Voluntary Dismissal of Infringement Claims Proves Insufficient to Establish Unreasonableness and Exceptionality Under Octane Fitness

In Munchkin, Inc. v. Luv N’ Care, Ltd., No. 2019-1454 (Fed. Cir. June 8, 2020), the Federal Circuit held that the district court abused its discretion in awarding attorneys’ fees and reversed the district court’s exceptional-case determination.

Munchkin filed a complaint for trademark infringement against Luv N’ Care.  A year later, Munchkin was granted leave to amend its complaint and added new trademark infringement, trade dress infringement, and patent infringement claims.  During the course of the litigation, Munchkin voluntarily dismissed all of its claims except for the patent infringement claim.  Munchkin later voluntarily dismissed the patent infringement claim after the patent was found invalid during an inter partes review.  The district court subsequently granted Luv N’ Care’s motion for attorneys’ fees under 35 U.S.C. § 285.

On appeal, the Federal Circuit began by noting the importance of a full assessment of Munchkin’s position because none of the issues had been fully litigated.  Regarding the patent infringement claim, the Court explained that the district court’s own claim construction ruling favored Munchkin and made Luv N’ Care’s invalidity challenge more challenging.  The Court further explained that the fact that Munchkin’s patent was ultimately invalidated, was insufficient to establish that Munchkin’s infringement claim was unreasonable.  Thus, the Federal Circuit found that the facts did not support the district court’s exceptional-case determination. 

The Federal Circuit similarly took issue with the district court’s exceptional case finding for the trademark and trade dress claims.  The Court reasoned that the district court’s conclusion that Munchkin’s position was unreasonable was at odds with its earlier decision granting Munchkin’s motion to amend the complaint.  The Court further explained that Luv N’ Care failed to adequately establish that Munchkin’s trademark and trade dress claims were objectively unreasonable.  Finally, the Court explained that the mere act of withdrawing the claims was insufficient to support a finding of unreasonableness. Accordingly, the Federal Circuit determined that the facts did not support the district court’s exceptional-case determination.