees awards beyond the lodestar amount in certain instances, the court's reliance on deterrence was inappropriate. The court ruled that the need to deter is appropriate in considering whether to grant a fees award—but not for enhancing an award. Adjustment from the standard amount is generally applied when the winning party's attorney's performance is not reflected in the lodestar calculation; factors not related to that performance are generally not accepted as a reason for enhancing fees.

The Federal Circuit also ruled that enhancements justified by a quick resolution of the case by the court were inappropriate because consideration of the results obtained should be restricted to the lodestar calculation itself, not the enhancement of it.

On these grounds, the court vacated the attorneys' fee award and remanded it for recalculation, though it emphasized that the district court is free to use any statutory framework it wishes to determine the amount.

Judges Alan D. Lourie, Kimberly A. Moore and Evan J. Wallach decided the case, with Lourie writing the decision. Damian Wasserbauer of Wasserbauer Law LLC, Collinsville, Conn., argued for Lumen View, while Carolyn V. Juarez of the Leventhal Law Firm, APC, San Diego, Calif., argued for FTB.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

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Decision text is available at: http://src.bna.com/cbh.