The Court of Appeals for the Federal Circuit, this week, published its decision in Monolithic Power Systems, Inc. v. O2 Micro Int’l, Ltd., ___ F.3d. ___ (Fed. Cir., August 13, 2013), clearly stating that an “exceptional case” finding under 35 USC §285 does not require a finding of “bad faith” or that the claim was “objectively baseless.” The court viewed the totality of the circumstances surrounding patent owner and counter-claimant O2′s conduct in the litigation as well as O2′s litigation strategy in the present case and related litigation matters with defendant Monolithic and its customers.
The court upheld the district court’s sizeable fee award (over $8M), stating in relevant part:
We have observed that, as a general matter, many forms of misconduct can support a district court’s exceptional case finding, including inequitable conduct before the U.S. Patent and Trademark Office (“PTO”); litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit; or willful infringement. Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001) (citing Hoffmann-La Roche Inc. v. Invamed Inc., 213 F.3d 1359, 1365 (Fed. Cir. 2000)).
In its opinion, the district court cited Brooks Furniture for the exceptional case standard: “A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as…misconduct during litigation, vexatious or unjustified litigation,conduct that violates FED. R. CIV. P. 11, or like infractions”…[T]he district court also cited Taltech Ltd. v. Esquel Enterprises Ltd., 604 F.3d 1324, 1329 (Fed. Cir. 2010), to clarify that “[l]itigation misconduct and unprofessional behavior are relevant to the award of attorney fees, and may suffice to make a case exceptional.”
O2 Micro is incorrect in suggesting that findings of “bad faith” and “objectively baseless” litigation are always required in addition to a “litigation misconduct” finding for an exceptional case. The district court applied the correct standard.
O2 Micro fails to appreciate the “well-established [rule] that litigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.” MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 919 (Fed. Cir. 2012) (internal quotation marks omitted). Instead, O2 Micro’s arguments challenging the exceptional case determination hinge on its mistaken conviction that there must be an additional “bad faith” component…
[T]he district court’s findings of an overall vexatious litigation strategy and numerous instances of litigation misconduct are sufficient to support an exceptional case determination. The record provides ample grounds for the district court to find that O2 Micro had undertaken a vexatious litigation strategy. Having presided over a decade of litigation between O2 Micro and MPS, the district court witnessed several instances in which O2 Micro sued MPS customers in order to prompt MPS to file declaratory judgment actions with the court. In each previous case, O2 Micro withdrew its claims and granted Covenants not to sue after substantial litigation had taken place…wasting the parties’ and the court’s resources.
O2 Micro repeatedly misrepresented…[and] failed to conduct an investigation into the veracity of its representations…obfuscated [facts]…[and] filed three “baseless motions.”…[I]t “ill behooves an appellate court to overrule a trial judge concerning litigation misconduct when the litigation occurred in front of the trial judge, not the appellate court.” Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1359 (Fed. Cir. 2008).
Monolithic, ___ F.3d ___, at 11-14 (emphasis added).