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Prevailing party: Dismissal with prejudice will do it

The US Court of Appeals for the Federal Circuit found that a district court erred in denying fees and costs to the prevailing party (here, the defendant), but upheld the district court’s denial of Rule 11 sanctions. Future Link Sys., LLC v. Realtek Semiconductor Corp., Case Nos. 23-1056; -1057 (Fed. Cir. Sept. 9, 2025) (Stoll, Reyna, Bryson, JJ.)

Future Link sued Realtek for patent infringement in the Western District of Texas. Realtek challenged service and personal jurisdiction and subsequently moved for Rule 11 sanctions. During discovery, Future Link produced a licensing agreement with a third party, under which the third party had agreed to pay a lump sum if Future Link sued Realtek. Shortly afterward, Future Link entered into a separate licensing agreement with Realtek covering the accused products and voluntarily dismissed the case.

Realtek moved for attorneys’ fees under 35 U.S.C. § 285 and costs under Rule 54(d)(1), and asserted that Future Link had filed objectively baseless lawsuits. The district court denied Realtek’s motions for fees and sanctions, did not address the motion for costs, and converted Future Link’s voluntary dismissal to a dismissal with prejudice.

Fees and costs

To seek fees and costs, a party must qualify as “the prevailing party.” In reviewing the district court’s decision on fees and costs, the Federal Circuit addressed Realtek’s prevailing party status under both § 285 and Rule 54(d).

Applying de novo review, the Federal Circuit concluded that Realtek was the prevailing party, despite the voluntary dismissal, because the district court had converted that dismissal to one with prejudice. The Federal Circuit emphasized that prevailing party analysis turns on whether there has been a material alteration of the legal relationship between the parties. Citing its own precedent, the Court explained that a dismissal with prejudice constitutes such a change because it bars the plaintiff from reasserting the same claims against the same products.
The Court explained that a favorable ruling on the merits is not required. A defendant that successfully avoids liability, such as through dismissal with prejudice, can still be deemed the prevailing party.

Since the dismissal with prejudice prevented Future Link from reasserting its patent claims against the accused products, Realtek was the prevailing party. The Federal Circuit vacated the district court’s denial of attorneys’ fees under § 285 and remanded the issue for consideration of whether the case was exceptional and fees were warranted. It likewise remanded the Rule 54(d) costs issue for initial determination.

Rule 11 sanctions

The Federal Circuit affirmed the district court’s denial of Rule 11 sanctions. Realtek had argued that Future Link’s prefiling investigation was inadequate and that the lawsuit was improperly motivated by a third-party payment arrangement, making that arrangement the but-for cause of the lawsuit.

The Federal Circuit rejected both arguments. First, it found that Future Link’s pre-suit investigation met Rule 11 standards: Future Link obtained and analyzed three accused products, prepared claim charts comparing asserted patent claims to the accused products, and investigated relevant optional features that it reasonably believed [...]

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Blame the Lawyer: In Exceptional Case, Plaintiff’s Attorney Liable for Court and Appellate Fees

The US Court of Appeals for the Federal Circuit affirmed an award of attorneys’ fees against a plaintiff and his counsel, and further granted defendants’ motion for appellate attorneys’ fees and double costs where plaintiff had brought baseless claims, engaged in litigation misconduct and brought a frivolous appeal. Pirri v. Cheek, Case No. 20-1959 (Fed. Cir. Mar. 22, 2021) (non-precedential) (per curiam).

When Plaintiff saw Defendant present her patented idea for “online dating in reverse” on the television show “Shark Tank,” he knew that she had gotten the idea from his therapist, Richards, who had betrayed his confidence. Through his counsel, Plaintiff sued Richards as well as Defendant, her company and her co-inventors (whom he never served) (collectively, Cheek) for joint inventorship of the patent (Richards was not a named inventor), and several state law claims, including breach of fiduciary duty, fraud, conversion and unjust enrichment. At the initial pretrial conference, Plaintiff voluntarily dismissed some of the state law claims and the joint inventorship claim against Richards. The district court dismissed the remaining state law claims as “obviously time-barred,” leaving only the joint inventorship claim against Cheek. Defendant moved for Rule 11 sanctions, which the district court denied.

Plaintiff sought leave to amend the complaint to add several new defendants and claims, but the district court denied the motion as futile. Notwithstanding the dismissal of Richards from the suit, Plaintiff subpoenaed Richards’s employment records, but withdrew the subpoena when Richards moved to quash. Plaintiff requested a discovery extension, which the Court denied as relating to irrelevant material. Just before the close of discovery, Plaintiff moved for voluntary dismissal with prejudice. Defendant opposed the dismissal motion in order to seek fees, and the district court denied the motion. Six days later, Plaintiff renewed the motion for dismissal, arguing that the previous denial of Rule 11 sanctions collaterally estopped a fees award. Again, Defendant opposed, and the Court denied the motion.

Two months later, the district court held a pre-summary-judgment conference, before which it ordered Plaintiff to file a letter indicating whether and why he would oppose summary judgment. After declining on several occasions to concede summary judgment or identify any evidence supporting his claims, Plaintiff finally consented to summary judgment for Defendants, which the district court granted.

The district court later granted Defendant’s motion for fees, finding that the case was exceptional. Because Plaintiffs’ counsel had prepared, signed and filed all the relevant submissions, the district court held counsel jointly and severally liable for the award.

Plaintiff appealed, and Defendant moved for appellate fees and double costs.

The Federal Circuit affirmed the fee award, finding no abuse of discretion, and further found that the appeal was frivolous as argued in part because Plaintiff’s counsel distorted the factual and legal bases for the fees award and “leveraged inapposite legal doctrines to make arguments that can only be described as baffling.” The Court concluded that “[w]hen an appeal is frivolous as argued, we may hold a party’s counsel jointly and severally liable.”




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