In patent litigation, the district court has discretion to award attorneys’ fees to the prevailing party if it finds the case exceptional. 35 U.S.C. §285. In MarcTec, LLC v. Johnson & Johnson and Cordis Corporation, 664 F.3d 907 (Fed. Cir. 2012), the Federal Circuit affirmed a district court’s award of expert witness fees in addition to attorneys’ fees under section 285.
The patents in suit covered a surgical device that included a polymer bonded by heat to an implant. The inventor, an orthopedic surgeon, obtained his patents by arguing to the Patent and Trademark Office that his claims did not cover stents and by amending his claims to require heat-bonding. The inventor assigned his patents to his own company, MarcTec.
Cordis is a subsidiary of Johnson & Johnson. Cordis makes and sales a stent called the Cypher stent, which has a polymer coating that is applied without heat.
In 2007, MarcTec sued Cordis for infringement of its two patents. In its Markman order, the district court construed the claims to require heat-bonding and to exclude stents.
Cordis moved for summary judgment of noninfringement on the grounds that the Cypher stent did not utilize heat-bonding and was a stent. MarcTec contended that the Cypher stent did have a polymer that was bonded by heat and provided an expert who testified that if the polymer was sprayed at the speed of sound, heat would be generated. MarcTec also argued that the Cypher stent was not a stent and that prosecution history estoppel did not apply because of the doctrine of claim differentiation.
The district court granted Cordis’ motion. The court found that the evidence was undisputed that no heat was used in making the Cypher stent. The court held that the expert that MarcTec’s expert provided an “untested and untestable theory that is neither reliable nor relevant to the issues at hand,” and excluded the expert as inadmissible under Daubert. The district court also held that stents had been disclaimed during the prosecution of the patents and that the Cypher stent was a stent.
MarcTec appealed the district court’s decision granting summary judgment to the Federal Circuit Court of Appeals. The appellate court affirmed the district court’s decision.
Cordis then moved for its attorneys’ fees and expert’s fees under section 285. Cordis argued that the case was exceptional because MarcTec misrepresented the law of claim construction, mischaracterized the claim construction decision, and offered “junk science,” and that the suit was frivolous and had been filed in bad faith.
The district court granted Cordis’ motion and awarded Cordis $3.9 million in attorneys’ fees and $810,000 in expert witness fees.
MarcTec appealed, arguing that the district court had applied the wrong test for an exceptional case and had abused its discretion in awarding the expert fees. The Federal Circuit affirmed on both grounds.
The Court of Appeals held that a case may be exceptional if “there has been ‘willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Federal Rule of Civil Procedure 11, or like infractions.’” When a prevailing defendant seeks a finding of an exceptional case, a court may consider how close the case was, the pre-filing investigation, and litigation conduct, including the plaintiff’s prolonging the litigation in bad faith. If there is no misconduct in obtaining the patent or in the litigation, in order to be found exceptional, there must be subjective bad faith in filing the suit and the suit must be objectively baseless. In other words, the case “must have no objective foundation, and the plaintiff must actually know this.” In this case, the court held that the case was exceptional under either test. First, MarcTec filed a baseless suit in bad faith and pursued it with no evidence of infringement. Second, MarcTec committed vexatious and unjustified conduct in the litigation, prolonging the case and causing Cordis to incur unnecessary fees.
The appellate court specifically found that MarcTec’s infringement case was objectively baseless and that MarcTec subjectively knew it. Thus, the suit was pursued in bad faith. The court relied on MarcTec’s knowledge of the specification and the prosecution history, which required heat-bonding and disclaimed stents, to conclude that MarcTec’s position in claim construction had no evidentiary support and that its conduct in continuing the litigation after claim construction was in bad faith.
The appellate court further held that litigation misconduct alone can support a finding of an exceptional case. The factors relied upon by the court included MarcTec’s misrepresentations in the law of claim construction and the use of expert testimony that failed to meet the standard for reliability. The court noted that not every case in which an expert is disqualified under Daubert is an exceptional case, but that this case was egregious.
Lastly, the court held that the award of fees was reasonable, based on MarcTec’s “vexatious conduct and bad faith [which] increased the cost of litigation.”
This case is both a reminder and a warning. It is a reminder that, although most patent litigators believe an award of attorneys’ fees is not common, those awards are made and are affirmed on appeal and may include an award of expert fees as well. The case is a warning because the risk of an adverse award is present for both the plaintiff and the defendant, such that all parties should carefully consider the positions they assert in litigation.