Suing for Patent Infringement and Losing After the PTO Warns of Patent Invalidity Results in Attorney Fee Award to Accused Infringer

Abstract

After the U.S. Patent and Trademark Office warned a patent owner that its patent claims were likely ineligible for patent protection, the patent owner sued an accused infringer for patent infringement, and after losing was required to pay the accused infringer’s attorney fees.

Courts may require the losing party in a patent litigation to pay the winner’s attorney’s fees if the case is "exceptional" due to the unusual weakness of the losing party’s litigating position, or due to the unreasonable manner in which the losing party litigated the case. In SAP Am., Inc. v. Investpic, LLC, a Texas court ruled that a patent infringement case was exceptional based on both points—the patent owner’s unreasonable litigation position and its unreasonable conduct during the litigation.

Background

During a post-grant review proceeding, the Patent Office indicated that, although it was confirming that Investpic’s patent claims were novel and not obvious, it had doubts as to whether the subject matter of those claims was eligible for patent protection. As a result, the Patent Office invited Investpic to address this issue in another post grant review proceeding.

SAP then filed a litigation against Investpic asking the court to declare that SAP did not infringe the claims of Investpic’s patent. Despite the Patent Office’s warning that Investpic’s patent may be invalid, Investpic asserted in that litigation that SAP infringed the claims of its patent. The Texas court ultimately ruled that the patent claims were invalid for the reason noted by the patent office and invalidated the patent.

The SAP America Decision

The court required Investpic to pay SAP’s attorney fees for the litigation because it found the Investpic’s position and conduct during the litigation exceptional.

Investpic’s litigating position was exceptional because it flagrantly ignored the Patent Office’s warning that the subject matter of the patent claims might not be eligible for patent protection. It did not accept the Patent Office’s invitation to address the issue in another post grant review proceeding. And it continued to assert its patent against companies like SAP.

Investpic’s litigation conduct was also exceptional due to the conduct of Lee Miller and Samir Varma, two owners of Investpic, who communicated with SAP about the infringement contentions for at least three months under a false pretense. Mr. Lee and Dr. Varma formed a new company and reached out to SAP sales personnel pretending the new company was interested in purchasing products from SAP. They communicated about the infringement contentions, but failed to disclose their relationships with Investpic, and failed to mention their interests in the lawsuit. In light of this behavior, the court concluded the case was exceptional and awarded SAP attorney fees. It declined to add Mr. Miller, Dr. Varma, or their new company as parties that would be directly liable for the fees owed, finding that Mr. Miller’s and Dr. Varma’s interest in Investpic was sufficient to levy the fee award against Investpic alone.

Strategy and Conclusion

This case demonstrates suing for patent infringement and losing after the PTO warns of possible patent invalidity can result the patent owner being ordered to pay the accused infringer’s attorney fees.