by Dennis Crouch
In OneSubsea IP v. FMC Tech (Fed. Cir. 2023), the court has affirmed a district court denial of attorney fees for the successful defendant. A key holding in the case is that denial of summary judgment serves as a big flashing sign that the case is not exceptional.
OSS sued FMC back in 2015 for infringing claims found in ten different patents all relating to subsea processing of hydrocarbons (oil and gas). This includes: adding chemicals, separating water and sand from the hydrocarbons; increasing pressure; etc. The patents required a “flow diverter assembly” to “divert fluids” to and from a processing area. The parties argued about the word “divert.” In the context of the invention, the district court concluded that it required two different potential flowpaths, and that fluid flow must be forced to follow one instead of the other. And simply changing directions is not a diversion.
The two-flowpath requirement was a problem for the patentee. FMC’s accused structure just had one flowpath that passed through the processor as shown in the figure below.
The Proceedings: The district court issued its claim construction back in 2016, but rather than quickly granting summary judgment of non-infringement, it stayed the case pending outcome of parallel inter partes reviews challenging the patents’ validity. Those IPRs resulted in many of the claims being found invalid as obvious, with that determination affirmed by the Federal Circuit without opinion. In 2019, the district court lifted the stay and the case moved toward trial. The district court again refused to grant summary judgment of non-infringement. According to the transcripts, FMC’s counsel presented 3,200 pages of documents illustrating the differences between the patented claims and the accused products. Judge Bennett (S.D.Tex.) thought that depth of factual record was a bit too much for a summary judgment. “And you really think I’m going to be able to grant summary judgment on that?” Judge Bennett asked. Eventually, Judge Bennett excluded OSS’s expert testimony for misapplying its prior claim construction and granted the summary judgment of non-infringement. OSS did not appeal the dismissal.
Attorney Fees: After winning on the merits, FMC moved for attorney fees and non-taxable costs. The district court denied those costs, finding the case to be not exceptional. On appeal, the Federal Circuit affirmed, finding no abuse of discretion.
Section 35 U.S.C. § 285 permits a district court to award reasonable attorney fees to the prevailing party; with the caveat that it may only do so “in exceptional cases.” Under the 2014 decisions of Octane Fitness and Highmark, the Section 285 analysis is a flexible one with the district court having substantial discretion in its determination of whether a particular case is “exceptional” and whether fee shifting is appropriate. In this case, the court noted a “totality of the circumstances” approach should be taken on a “case-by-case” basis. The district court can consider whether the case is an outlier from others in terms of the “substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.” Octane Fitness.
Because district courts are given discretion in making these determinations, the decisions are given deference on appeal and only overturned based upon either: (1) clear error of judgment, (2) clear error in factual finding, or (3) a material error of law. (Note here, the error of law is reviewed de novo).
Deference and Successor Judges: Here, Judge Bennett stepped into the lawsuit at the very end of the case, replacing Judge Atlas who moved to senior status. On appeal, FMC argued that no deference should be given to Judge Bennett’s decision because he had not “lived with the case.” In Highmark, the Supreme Court grounded its decision to give deference to district court decisions upon the fact that district courts are much more into the weeds of the litigation and thus better positioned to judge exceptionally bad behavior. Because Judge Bennett decided the case on written record without even a hearing, FMC suggested that his decision should not be given deference. On appeal though the Federal Circuit rejected that analysis based upon caselaw from the other circuits consistently holding that deference is also given to successor judges discretionary decisions. “The successor judge receives the same deferential review on appeal as the original judge would have received.” Slip Op. Further, “FMC had ample notice that a successor judge would decide its § 285 motion and did not object.”
Exceptional Case: In looking at the exceptional case question, the appellate court concluded that FMC’s failure to achieve an early summary judgment was its own fault. Basically, the original motion for summary judgment was deemed “unpersuasive.” The appellate court then explained the importance of summary judgment denial:
When a district court, fully aware of the competing contentions of the parties, declines to end the case on summary judgment and allows a plaintiff’s case to proceed, the district court may have effectively determined that the position of the party opposing summary judgment is not objectively baseless, making it nearly impossible for the plaintiff’s case (on the issue that was the subject of the summary judgment motion) to “stand out” as lacking substance at that time.
Denial of fees affirmed.
US Patent Nos. 6,637,514, 7,111,687, 8,066,076, 8,122,948, 8,272,435, 8,281,864, 8,540,018, 8,573,306, 8,746,332, and 8,776,893.