Munchkin v. Luv N’ Care was decided on June 8, 2020, on appeal from the Central District of California. Plaintiff Munchkin sued Defendant Luv N’ Care for unfair competition, trademark infringement, trade dress infringement, and patent infringement. Subsequently, Luv N’ Care filed an IPR petition at the PTAB, which was instituted. “[C]laiming it wanted to streamline the litigation,” Munchkin dropped all of its non-patent claims at the district court. The PTAB invalidated the asserted patent in a final decision, which was affirmed. Munchkin then dropped its patent claim in the district court. The district court granted Luv N’ Care’s motion for attorney fees, “determining that Munchkin’s claim for trademark infringement…, trade dress infringement claims, and patent infringement claim were all so substantively weak as to render the case exceptional.” “Included in that fee award were [Luv N’ Care] attorney’s fees for litigating the IPR.” Munchkin appealed.
The Federal Circuit reversed the grant of attorney fees for trademark, trade dress, and patent infringement.
The district court abused its discretion in awarding attorney fees. “The district court’s decision awarding [Luv N’ Care] its attorney’s fees never adequately explains why Munchkin’s validity position was unreasonable when the district court’s claim construction ruling favored Munchkin and erected a serious hurdle to [Luv N’ Care’s] invalidity challenge.” “The relevant question for purposes of assessing the strength of Munchkin’s validity position is not whether its proposed construction is correct; rather the relevant question is whether it is reasonable.” Here, the district court did not “address, in any fact-intensive way, the relative strength and reasonableness of Munchkin’s validity position,” which was “keyed to its claim construction argument—an argument that the district court itself had accepted in its Markman order.”
Luv N’ Care’ argued that Munchkin was unreasonable in maintaining its patent infringement lawsuit once the PTAB instituted the IPR because (1) statistics indicated that the PTAB cancels some of the instituted claims 85% of the time and cancels all of the claims 68% of the time, (2) the PTAB found all of the asserted claims unpatentable, and (3) the Federal Circuit summarily affirmed that decision. The district court was “led astray” by this argument.
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“These IPR statistics combined with the merits outcome are not enough, for they tell us nothing about the substantive strength of Munchkin’s litigating position (considering both the governing law and the facts of the case).” (parenthesis and emphasis in opinion). “That Munchkin’s patent was ultimately held unpatentable does not alone translate to finding its defense of the patent unreasonable.” “Nor are the merits outcomes of other patent owners’ IPR cases material, as those case outcomes are based on their own, different facts.” “[Luv N’ Care] cannot point to any statement by the Patent Board suggesting that it viewed Munchkin’s position to be frivolous or anything out of the ordinary, nor did it or the district court ever conduct that required substantive analysis to demonstrate that Munchkin’s defense was so meritless as to stand out from the norm.”
The Federal Circuit thus reversed the grant of attorney fees.