In Hytera Communications Corp. Ltd. v. Motorola Solutions, Inc., 1-17-cv-01794 (NDOH 2021-04-29, Order) (Donald C. Nugent), the District Court denied defendant’s motion for attorney fees under 35 U.S.C. § 285, determining plaintiff’s litigation positions were not baseless even after a granting of summary judgment of noninfringement that “was not a close call.”
As way of background, in patent infringement cases, Courts are authorized to award “reasonable attorney fees to the prevailing party” in “exceptional cases.” The determination of whether to award fees requires a two-step process: first, the court must make a factual determination as to whether the case is “exceptional,” and second the court must exercise its discretion to determine if an award of attorney fees is warranted. Under the Federal Circuit’s holding in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), a case is exceptional if under the totality of the circumstances “it stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
However, a defendant need not show that the litigation is both objectively baseless and brought in bad faith. Rather, a case may be deemed “exceptional” if it presents “either subjective bad faith or exceptionally meritless claims.” A finding of subjective bad faith may be supported solely by circumstantial evidence, without inquiry into the plaintiff’s state of mind. Moreover, a case may also be designated “exceptional” when a suit originally brought in good faith is prolonged or extended after it becomes clear that it can no longer be pursued in good faith. However, the party seeking attorney’s fees under bears the burden of showing that the case is exceptional by a preponderance of the evidence.
Turning to the case at issue, defendant Motorola first claimed that plaintiff Hytera brought the action solely as a way of retaliating against it for Motorola pursuing trade-secret and infringement claims against Hytera in multiple other jurisdictions. However, the court reasoned that “although circumstantial evidence of bad faith can be sufficient to support an exceptional finding for purposes of attorney fees, the allegation that Hytera’s infringement claims in this case were improperly motivated from the outset remains speculative and is unsupported even by circumstantial evidence.” Further, the court also found that there is no evidence of bad faith delays or obfuscation by Hytera during the litigation process.
Next, Motorola contended that Hytera knew that its case was baseless from the beginning because it was aware that the Motorola products did not meet all of the required claim limitations. And regardless, even if Hytera did not know it at the time it brought the case, Motorola also claimed that Hytera failed in its duty by continuing to rely solely on theories that were unsupportable under the claim construction that was adopted by the Court.
However, the court rejected these contentions by Motorola, reasoning it was not wholly unreasonable for Hytera to investigate and attempt to develop other infringement theories following claim construction. In short, the court found that although its “decision on Summary Judgment was not a close call. The patent language, and the Court’s construction of claim terms clearly support the finding in favor of Motorola. Hytera’s arguments were somewhat strained and often separated from the context and a common sense interpretation of the patent language. However, they were not entirely baseless or frivolous. A case is not extraordinary simply because the Plaintiff was ultimately unsuccessful, even if its lack of success was entirely predictable. In this case. Motorola did not meet its burden of proving by a preponderance of the evidence that this case was exceptional under 35 U.S.C. §285.”
Therefore, the court found that Motorola failed to shown, by a preponderance of the evidence, that the case was “exceptional” within the meaning of 35 U.S.C. § 285 and denied Motorola’s request for the imposition of its attorney fees. Thus, this case shows that even when a decision on summary judgment was not a close call by the court, this still does not mean the case is necessarily “exceptional” within the meaning of the Patent Statute such that a defendant can just expect its attorney’s fees to be awarded. Instead, the defendant still must show by a preponderance of the evidence why the case was exceptional and that it is entitled to its attorney’s fees.