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Rothwell Figg Attorney and Member Steven Lieberman Quoted in IP Law360 Article

Article analyzes recent Vizio Inc. patent case and its impact on how litigants can secure fees

April 20, 2015

Rothwell Figg attorney and member Steve Lieberman recently was quoted in IP Law360 focusing on a recent Visio Inc. patent case involving litigation misconduct and how litigants can secure fees.

Cleick here to read the article online.

Fed. Circ. Rebuke To Fuel Heated Disputes On Attys' Fees
by Ryan Davis

Law360, New York (April 20, 2015, 5:16 PM ET) -- The Federal Circuit's recent ruling that a district judge was wrong to not award attorneys' fees to Vizio Inc. in a patent case involving litigation misconduct by the opposing side provides useful guidance on how litigants can secure fees, but it may spark bitter fights in future cases, attorneys say.

In an April 10 decision, the appeals court found that U.S. District Judge Mariana Pfaelzer abused her discretion by denying Vizio's request for attorneys' fees despite finding the case exceptional and describing conduct by plaintiff Oplus Technologies Ltd. and its attorneys from Niro Haller & Niro Ltd. that she said "flouted the standards of appropriate conduct and professional behavior."

The Federal Circuit said that it could not understand the judge's conclusion that fees were not appropriate because the misconduct did not increase the litigation costs for Vizio, which had earlier won summary judgment that it did not infringe Oplus' video signal patents.

"Given that the district court found counsel's behavior 'inappropriate,' 'unprofessional,' 'vexatious,' and 'harassing,' it is difficult to imagine how Vizio had not incurred additional expenses defending against such filings," the appeals court wrote.

The court's decision to order Judge Pfaelzer to reconsider her decision is notable because it gives an indication of the type of case where the Federal Circuit believes fee awards are appropriate in light of the U.S. Supreme Court's Octane Fitness ruling relaxing the standard for awarding fees, attorneys say.

"We've seen a number of cases where judges have refused to award attorneys' fees, but this shows the Federal Circuit is ready to see attorneys' fee awards granted in the right case," said Maya Eckstein of Hunton & Williams LLP.

The Vizio decision clearly shows that litigation misconduct can be a solid ground for a fee award, Eckstein said, so "if you can do a good job of showing your opponent's misconduct, you should have a better change of getting fees."

The Vizio and Octane rulings are going to make attorneys' fees in patent litigation an even more hotly debated issue that will arise in more cases, said Steven Lieberman of Rothwell Figg Ernst & Manbeck PC.

"Lawyers and their clients are going to seek fees at the district court level, and if they're denied, they're going to inject that issue on appeal," he said.

He said he worries that as a result of the decision highlighting that litigation misconduct is grounds for attorneys' fees, "patent litigation will become a mud wrestling match," with attorneys on each side trying to argue that their opponent engaged in misconduct to bolster their chances of winning fees.

"It’s going to decrease civility and collegiality, rather than the opposite," he said. "In the course of a case, there are thousands of interactions between attorneys, and every email, every objection in deposition will be potential fodder for an accusation of litigation misconduct."

That has the potential to make patent litigation unpleasant for litigants and judges, since the briefing on such issues can get very personal and "it's very hard to maintain a relationship with someone accusing you of litigation misconduct," he said. "Overall, it's a tremendous detriment to the profession."

It will take some time for the courts to find the right balance on when fees are appropriate, but until that happens, it will continue to be a contentious issue, he said.

The April 2014 Octane Fitness ruling appears to have made courts more likely to award attorneys' fees in patent cases. According to a report last week by the Federal Circuit Bar Association, the rate at which district courts have granted fees to prevailing accused infringers has nearly tripled in the 11 months since the decision compared to the 12 months leading up to it.

In Octane Fitness, the high court held that fees are appropriate if the losing party's conduct "stands out from others" and threw out a strict standard for awarding fees that the Federal Circuit had previously used.

The same day, the justices held in a case known as Highmark that district court fee awards are entitled to deference on appeal and can only be reviewed for abuse of discretion.

Judge Pfaelzer's denial of fees came several months before those decisions, but the Federal Circuit invoked both of them. The appeals court held that she had abused her discretion under Highmark by denying fees and ordered her to review her ruling under the revised Octane standard.

"The district court ruling came out before Octane Fitness, so the court could have vacated and remanded and said look at it again under Octane, but it went so far as to say this was an abuse of discretion," Eckstein said.

Vizio said in a statement last week that the decision strengthens protection for companies seeking fees in patent cases, particularly those involving what the company called baseless claims by patent trolls.

"The Federal Circuit's recent guidance regarding Vizio's proper request to recover its attorneys' fees sets a precedent for meritless patent assertions and we are grateful that the Federal Circuit is recognizing this serious problem," Vizio general counsel Jerry Huang said.

The Federal Circuit decision puts judges who are not inclined to award fees in the face of misconduct on notice, noting that while judges have discretion in awarding fees, "when, as here, a court finds litigation misconduct and that a case is exceptional, the court must articulate the reasons for its fee decision."

According to Vizio's Federal Circuit brief, Judge Pfaelzer made several statements in court indicating that she had an "arbitrary and personal mandate never to award fees."

At one point, the brief said, she told Oplus' attorney: "I want to make this representation to you. I don’t give attorneys' fees," even in cases of litigation misconduct.

There are some judges who don't believe in awarding attorneys' fees and adhere to the "American rule" that both sides in litigation are responsible for their own fees. However, the Federal Circuit made clear that their ability to deny fees is not unfettered.

"Now the court is telling district court judges that you can’t just decline to award fees without an explanation, you have to articulate a rationale," Lieberman said.

The case is Oplus Technologies Ltd. v. Vizio Inc., case number 14-1297, in the U.S. Court of Appeals for the Federal Circuit.

Editing by Jeremy Barker and Kelly Duncan.