Defendants Can Recover Fees for “Baseless” Infringement Allegations Even When Non-Infringement Decision Vacated as Moot by IPR, but Cannot Recover from Counsel or for the Related IPR

In Dragon Intellectual Property LLC v. Dish Network L.L.C. et al, Nos. 2022-1621, 2022-1777 (Fed. Cir. May 20, 2024), the Federal Circuit resolved cross appeals on an attorney’s fees under 35 U.S.C. § 285. 

Below, the district court ordered a claim construction based on clear prosecution history disclaimer. This led the parties to stipulate to noninfringement, so the court issued a judgment of noninfringement. Dragon then appealed the noninfringement and underlying construction. But the patents were invalidated in an IPR decision that was upheld on appeal, while Dragon’s concurrent appeal on noninfringement was denied. Subsequently, at Dragon’s request, the district court vacated judgment of noninfringement as moot. 

The defendants moved for attorneys’ fees under § 285, which the district court initially denied.  The court found defendants not “prevailing parties” under § 285 because their victory arose from the parallel IPR, a different proceeding. But the Federal Circuit reversed, granting “prevailing party” status for the IPR win. Dragon Intell. Prop., LLC v. DISH Network LLC, 956 F.3d 1358, 1361–62 (Fed. Cir. 2020).

On remand, the district court found the cases exceptional based in part on prosecution history disclaimer. The court (i) awarded fees for litigation but (ii) denied IPR fees and (iii) denied recovery from Dragon’s former counsel. The Federal Circuit affirmed all three rulings on appeal, with a dissent on the issue of IPR fees.

Regarding litigation fees, the Federal Circuit disagreed with Dragon’s contention it could not be held liable for fees because vacatur rendered the fees award unreviewable. Dragon had argued vacatur of non-infringement also vacated the claim construction that supported the fees decision. The Federal Circuit noted the district court vacated the noninfringement judgment alone and Dragon had not sought vacatur of claim construction. It further reasoned the court considered prosecution history and claim construction multiple times, including when addressing attorneys’ fees, thus finding the issue adequately considered for purposes of § 285.

Next, the Federal Circuit declined to extend fee liability to counsel. The Court emphasized that § 285 is silent as to who may be liable, while other statutes and rules that extend fee liability to counsel do so explicitly. 

Finally, in upholding denial of fees for a related IPR, the majority found IPRs ineligible under § 285 because they are not cases before the district court. The majority emphasized that defendants choose voluntarily to file IPRs. The court also reasoned that including IPRs under § 285 would task judges with evaluating exceptionality in a proceeding in which they were uninvolved.

Judge Bencivengo, an SDCA judge sitting by designation, dissented on the issue of IPR fees. The dissent reasoned defendants filed the IPR only because Dragon initiated the lawsuit, which was an available statutory option for defense. The dissent further noted Appellants only obtained “prevailing party” status under the statute because of their IPR victory. Judge Bencivengo disagreed that allowing recovery for IPR fees would force district judges to evaluate conduct in IPR proceedings and urged that § 285 allows recovery of “fees incurred in an IPR that resolved any invalidity defenses that were required to be asserted in response to [a] baseless complaint.”