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Claim Construction Not Based on the Intrinsic Record and Pursuit of Baseless Infringement Action Result in a $5 Million Fee Award

January 03, 2012

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Last Month at the Federal Circuit - February 2012

Judges: Newman, Prost, O'Malley

[Appealed from: S.D. Ill., Chief Judge Herndon]

In MarcTec, LLC v. Johnson & Johnson, No. 10-1285 (Fed. Cir. Jan. 3, 2012), the Federal Circuit affirmed the district court’s exceptional case finding under 35 U.S.C. § 285 and held that the district court did not abuse its discretion in awarding attorney and expert witness fees under its inherent authority. The patents-in-suit, assigned to MarcTec, LLC (“MarcTec”), are directed to a surgical implant in which a polymeric material is bonded by heat to an expandable implant, where the polymer includes a therapeutic agent such as an antibiotic. MarcTec brought suit against Cordis Corporation and Johnson & Johnson (collectively “Cordis”), alleging that Cordis’s Cypher stent infringed its patents. Following claim construction, the district court granted Cordis’s motion for SJ of noninfringement. In a prior appeal, the Federal Circuit affirmed the district court’s claim construction and judgment of noninfringement.

Thereafter, the district court granted Cordis’s motion to declare the case exceptional and be compensated for its reasonable attorney and expert witness fees. The district court found MarcTec’s infringement allegations “baseless” and “frivolous,” that MarcTec acted in “bad faith” by bringing and maintaining the litigation, and awarded Cordis nearly $4 million in attorney fees and expenses and nearly $1 million in expert fees. MarcTec appealed.

The Federal Circuit first held that the district court did not err in awarding attorney fees because the district court found that MarcTec (1) acted in bad faith in filing a baseless infringement action and continuing to pursue it despite no evidence of infringement; and (2) engaged in vexatious and unjustified litigation conduct that unnecessarily prolonged the proceedings and forced Cordis to incur substantial expenses. The Federal Circuit rejected MarcTec’s challenge to the district court’s award because the court’s findings were consistent with and fully supportive of a finding of subjective bad faith, even though the court did not specifically state that the bad faith found was “subjective.” Three findings by the district court supported a finding of subjective bad faith: (1) the patentee amended the claims during prosecution to reflect that the invention required the application of heat, whereas the accused product did not use heat; (2) the patentee represented to the PTO that the claims excluded stents to obtain allowance, but asserted that Cordis’s stent infringed; and (3) even after MarcTec had evidence establishing that heat-bonding, which the patentee told the PTO was required for the claims, was not used in Cordis’s manufacturing process, MarcTec pursued its suit by relying on mischaracterizations of the claim construction and unreliable and irrelevant expert testimony. While “[d]efeat of a litigation position, even on summary judgment, does not warrant an automatic finding that the suit was objectively baseless,” slip op. at 19 (alteration in original) (citation omitted), MarcTec’s proposed claim construction was “so lacking in any evidentiary support that assertion of this construction was unreasonable and reflects a lack of good faith,” id. Thus, the Court found that MarcTec’s proposed construction and decision to continue litigation after claim construction supported the district court’s exceptional case finding.

Second, the Federal Circuit found that MarcTec’s litigation misconduct provided a separate and independent basis supporting the district court’s exceptional case finding. Specifically, MarcTec engaged in litigation misconduct by advancing unfounded arguments that unnecessarily extended the litigation and caused Cordis to incur needless litigation expenses by (1) misrepresenting “both the law of claim construction and the constructions ultimately adopted by the court”; and (2) introducing and relying on “expert testimony that failed to meet even minimal standards of reliability . . . .” Id. at 21. Thus, the Federal Circuit concluded that the district court did not abuse its discretion in awarding attorney fees.

Lastly, the Federal Circuit held that the district court did not abuse its discretion in awarding expert fees. While the Court recognized that it is a “better practice” for a district court to analyze expert witness fees separately and explain why an award of attorney fees under § 285 is insufficient to sanction the patentee, the Federal Circuit found that “the circumstances in this case justify the district court’s decision granting expert witness fees.” Id. at 24. In particular, “(1) Cordis was forced to incur expert witness expenses to rebut MarcTec’s unreliable and irrelevant expert testimony which was excluded under Daubert; and (2) the amount Cordis was required to expend on experts was not compensable under § 285.” Id. at 24-25.

Summary authored by Uttam G. Dubal, Esq.