Argument Recap

Last week the Federal Circuit heard three cases that attracted amicus briefs. In the first of these three cases, Dragon Intellectual Property v. Dish Network LLC, Dish Network and Sirius XM Radio presented three questions to the court. As we noted in our argument preview, all three questions revolve around the district court’s finding that they were not prevailing parties and therefore not entitled to attorneys’ fees. The district court reached these conclusions after determining the case had become moot as a result of the Patent Trial and Appeal Board’s cancellation of the underlying patent-in-suit. On Tuesday, Dish Network and Sirius XM Radio, along with the appellee’s attorney (representing himself, his co-counsel, and his firm), presented their arguments to a panel that included Judges Lourie, Moore, and Stoll. This is our argument recap.

Jamie Lynn argued for Dish Network LLC. He began by arguing that Dish Network and Sirius XM Radio are the prevailing parties because they “have prevailed and rebuffed Dragon before three tribunals,” including in an inter partes review before the PTAB. Early in his argument, he cited the Federal Circuit’s recent decision in B.E. Technology, L.L.C. v. Facebook, Inc., and argued that “the reasoning is applicable here and should be applied here to find that we are the prevailing parties.” He explained that, as in that case, here “we went to the PTAB and succeeded.” He agreed with one of the judges’ characterizations of his position that he was “only arguing that the party that took the time, effort, and money to successfully challenge the patent through the IPR, and who happened to simultaneously be sued, should be deemed the prevailing party because they did in the IPR what they would have or could have or might have had to do in the district court litigation.” Lynn went on to contend that, under the current state of the law, the decision below “can’t stand.” One of the judges agreed: “I don’t see any daylight between this case and B.E. Tech.” Indeed, she later said: “You can tell, I probably agree with you . . . on the things we’ve discussed so far.”

“However,” she continued, “when you start asking for a quantum of attorneys’ fees related to whatever it is you may or may not have spent in the IPR proceeding, that’s when I start getting a little uncomfortable with your position.” She went on to explain that IPR proceedings do not involve fee shifting, and there is “nothing in the IPR statute that allows for fee shifting.” When Lynn responded that for frivolous cases he believed you could get fees from the PTAB, Judge Lourie interjected, that “that’s the point: Go to the PTAB.” When Lynn continued to press his argument to obtain from the district court attorney’s fees incurred by his client at the PTAB, one of the judges asked, seemingly dumbfounded, “How can you argue that?” Lynn responded that attorneys’ fees incurred in administrative proceedings are recoverable when the “administrative proceedings [that occur] in parallel to district court litigation are useful and necessary to the litigation and replace things that would have taken place in the litigation.” A judge pointed out that Lynn’s position would contradict one of the purposes of the AIA, which was to reduce litigation, because the position would make attorneys’ fees incurred at the PTAB recoverable only when there was parallel district court litigation. She went on to say that, if Lynn were right, she would file a declaratory judgment action in district court every time she filed an IPR petition at the PTAB, “and then [she’d] ask the district court to stay [the litigation] while the IPR was ongoing.” Lynn responded that rejecting his position would create a greater problem; if he confronted a likely-invalid patent in litigation, he might avoid going to the PTAB to cancel the patent given the inability to recover fees there despite the PTAB’s more efficient proceeding, and instead seek to invalidate the patent in court and then recover his fees. “It actually dissuades people from going to the PTAB,” he concluded. When Lynn cited a Federal Circuit case as support for his position, one of the judge highlighted that that case “said the parties were required to participate in the reissue proceeding, and that requirement is why they awarded fees.” Lynn then sought to avoid a holding that distinguished that case based on the lack of a requirement by the district court here to participate in the IPR. But the judge was not swayed by his argument: “I’ll tell you flat out I think [that case] was wrongly decided, but, lucky for me, [the opinion] says [the court] found that [participation in the reexamination] was required.”

Lynn concluded his opening argument by stating that “it sounds like I’m not convincing at least two of you.” Perhaps also sensing the tenor of the argument, Mark Baghdassarian, who had planned to argue for Sirius XM Radio Inc. for just one minute, yielded his time. In response, Judge Lourie remarked, “That’s wise.”

Robert E. Freitas argued for Jason S. Angell, Freitas & Weinberg LLP, and himself. While he argued that B.E. Tech is not controlling because it allegedly contradicts “70-years of Supreme Court precedent,” one of the judges responded that she “ha[d] to follow B.E. Tech; I don’t have a choice; it is binding precedent on this panel, and, since I have to follow B.E. Tech, your only argument, it seems to me, is to the en banc court that B.E. Tech is wrongly decided.” Freitas responded that he was distinguishing that case, but anyway he agreed he was also arguing that B.E. Tech was wrongly decided. Moreover, he argued, anyway prevailing at the PTAB does not make a party a prevailing party in district court because of both the governing statute and the relevant precedent.

Regarding the scope or reach of the exceptional case statute, Freitas maintained it does not pertain to a party’s lawyers, such as himself. He focused on the absence of any language in 35 U.S.C. § 285 identifying lawyers as being responsible for paying the prevailing party’s attorneys’ fees, and precedent allegedly requiring express language reversing the default rule that parties’ attorneys are not responsible to pay their clients’ liabilities to pay their adversaries’ attorneys’ fees. In response to the point that Federal Rule of Civil Procedure 11 allows attorneys to be held jointly and severally liable with their clients for paying attorneys’ fees, Freitas argued that Rule 11 makes this point expressly. “When lawyers are not carved in,” he explained, as in § 285, “they’re not in.” Judge Lourie then pointed out that “[t]here were no fees assessed against attorneys here.”

Lynn clarified in his rebuttal time that his client was not just asking for attorneys’ fees for the time spent at the PTAB, but also for attorneys’ fees for the work in the district court litigation and appeals. He finally argued that it is in the court’s discretion to decide the issue of whether attorneys are jointly liable for an award of attorneys’ fees under § 285, and, for support for his position that attorneys may be responsible, he cited to the way courts have awarded fees under Federal Rule of Appellate Procedure 38, “which says nothing about who has to pay the fees.”

Given B.E. Tech and the oral argument, it seems likely the panel will at least vacate if not reverse the judgment here. The panel will likely hold that mootness as a result of a party succeeding in canceling the patent-in-suit through a parallel IPR proceeding does not eliminate the possibility that the party was a prevailing party in the district court litigation. That said, it also appears likely that the panel will hold that, even if deemed a prevailing party, a party may not use § 285 to obtain an award covering attorneys’ fees it incurred in prosecuting an IPR proceeding.

We will watch for the court’s disposition of the case and report on it.