Dragon Intellectual Property, LLC v. Dish Network LLC (Fed. Cir. 2020)

After Dragon sued DISH for patent infringement back in 2013, DISH collaterally attacked the patent with an inter partes review (IPR) proceeding against the asserted US5930444. The district court partially stayed the litigation — stayed as to DISH and another IPR filer (SXM), but continued the litigation proceedings as to eight other defendants.

Things didn’t go so well for Dragon. Following a claim construction, the district court entered judgment of non-infringement in favor of all defendants (April 2016). Then, the PTAB came back cancelling all of the asserted claims (June 2016). On appeal, the Federal Circuit affirmed the PTAB cancellation and dismissed the district court appeal as moot. On remand, the district court then vacated its prior non-infringement decision and also dismissed the case as moot under US Bancorp and Munsingwear. “A party who seeks review of the merits of an adverse ruling, but is frustrated by the vagaries of circumstance, ought not in fairness be forced to acquiesce in the judgment” U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 25 (1994).

Following the dismissal for mootness, DISH and SXM requested attorney fees under 35 U.S.C. § 285 as the prevailing parties. The district court denied the motion — finding that the parties won the case, but don’t actually count as “prevailing parties” as required by the statute.

The court in exceptional cases may award reasonable attorney fees to the prevailing party.

35 U.S.C. § 285. Further, the district court ruled that the success came in the PTAB, not the district court; and “success in a different forum is not a basis for attorneys’ fees.”

On appeal, the Federal Circuit has vacated and remanded — holding that the “prevailing party” question does not require “actual relief on the merits.” What matters is whether the defendant “successfully rebuffed Dragon’s attempt to alter the parties’ legal relationship in an infringement suit.”

For precedent here the court cites and follows B.E. Tech., L.L.C. v. Facebook, Inc., 940 F.3d 675 (Fed. Cir. 2019). B.E.Tech. has very similar facts with an infringement lawsuit being rendered moot based upon an unpatentability finding during an IPR. One difference is that in B.E.Tech, the defendant was seeking costs under Fed. R. Civ. P. 54(d)(1) rather than attorney fees under 35 U.S.C. § 285. However, since both provisions require a “prevailing party,” the court found that the the same rule should apply to both situations.

The decision here should be distinguished from the court’s recent decision in O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC, 2019-1134, 2020 WL 1845302, at *3 (Fed. Cir. Apr. 13, 2020). In Mossberg, the court ruled that case voluntarily dismissed without a court order could not satisfy the prevailing party requirement because it lacked “sufficient judicial imprimatur.”

On remand in Dragon IP, the district court will need to reconsider whether an exceptional case exists and whether attorney fees are appropriate given that the defendant now satisfies the “prevailing party” requirement.

Of note, although the mootness determination satisfies the prevailing party requirement, it is likely not sufficiently “on the merits” in order to satisfy the requirements for claim or issue preclusion.