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Exceptionally Speaking: The Potential High Cost of Losing a Patent Infringement Case

By: Martha S. Helmreich, Eric G. Soller
March 14, 2012

$4,683,653.03.  That's the total amount of the bill that the Federal Circuit stamped "due and payable" by MarcTec, a medical device maker, in MarcTec, LLC v. Johnson & Johnson and Cordis Corporation, 664 F.3d 907, in a decision handed down on January 3, 2012.  $3,873,865.01 of this amount was for attorneys fees awarded under the "exceptional case" provision of 35 U.S.C. § 285, and $809,788.02 was for expert fees and expenses, awarded under the court's inherent sanctioning authority.

While many practitioners include in their pleadings a claim for attorney fees under Section 285, few cases proceed to a favorable determination on the merits of such a claim.  However, when these cases do, like MarcTec, the amounts can be staggering.

The Initial Lawsuit

The January 3, 2012 decision was the second time this case was before the Federal Circuit.  In the first appeal, MarcTec appealed a summary judgment of non-infringement in favor of Cordis.  At issue were two patents, with identical specifications, directed to a surgical implant in which a heat-bondable material is bonded to the surgical device or implant.  The district court, in its claim construction ruling, concluded that "heat bonding" was the only form of bonding taught by the patents and that the inventor had so limited the form of bonding during prosecution of the patents, as well as disclaiming "stents", in order to gain allowance of the patents over prior art - even though MarcTec had argued at the Markman hearing that the court should focus on the term "bondable" in the claim language and, in effect, ignored both the specifications and statements made during prosecution.

Following claim construction, Cordis moved for summary judgment of non-infringement, which the district court granted, on the ground that the undisputed evidence showed that the coating on Cordis' accused stent was applied and bonded at room temperature, and therefore there could be no infringement.  In so ruling, the court excluded MarcTec's proffered expert testimony on Cordis' use of heat in manufacturing the accused devices on both relevance and Daubert/reliability grounds.  The Federal Circuit affirmed the claim construction and summary judgment orders in MarcTec, LLC v. Johnson & Johnson , 394 Fed. Appx. 685 (Fed. Cir. 2010).

The Fee Litigation

After the district court granted summary judgment in its favor, Cordis moved to have the case declared "exceptional" under 35 U.S.C. § 285.  In its motion, Cordis argued that MarcTec engaged in litigation misconduct by, among other things: (1) misrepresenting claim construction law embodied by Phillips v. AWH Corp. , to avoid intrinsic evidence; (2) mischaracterizing the district court's claim construction; and (3) offering "junk science" that was unreliable, untestable, and had no relevance to this case. Cordis further argued that MarcTec filed a frivolous and baseless lawsuit and acted in bad faith by continuing to pursue its claims without any evidence of infringement.

The district court agreed with Cordis and not only granted its motion to declare the case exceptional, but also awarded it the full amount of the fees it sought as well as expert fees as a sanction for MarcTec's vexatious and bad faith conduct in bringing and pressing suit.

The Standard for Awarding Fees

In its appeal to the Federal Circuit, MarcTec contested only the finding that the case was exceptional and the awarding of attorney fees and expert fees, but did not challenge the reasonableness of the amount of fees awarded.  In affirming, the Federal Circuit noted that "[a] case may be deemed exceptional... where there has been 'willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates [Rule] 11 or like infractions.' "  Where, as in this case, an alleged infringer prevails, relevant factors include " 'the closeness of the question, prefiling investigation [on the part of the patentee] and discussions with the defendant and litigation behavior," including the prolongation of litigation in bad faith.  The Federal Circuit concluded that in this case, the district court had properly awarded § 285 fees because MarcTec had both acted in bad faith by initiating and pursuing an objectively baseless infringement action and engaged in vexatious and unjustifiable litigation conduct.

Why This Was An "Exceptional Case"

Particularly justifying the fee award in this case, in the Federal Circuit's view, were MarcTec's patent claim amendments and representations to the USPTO to make it clear that its invention required the application of heat to heat-bondable material and excluded stents, whereas it became clear early on in the litigation that Cordis' application did not require heat and its device at issue was a stent.  Also making this an exceptional case, in the Court's view, were MarcTec's persistent, and frivolous "mischaracterizations" of the district court's claim construction, its effort to have the district court ignore the teachings of Phillips v. AWH Corp. regarding the proper construction of claims, and its attempt to introduce "scientific evidence" that failed to meet the Daubert test, e.g. that spraying a drug/polymer coating on to a stent at nearly the speed of sound would generate heat.

As the Federal Circuit's opinion makes clear, it was no single thing that MarcTec did in bringing or litigating this case that made it "exceptional" for purposes of § 285, and the decision cannot be read as a condemnation of the use of aggressive litigation positions and/or tactics.  It was the objective baselessness of MarcTec's position together with its subjective bad faith, i.e., its knowledge that it had no basis, under established law and its own representations to the USPTO, for asserting infringement, as well as its persistence in advancing these baseless positions by dubious means that supported the "exceptional case" finding.
 

Reprinted with permission from the March 7, 2012 issue of The Legal Intelligencer. © 2012 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.