Bad Conduct During Litigation Means Attorneys’ Fees Against the Government, Regardless of Damage Amount

By on May 14, 2020
Posted In Patents

The US Court of Appeals for the Federal Circuit affirmed the US Court of Federal Claims attorneys’ fees award for patent infringement by the United States solely based on its actions during litigation. Hitkansut LLC, Acceledyne Technologies, LTD, LLC v. United States, Case No. 19-1884 (Fed. Cir. May 1, 2020) (Prost, CJ).

Hitkansut had a patent application pending when it entered into a nondisclosure agreement with Oak Ridge National Laboratory (ORNL). Hitkansut provided ORNL with a copy of the then-unpublished patent application. ORNL used the patent application, without authorization, to prepare various research reports and publications and to receive funding and awards. Following issuance of the patent, Hitkansut sued the United States (acting through ORNL) under 28 USC § 1498.

The Claims Court determined that certain claims of the patent were valid and infringed by the government. Although Hitkansut sought a royalty in the amount of approximately $5 million, the Claims Court awarded $200,000, plus interest, as the hypothetically negotiated cost of an up-front licensing fee. Hitkansut moved for an award of attorneys’ fees and expenses under § 1498(a), which the Claims Court granted in part for a total of more than $4.3 million. The United States appealed.

On appeal, the United States argued that the Claims Court erred in statutory interpretation of § 1498(a) by including not only the government’s litigation position, but also its pre-litigation conduct. The government also argued that, regardless of statutory interpretation, it was substantially justified in its actions and therefore no attorneys’ fees were warranted. Lastly, the government argued that the lower court erred by not proportionally reducing its attorneys’ fees since the damage award was lower than Hitkansut initially sought.

Having never before interpreted the clause of § 1498(a), the Federal Circuit began by reviewing analogous case law, holdings by various appellate courts, and whether Congress intended that “the position of United States” as used in § 1498(a) includes the position of the United States both during and before the lawsuit. Relying primarily on its 1982 decision in Broad Ave. Laundry & Tailoring v. United States, the Federal Circuit determined that “the position of the United States” only refers to the position taken by the United States in the civil action in which the attorneys’ fees were incurred and not to pre-litigation actions.

Hitkansut argued that an interpretation precluding pre-litigation behavior would foreclose a trial court from considering whether the government’s position was supportable based on the unique facts and context of the underlying case. In response, the Federal Circuit noted that nothing in its holding would prevent the Claims Court from looking to the facts of an individual case, including facts that occurred pre-litigation, when deciding whether those litigation positions were substantially justified. The Federal Circuit further pointed out that the test for whether a position is substantially justified requires the position to have a “reasonable basis both in law and fact.”

The Federal Circuit explained that although the Claims Court relied on an overly broad interpretation of § 1498(a), its analysis demonstrated that the position of the United States was not substantially justified even under a correct definition of the clause. The Federal Circuit found no abuse of discretion by the Claims Court in its award of attorneys’ fees based on the government’s invalidity and non-infringement positions, discovery responses and other positions expressed during litigation. For example, the Federal Circuit noted that during discovery, ORNL provided interrogatory responses that were contrary to both documentary evidence and the deposition testimony of its employees. The Federal Circuit further noted that the government’s enablement argument was contradicted by its own expert witness, who conceded that “a person of ordinary skill in the art could account for the errors in the patent without undue experimentation and perform all necessary calculations within approximately one hour.”

The Federal Circuit rejected the government’s argument that the fee award should be reduced because Hitkansut achieved only “limited success” in its lawsuit because it originally sought $5.6 million in damages but was awarded only $200,000. The Federal Circuit explained that the Claims Court has “broad discretion” to determine the fee award, and that because Hitkansut succeeded on its sole claim and proved a material amount of actual, compensable damages, the Claims Court did not abuse its discretion by declining to further reduce its award of attorneys’ fees.

Jodi Benassi
Jodi Benassi focuses her practice on litigation and investigations. Jodi has experience in federal court district actions in California, Texas, Florida and Michigan and actions before the US Trademark Trial and Appeal Board (TTAB) of the US Patent and Trademark Office (USPTO). She has also conducted internal investigations on behalf of audit committees from high profile Fortune 500 organizations to Silicon Valley start-ups. Jodi Benassi's full bio.