Rothschild v. Guardian was decided on June 5, 2017 on appeal from the Eastern District of Texas. There, the district court granted plaintiff Rothschild’s voluntary motion to dismiss. The court then denied defendants’ cross motion for attorney fees because Rothschild voluntarily withdrew its complaint within Rule 11’s safe harbor period (motions for sanctions under Rule 11 must be served upon the opposing party, with all supporting documents, 21 days before they can be filed); Rothschild’s arguments were “non-conclusory and facially plausible;” and Rothschild other pending lawsuits did not make the case exceptional. Defendants appealed.
The Federal Circuit reversed the denial of attorney fees and remanded.
On appeal, “all aspects of a district court’s §285 determination [are reviewed] for an abuse of discretion.”
The district court abused its discretion when assessing Rothschild’s litigation position. In its Safe Harbor Notice and motion for attorney fees, defendants included prior art that purportedly anticipate a claim of the patent. In response, Rothschild submitted affidavits stating that it had not analyzed the noted prior art, but asserting that it possessed a good-faith belief that the patent was valid. The district court should have addressed “these incongruent statements.” Although Rothschild asserted that it reviewed publicly available information and determined that the accused product infringed at least one claim of the patent, there was no record support for the declarations (e.g., “examples of websites, product brochures, manuals, or any other publicly available information that they purportedly reviewed”). The “conclusory and unsupported statements from Rothschild” thus had “no evidentiary value.”
The district court abused its discretion when assessing Rothschild’s conduct in other litigation. According to defendants, Rothschild has asserted its patent “in fifty-eight cases against technologies ranging from video cameras to coffeemakers to heat pumps.” Further, defendants contend that “Rothschild has settled the vast majority, if not all, of these cases for significantly below the average cost of defending an infringement lawsuit.” In concluding that Rothschild acted reasonably and without bad faith, the district court relied on Rothschild’s conclusory statements about validity and infringement. However, such conclusory statements “have no evidentiary value.” With no evidence showing that Rothschild engaged in reasonable conduct, “the undisputed evidence regarding Rothschild’s vexatious litigation warrants an affirmative exceptional case finding here.”
Lastly, the district court “erred as a matter of law when… it stated that an attorney fee award under §285 would contravene the aims of Rule 11’s safe-harbor provision.” Whether a party avoid or engages in sanctionable conduct is not the benchmark for awarding attorney fees. “[I]ndeed, a district court may award fees in the rare case in which a party’s unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so exceptional as to justify an award of fees.”
Judge Mayer concurred, arguing that the district court abused its discretion in refusing to award fees because “the infringement complaint… was frivolous on its face.” “Neither nuanced legal analysis nor complex technical inquiry was required to determine that the [patent] could not be both broad enough to cover [the accused product] and narrow enough to withstand subject matter eligibility scrutiny.”
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