Federal Circuit Confirms Boundaries of Fee Recovery Under 35 USC § 285 | Morgan Lewis

In Dragon Intellectual Property LLC v. DISH Network LLC, the US Court of Appeals for the Federal Circuit addressed an “exceptional” set of circumstances concerning the recovery of attorney fees in district court litigation under 35 USC § 285.

In its May 20, 2024 decision, [1] the Federal Circuit reinforced the boundaries of fees recoverable under § 285, clarifying that

1. attorney fees incurred in IPR proceedings are not recoverable under § 285 because they are part of separate and voluntary proceedings; and
2. a party’s counsel cannot be held jointly and severally liable for fee awards under § 285.

BACKGROUND

In December 2013, Dragon Intellectual Property LLC (Dragon) filed a patent infringement suit against DISH Network LLC (Dish), Sirius XM Radio Inc. (SXM), and several other defendants. [2] In December 2014, DISH filed a petition for inter partes review, which SXM joined. [3] Eventually, after the claim construction hearing, the district court entered a judgment of noninfringement. Later, the Board issued a final written decision holding all challenged claims unpatentable. [4] DISH and SXM then moved the district court for attorney fees under 35 USC § 285 and 28 USC § 1927. [5]

After two appeals and remands addressing different issues, the district court ultimately granted-in-part and denied-in-part the motion for attorney fees. It deemed the case “exceptional” and awarded attorney fees that were generated in the district court litigation. But the court denied the requests to (1) recover attorney fees incurred during the IPR proceedings, and (2) hold Dragon’s lawyers jointly and severally liable for the fees. [6] DISH and SXM again appealed.

NOTABLE ASPECTS OF OPINION [7]

District Courts Cannot Award Fees Incurred for IPR Proceedings Under § 285

The Federal Circuit affirmed the district court’s conclusion that it could not award fees incurred in IPR proceedings under § 285. [8] According to the Federal Circuit, there is no basis for awarding IPR fees under § 285 “[i]n cases where a party voluntarily elects to pursue an invalidity challenge through IPR proceedings.” [9] If “cases” under § 285 included IPR proceedings, then “district court judges would be tasked with evaluating the exceptionality of arguments, conduct, and behavior in a proceeding in which they had no involvement.” [10] Thus, the Federal Circuit rejected DISH and SXM’s “argument that § 285 allows recovery of fees incurred in the voluntarily undertaken parallel IPR proceedings.” [11]

Counsel Was Not Joint and Severally Liable for the Fees

The Federal Circuit also agreed with the district court’s conclusion that “liability for attorneys’ fees awarded under § 285 does not extend to counsel.” The court explained that, unlike other statutes that expressly allow recovery from counsel, § 285 “is silent as to who can be liable for a fee award.” [12] “That Congress has expressly allowed recovery of costs and fees against counsel elsewhere but intended to imply such a provision in § 285 with exceptionality language is untenable.” [13] And the Federal Circuit saw “no basis in [its] precedent to allow Appellants to recover § 285 fees from counsel, especially where, as here, exceptionality was based on Dragon’s substantive litigation position and not on counsel’s manner of litigating.” [14]

Strategic Takeaways

Strategic takeaways from Dragon Intellectual Property LLC v. DISH Network LLC include the following:

1. Defendants should carefully consider the strategic choice of pursuing IPR proceedings, recognizing that associated fees are not recoverable in the district court under § 285.
2. Counsel of record are not personally liable for § 285 fee awards, barring an explicit statutory provision.

[1] Dragon Intellectual Property LLC v. DISH Network LLC, Nos. 2022-1621, 2022-1777, 2022-1622, 2022-1779, 2024 WL 2263527 (Fed. Cir. May 20, 2024).

[2] Id. at *1.

[3] Id.

[4] Id. at *1.

[5] Id.

[6] Id. at *2.

[7] Dragon cross-appealed the district court’s decision to award attorney fees incurred in the district court case. The Federal Circuit affirmed the district court’s award of attorney fees in connection with the district court proceeding. However, nothing about the Federal Circuit’s decision to affirm this aspect of the district court order appears particularly noteworthy. As such, this LawFlash focuses on the two, differentiating aspects of this decision.

[8] Id.

[9] Id.

[10] Id. at *4.

[11] Id.

[12] Id.

[13] Id. at *5.

[14] Id.

[View source.]

Story originally seen here