Attorneys’ Fees, Costs, and an Enhancement! Oh My!

We have previously posted on the judiciary’s attempts to address frivolous and unwarranted suits brought by patent holding, non-practicing entities (“NPEs”). To deter such litigation, courts have the power to award attorneys’ fees and costs to defendants subject to such baseless suits. In an October 23 Opinion and Order in Lumen View Tech., LLC v., Inc., District Judge Denise Cote, applying 35 U.S.C. § 285 (“Section 285”), not only awarded the defendant its attorneys’ fees and costs, but also applied an enhancement to the awarded fees.

Lumen View Technology, LLC (“Lumen”), brought suit against, Inc. (“FTB”) on May 29, 2013 in the Southern District of New York, alleging infringement of U.S. patent no. 8,069,073. The complaint against FTB was one of at least twenty substantially similar patent infringement complaints filed by Lumen against other parties between 2012 to 2013.

On November 22, 2013, the court held that the ‘073 patent claimed an abstract idea that was not patentable under 35 U.S.C. § 101, and was therefore invalid. Lumen appealed the decision to the Federal Circuit. The case was stayed, pending the Supreme Court decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). Following the Supreme Court’s decision in Alice on June 19, 2014, Lumen voluntarily dismissed its appeal to the Federal Circuit.

FTB moved for attorneys’ fees on the ground that the case was exceptional under Section 285. The court granted FTB’s motion, finding that case to be exceptional. In particular, the court found that regardless of the invalidity finding, “[n]o reasonable litigant could have expected success on the merits. . . . [T]he most basic pre-suit investigation would have revealed this fact.” The court found that Lumen was motivated not by a desire to protect its intellectual property rights, but instead, by its plan “to extract a nuisance settlement from FTB on the theory that FTB would rather pay an unjustified license fee than bear the costs of the threatened expensive litigation.” Supporting the court’s findings were Lumen’s threats of “full scale litigation,” “protracted discovery,” and “a settlement demand escalator should FTB” respond to Lumen’s complaint.

In ordering the award of enhancement of fees, Judge Cote noted that the regular “lodestar” number in calculating attorneys’ fees “would be insufficient to deter similar misconduct in the future” and that “[a]ny award in this action must be substantial enough to deter Lumen from” committing similar litigation misconduct in the future. Judge Cote further explained that “[a] lodestar amount significantly greater . . . would have been reasonable and would have been incurred but for the prompt resolution of the motion addressed to the validity of the ‘073 patent.” The attorneys fees were enhanced by a multiplier of two, and FTB was awarded over $300,000 in attorneys’ fees and costs with interest.

Gibbons will continue to monitor how courts apply Section 285 to address NPE patent litigations.

Charles H. Chevalier is an Associate in the Gibbons Intellectual Property Department. George M. Gould, Counsel to the Gibbons Intellectual Property Department co-authored this post.