No Bright-Line Rule Regarding Proportionate Litigation in Exceptional Case Context

In ATEN International Co. v. Uniclass Tech. Co., No. 2018-1922 (Fed. Cir. Aug. 6, 2019), the Federal Circuit affirmed a denial of a motion under 35 U.S.C. § 285, which allows for the award of reasonable attorneys’ fees in exceptional cases.  The motion asked the district court to create a bright-line rule that would make a case exceptional, thereby awarding attorneys’ fees to the prevailing party, if the litigation costs of that case exceeded the potential damages.  This idea, that costs should not exceed potential damages, is referred to as “proportionate litigation.”

The Federal Circuit, affirming the district court’s denial of the motion, refused to make such a rule.  Section 285 jurisprudence has established a flexible standard for determining whether a case is exceptional, asking courts to consider the totality of the circumstances of each case.  A panel consisting of Judges Moore, Wallach, and Taranto determined that making a per se rule that a case is exceptional if litigation costs exceed the potential damages would cut against that jurisprudence.  Additionally, the Federal Circuit noted that there are many litigation strategies beyond seeking damages that could motivate a patent infringement suit.  For example, in International Trade Commission and some Hatch-Waxman cases, only an injunction is sought.  Indeed, ATEN sought injunctive relief in this case, which the Court said in itself undermined Uniclass’s argument.