Thursday, May 11, 2017

Nova loses exceptional case appeal at CAFC

The outcome for Nova, represented by Donald Dunner, was adverse:

NOVA Chemicals Corp. (Canada) and NOVA Chemicals Inc. (Delaware) (collectively, “NOVA”) appeal the district court’s award of approximately $2.5 million in attorney fees to Dow Chemical Co. (“Dow”) under 35 U.S.C. § 285. NOVA filed the underlying action in equity, seeking relief from a prior judgment that it had infringed certain Dow patents. The only issue in this appeal is whether the district court abused its discretion in finding this case exceptional for purposes of § 285. Because it did not abuse its discretion, we affirm.

Of background

The [district] court, however, granted Dow’s motion under § 285, which allows courts to award “reasonable attorney fees to the prevailing party” in “exceptional cases.” 35 U.S.C. § 285. The district court did so based on the weakness of NOVA’s litigating position and the manner in which NOVA pursued this case. Dow IV, 2015 WL 5766257, at *5–7. In particular, the court reiterated that NOVA’s claims for relief “just didn’t stand up” and were “not even plausible.” Id. at *6 (internal quotation marks omitted); see also id. at *2–3 (reiterating the insufficiency of NOVA’s allegations). It also stated that NOVA “could have dealt with the situation” in “less inflammatory ways.” Id. at *5. The court concluded that, despite the “high burden” applicable, NOVA “nonetheless moved forward with its theories, theories which the [c]ourt ultimately found were not even plausible.” Id. at *6.

Note a nuance in the CAFC decision:

A party whose only option for relief from a prior judgment is to file a separate action in equity should not be disincentivized from doing so if that party has a plausible basis for relief. Therefore, despite the extraordinary nature of relief that NOVA sought, the district court erred to the extent it based its exceptional-case determination on NOVA’s filing of the equity action itself.


To the extent the district court relied on NOVA’s extensive pre-suit diligence to support an exceptional-case finding, doing so would appear counterintuitive. In context, though, we think the better reading is that the district court properly relied on the extensiveness of NOVA’s pre-suit diligence to confirm NOVA’s high burden and the gravity of its allegations. The court did not rely on the pre-suit diligence itself as an independent basis to find the case exceptional. It later clarified that even though NOVA’s pre-suit diligence “undercut[] Dow’s assertion” of bad faith, “it d[id] nothing to sway the [c]ourt to find that this case [wa]s not exceptional.” Id. We agree, as a general matter, that the extent of a party’s pre-suit investigation or how fervently it believed in its allegations does not affect the objective strength of that party’s litigating position.


Any concern regarding the district court’s comparison is tempered because, again, it did not hold that this case stood out merely because NOVA requested that a prior judgment be set aside for fraud whereas many other patent cases do not present such circumstances. The equity action was a direct extension of, and intertwined with, the prior infringement action.3 Requiring the district court in this circumstance to narrow its comparison to other independent actions requesting relief from judgment would run counter to the Supreme Court’s general instruction that “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Octane Fitness, 134 S. Ct. at 1756. The district court therefore did not commit reversible error in comparing this case to patent cases more generally.


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