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Tuesday, 26 January 2016 12:38

Section 285 is Inappropriate for Deterrence Based Sanctions

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In a recent decision in Lumen View v. FindTheBest.Com, the Federal Circuit held that Section 285 of U.S. patent laws does not support the deterrence based award of fees or sanctions, instead the Federal Circuit suggested that sanctions under Rule 11 of the FRCP to be the more appropriate vehicle. The Federal Circuit in this case did affirm the lower court's "exceptional case" finding under 35 U.S.C. 285 as well as the award of "reasonable attorney fees", but has vacated the doubling of the award to "deter baseless litigation" as unjustifiable.

In the original suit, Lumen brought action against FTB for infringing its U.S. Patent 8,069,073 covering a computer method for matching parties to a financial transaction based on analyses of preference data. This case was dismissed under 35 USC 101 as being a fundamental process merely implemented on a general purpose computer. In the fee award judgment, the district court that the accused infringers clearly did not infringe on the patent, even under the patentee's proposed claim construction, and the most basic pre-suit investigation would have made the case of non-infringement very clear, and which had been explained in a pre-filing letter from the defendant. In determining that this case was "exceptional", the district court emphasized on the baselessness of the patentee's legal claim.

After determining that the case was exceptional, the lower court awarded $148,592 in reasonable fees under the lodestar test. However, it then went a step further in doubling this figure in order to deter future baseless litigation. On appeal, the Federal Circuit initially agreed that the award calculation is within the discretion of a district court judge. However, the doubling of the judgment for punitary and deterring purposes was beyond the scope of 285, which only specifies "reasonable attorney fees" once an exceptional case is found. The Federal Circuit did hint that sanctions under Rule 11 may be appropriate in this case, in stating that "whether the court wishes to utilize Rule 11 or any other statutory framework is of course up to the district court."

The full opinion is available at the following link.

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Tony Guo

As a specialized technology counsel, Tony supports his clients in the high tech, creative, and online industries. His primary areas of practice include intellectual property protection, Internet law, and startups. Tony is a USPTO registered patent attorney, as well as a licensed lawyer in California and Florida. He comes from a background involving considerable hardware and software development experience, having worked in both development and IT roles in the tech and finance industries.

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