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IP Alert: Octane Fitness Standard Works Both Ways

February 1, 2016

Today, in Site Update Solutions, LLC v. CBS Corp. et al., the Court of Appeals for the Federal Circuit affirmed an order of the Northern District of California denying a defendant’s motion for attorney’s fees under 35 U.S.C. 285. Holding that the “abuse of discretion” standard applies, the court observed that “[t]he new Octane Fitness standard for an exceptional case applies both ways: discretion is entitled to a district court’s findings that § 285 attorney’s fees are not applicable, as much as discretion is owed to findings that they are applicable.”

The plaintiff, Site Update Solutions, LLC, asserted a patent against a number of companies, including defendant Newegg Inc. After a Markman hearing resulted in a claim construction that was unfavorable to the plaintiff, the parties stipulated to the dismissal with prejudice of all of the claims against Newegg. Newegg then moved for attorneys’ fees on the basis that the case was exceptional under 35 U.S.C. 285, but the court denied this motion.

In 2014, on Newegg’s initial appeal, the Federal Circuit remanded in the wake of the U.S. Supreme Court’s decision in Octane Fitness, LCC v. Icon Health and Fitness, Inc. As previously reported, in that case the Supreme Court established a new standard for the award of attorney’s fees and the determination of whether a patent case may be found “exceptional.”

On remand, the district court again denied Newegg’s motion for fees, providing several reasons for this decision in a lengthy opinion. Newegg appealed again. Newegg asserted that the case “stands out” because the plaintiff’s “practice of extracting nuisance value settlements as a business model warrants fees.” A number of electronics companies submitted an amicus brief in support of this position.

On appeal, the Federal Circuit affirmed the denial of fees. Noting that the review of the denial of a motion for attorney’s fees was under the “abuse of discretion” standard, the Federal Circuit found no reason to disturb the district court’s judgment. Observing that the Octane Fitness standard “applies both ways,” the court explained that “matters of attorney’s fees, and the effective contours illuminating this area, are committed to the sound discretion of the trial court.” Finding no reason to believe that the district court had abused its discretion, the Federal Circuit concluded that there was no basis to overturn the denial of attorney’s fees.

The court classified today’s decision as nonprecedential. Nonetheless, the decision is notable in that it elucidates the standards for obtaining attorney’s fees and the role of the appellate court when fees have been awarded or denied. Please contact any Fitch Even attorney with questions concerning today’s decision.

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