Attorneys spend a lot of time threatening fee awards when dealing with an NPE, even though they can be challenging to get. So I always think it's interesting to see what kinds of behavior will support a fee award.
Last week, Judge Williams issued a memorandum order granting fees in Extremity Medical, LLC v. Nextremity Solutions, LLC, C.A. No. 22-239-GBW (D. Del.). The Court listed three bases for its fee award. First, the patentee made zero showing of any pre-suit investigation of invalidity:
[T]here is no dispute that Defendants notified Plaintiff of [prior art references] Marcus and Chandran several years prior to the date in which this matter was filed. While the Court noted supra that Defendants' pre-litigation letters, without more, do not demonstrate that Plaintiff had knowledge of the invalidity of Claim 59, Plaintiff cannot dispute that, at minimum, the letters placed Plaintiff on notice of Defendants' intent to challenge the validity of its patent. Thus, before filing its infringement claim, Plaintiff should have conducted some investigation into the validity of Claim 59. . . . Yet, as Defendants note, Plaintiff presents no evidence that it engaged in any form of pre-suit investigation. . . . Given no evidence to the contrary, the Court is left to assume that Plaintiff did not conduct a pre-suit investigation before initiating litigation against Defendants for infringement. . . . Such an "absence of any reasonable pre-suit investigation" by Plaintiff "counsel[s] in favor of an 'exceptional case' finding . . ."
Extremity Medical, LLC v. Nextremity Solutions, LLC, C.A. No. 22-239-GBW, at 5-6 (D. Del. Oct. 3, 2024).
Second, they just flat-out did not defend the invalidity of one of the claims during the IPR:
Plaintiff made no attempt during IPR "to explain or point to any feature in [C]laim 59 that was not disclosed in either Marcus or Chandran, [Plaintiff] never offered any claim construction position that could raise any issue regarding anticipation of [Claim 59 by Marcus or Chandran, and [Plaintiff] offered no expert testimony to contest the expert testimony of Defendants' expert that claim 59 was anticipated by Marcus and Chandran." . . . Given that Plaintiff pursued this litigation in the first instance, it is extraordinary that Plaintiff "never articulated an infringement theory" during IPR and instead chose to concede the invalidity of its patent. . . .
While Plaintiff contends that it "could have" presented substantive evidence to support the validity of Claim 59, this argument does not change the fact that Plaintiff ultimately did not do so. . . .
Id. at 6-7. The Court also considered that plaintiff increased its settlement demand after the PTAB issued guidance that it would not be able to amend:
Plaintiff noted that it sought to amend Claim 59 in the alternative in case Claim 59 did not survive IPR. . . . [O]nce the Board issued a negative guidance to its petition to amend Claim 59, it should have been apparent to Plaintiff that its infringement claim would likely fail given that Plaintiff had already conceded invalidity of Claim 59 and the Board expressed that Plaintiff would not be allowed to amend the claim. Yet, Plaintiff does not dispute that, immediately following the Board's negative guidance, Plaintiff increased its settlement offer despite the expected fate of Claim 59. . . . Because Plaintiff had an ongoing obligation to assess the soundness of its infringement claim throughout litigation, Plaintiff's attempt to demand increased settlements even after the Board's negative guidance supports a finding that Plaintiff intended to use this litigation "to extract an unreasonable and exploitive settlement" from Defendants.
Id. at 7-8. According to the briefing, the plaintiff initially demanded $500k and a 4% royalty, and upped that demand to $500k and a 6% royalty after the PTAB indicated it wasn't going to be able to amend.
Third, the plaintiff made no validity arguments at the district court level either:
Plaintiff's utter failure to present the Court with any substantive arguments in favor of its litigation position, both during the district court litigation and in response to this motion, demonstrates that this matter is exceptional. . . . In seeking fees, Defendants maintained that Plaintiff pursued litigation without an objective basis that Claim 59 was valid. D.I. 35 at 6. Yet, in response to this claim, Plaintiff did not make any attempt to offer substantive arguments to support its position as to the validity of Claim 59. Given Plaintiff's continued failure to present any basis that Claim 59 is valid throughout the district court litigation, IPR, and in response to this present motion, the Court is once again left to assume that no such basis exists.
Id. at 8-9.
The Court ultimately awarded $52,573 in fees.
Honestly, it's going to be rare for a case to have facts that are this good for fees, including notice before filing and a total lack of any validity defense before both the PTAB and the District Court. Still, it's another data point!
Was This a Competitor Case?? (And Other Notes)
Some interesting side notes about this decision and the briefing:
- It looks like this was a competitor case, rather than an NPE case as you might have thought from the Court's finding that the plaintiff completely failed to articulate a validity position. Per the complaint, the parties here are plaintiff Extremity Medical and defendant Nextremity Solutions, Inc., and the patentee has 39 patents. D.I. 1 ¶¶ 2-3, 15.
- The attorneys' hourly rates are not sealed and are available on the public docket. See D.I. 36, ¶ 4. Those are always interesting but are most often sealed in these kinds of filings. Keep this case in mind for next time you need something to cite for the reasonableness/unreasonableness of an hourly rate in a future fees motion.
- The Court here relied on settlement communications to grant fees. Remember that Federal Rule of Evidence 408 provides only limited protection for settlement communications. For whatever reason, attorneys often seem to think that their settlement communications are somehow absolutely sealed by default and cannot be used for any purpose under FRE 408. Not so. That rule addresses admissibility, and even then only admissibility as to certain issues ("to prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction").
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