IP Law Daily, PATENT—E.D. Wis.: Prevailing defendant denied attorney fees in non-exceptional infringement case, (Jan 29, 2014)

By Mark Engstrom, J.D.

A manufacturer of plastic containers (Rehrig Pacific Corp.) was not entitled to attorney fees after successfully defending a patent infringement suit by a competitor (Orbis Corp.) because the case could not be deemed exceptional, the federal district court in Milwaukee has ruled (Orbis Corp. v. Rehrig Pacific Co., January 27, 2014, Stadtmueller, J.). Rehrig’s motion to classify the case as exceptional was denied.

Background. Orbis filed a patent infringement action against Rehrig, but the lawsuit was dismissed on summary judgment because the patent was invalid under the on-sale bar. Rehrig moved to classify the case as exceptional to qualify for prevailing-party attorney fees.

Applying the principles that were established by the Federal Circuit in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (2005), the court decided that it would not find that the case was exceptional unless it concluded that Orbis had either: (1) engaged in inappropriate behavior or (2) asserted its infringement claims in subjective bad faith—because the litigation was objectively baseless. If the court determined that the case was exceptional, it then had to decide whether an award of attorney fees would be appropriate, and if so, how much the fee award should be.

Rehrig argued that the case was exceptional because Orbis had: (1) engaged in litigation misconduct by continuing to litigate its patent claims after invalidating evidence had emerged; (2) engaged in inequitable conduct when it breached its duty of candor by filing and prosecuting the patent at issue; and (3) filed its lawsuit in subjective bad faith, because the suit was “objectively baseless from its inception “

Litigation misconduct. Rehrig argued that Orbis had acted in bad faith, and thus engaged in litigation misconduct, by filing a lawsuit that it later refused to drop, despite having notice of the potential that its patent was invalid under the on-sale bar.

According to the court, Orbis did not engage in misconduct by filing its lawsuit or by refusing to drop it. Although the court granted summary judgment to Rehrig, the outcome of the case was not “so clear-cut that Orbis’ pursuit of it should be deemed misconduct.” Rehrig noted that a “raft of evidence” supported a finding that Orbis knew that its patent was invalid under the on-sale bar. Without a decision from the court, however, the legal import of that evidence was unclear. The court had acknowledged as much when it previously noted that it was a “much closer question … whether any of [Orbis’ pre-critical date actions] constituted a commercial offer for sale.”

Although the court disagreed with Orbis’s legal arguments, it never concluded that Orbis’s position was unreasonable, objectively baseless, or pursued in bad faith. Moreover, there was no case law in the Federal Circuit that was directly on point and in Rehrig’s favor. The court thus concluded that Orbis was justified in pursuing its lawsuit and seeking summary judgment. For those reasons, the court rejected Rehrig’s argument that the case should be deemed exceptional on the ground of litigation misconduct.

Inequitable conduct in patent filing and prosecution. To receive attorney’s fees based on inequitable conduct in the filing and prosecution of Orbis’s patent, Rehrig had to prove materiality and intent—by clear and convincing evidence.

The court noted that Rehrig had alleged that the inventor, Mr. Stahl, “assumed that Buckhorn had been disclosed to the Patent Office and was surprised and disappointed to learn” that it had not. Nevertheless, neither that allegation nor any of the facts of record could establish by clear and convincing evidence that Orbis had intended to deceive the examiners that were reviewing its patent. At most, Orbis and Mr. Stahl “may have accidentally failed to submit information.” Ultimately, there was no evidence that the mistake was intentional.

For those reasons, the court rejected Rehrig’s argument that this case was exceptional based upon inequitable conduct.

Objective baselessness and subjective bad faith. To prove objective baselessness, Rehrig had to show that Orbis’s legal position was “so unreasonable that no reasonable litigant could believe it would succeed.”

In this case, the court had already found that Orbis’s legal positions were reasonable. The “on-sale bar” issue, which required significant discussion by the court, was “a close one.” The issue required the application of various legal principles to unique facts; it was not resolved through well-settled legal precedent.

Although the court ultimately disagreed with Orbis’s position, the court’s disagreement did not render Orbis’s position unreasonable. The court thus concluded that Orbis’s lawsuit was not objectively baseless. For that reason, Rehrig could not show that the case was exceptional on the basis of subjective bad faith.

The case is No. 12-CV-1073-JPS.

Attorneys: Lisa Colleen Sullivan (Ungaretti & Harris) for Orbis Corp. Dean P. Laing (O’Neil, Cannon, Hollman, DeJong & Laing, SC) and John E. Carlson (Carlson, Gaskey & Olds, PC) for Rehrig Pacific Co.

Companies: Orbis Corp.; Rehrig Pacific Co.

Cases: Patent WisconsinNews