2024 Federal Circuit IP Appeals – Dragon Intellectual Property LLC v. DISH Network L.L.C., 101 F.4th 1366 (Fed. Cir. 2024) (Moore, Stoll, Bencivengo)

Dragon sued several defendants for infringement. In response, two defendants—DISH and Sirius—wrote to Dragon’s counsel asserting that a reasonable pre-suit investigation would have demonstrated that their products did not infringe. DISH and Sirius also challenged Dragon’s patent in an IPR. After institution, the district court stayed the case against DISH and Sirius but proceeded with claim construction as to the other defendants.

After claim construction, all parties stipulated that the defendants’ accused products did not infringe, and the district court entered final judgment of non-infringement. Meanwhile, the Patent Trial & Appeal Board held all asserted claims unpatentable. The Federal Circuit affirmed the Board’s decision and dismissed Dragon’s appeal of the district court’s judgment as moot.

The district court ultimately awarded DISH and Sirius the attorneys’ fees they had incurred litigating the district-court case. The court declined to award the fees they incurred in the IPRs or to hold Dragon’s counsel liable for the fee award. Both parties appealed.

The Federal Circuit affirmed. As to Dragon’s appeal, the court upheld the award of fees. Dragon had made a “clear prosecution history disclaimer” that “precluded a finding of infringement” and also had access to public information “demonstrating noninfringement.” And Dragon continued litigating even “after being put on notice of the objective baselessness” of its allegations. The court rejected Dragon’s argument that an exceptionality finding was not appropriate because the district court had eventually vacated its judgment of non-infringement after the patents were invalidated. The exceptionality finding, the Federal Circuit held, was well supported by the district court’s “independent[]” analysis of the weaknesses of Dragon’s infringement arguments.

As to the defendants’ appeal, the court held that 35 U.S.C. § 285’s reference to “cases” does not include IPRs, and therefore IPR fees are not recoverable under the statute. DISH and Sirius, the court explained, “voluntarily pursued” IPRs instead of arguing invalidity in district court. The court noted that district courts are not well-positioned to assess “the exceptionality of arguments, conduct, and behavior in a proceeding in which they had no involvement.”

The Federal Circuit also agreed with the district court that “liability for attorneys’ fees awarded under § 285 does not extend to counsel.” The court explained that “other statutes explicitly allow parties to recover costs and fees from counsel” and therefore reasoned that § 285’s silence on the issue indicated Congress’s intent that counsel should not be held jointly liable for a fee award.

Judge Bencivengo dissented as to the IPR-fees issue. She reasoned that DISH and Sirius had “exercised their statutory option to litigate their affirmative defenses in IPR” and that the IPR “substituted for district court litigation on [their] validity challenge.” She also contended that an award of fees was warranted because DISH and Sirius “incurred fees in the IPR that they would not have incurred but for being sued” in a case that should never have been brought.

Related:

• Realtime Adaptive Streaming L.L.C. v. Sling TV, L.L.C., 113 F.4th 1348 (Fed. Cir. 2024) (vacating and remanding exceptional case finding because, while decisions by other courts finding claims of a related patent ineligible could support a finding of exceptionality, the other “red flags” identified by the district court were not sufficiently probative).

This article appeared in the 2024 Federal Circuit IP Appeals: Summaries of Key 2024 Decisions report.