Last week, Judge Noreika denied defendant Shopify Inc.'s motion for attorneys' fees under 35 U.S.C. § 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party."), holding Shopify partly accountable for the amount of fees it incurred during the relatively short pendency of the case. While the opinion is worth reading in its entirety, there are two particularly notable aspects to the decision.
First, Judge Noreika found that Shopify was the "prevailing party," on the basis of the plaintiff's voluntary dismissal of its case with prejudice. While the Court had not issued any merits-based decisions prior to the dismissal, and did not itself effectuate the dismissal (it was self-executing under Rule 41), Judge Noreika held that the voluntary dismissal nonetheless left Shopify as the prevailing party.
Citing recent Federal Court precedent holding that a stipulated dismissal with prejudice would support a prevailing party finding under Section 285, she explained that the protection afforded Shopify by the "with prejudice" dismissal is "the type of 'material alteration of the legal relationship of the parties' that is the touchstone of the prevailing-party inquiry."
Second, in the context of analyzing the plaintiff's litigation tactics for the purposes of determining whether they rendered the case exceptional, Judge Noreika found that Shopify itself shouldered some of the blame for the fees it incurred, and that its conduct therefore weighed against a finding of exceptionality.
She concluded that while Shopify "had no obligation to engage in what it viewed as 'nuisance settlement' negotiations with Plaintiff," it could have shared the basis for its motion to dismiss prior to drafting it, which may have led plaintiff to dismiss its claims earlier. Instead, the Judge pointed out, Shopify "accrued an incredible $45,332 in attorneys' fees in preparing a motion to dismiss that was never filed or argued."
Although the Judge expressed concern about some of plaintiff's litigation tactics (in particular she noted the "sloppiness" and "lack of effort" exhibited by plaintiff in assembling its "haphazard" complaint), she declined to award Shopify its fees for the motion to dismiss under the totality of the circumstances, finding that "[b]oth sides contributed in their own way to this apparently unnecessary litigation and the resulting price tag."
Whether you agree that $45k is an incredible amount for a motion to dismiss and brief, it is worth keeping in mind that the movant's conduct and its churn may undermine an eventual fee motion.
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