Nilssen v. Ostram Sylvania, Inc.: Federal Circuit Affirms Award of Attorney Fees for Inequitable Conduct and Litigation Misconduct

Nilssen v. Osram Sylvania, Inc.

Federal Circuit, June 17, 2008, No. 2007-1198
Slip Opinion

The Federal Circuit affirmed the judgment of the U.S. District Court for the Northern District of Illinois granting a motion for attorney fees to Osram Sylvania, Inc. and Osram Sylvania Products, Inc. (collectively, "Osram") due to the inequitable conduct and litigation misconduct of the appellants pursuant to 35 U.S.C. § 285. Section 285 of the Patent Act authorizes the award of attorney fees to the prevailing party in "exceptional cases."

The Federal Circuit held that the district court did not clearly err in finding that the case was "exceptional" and that it was within its discretion to award attorney fees to Osram. Appellants argued that Nilssen's inequitable conduct was "benign" and their litigation misconduct amounted to instances of "harmless oversight" and "permissibly rough litigation tactics." The Federal Circuit refused to distinguish the inherent contradictory notion of benign inequitable conduct and further noted that the argument ultimately "amount[ed] to little more than an impermissible attempt to reargue the merits of [the district court's] holding." With respect to the litigation misconduct, the court noted that "it 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," concluding that the district court had sufficient evidence to have concluded that trial misconduct occurred.

Appellants further argued that a finding of inequitable conduct was insufficient to constitute an exceptional case. The court agreed that while there was no per se rule of exceptionality in cases involving inequitable conduct, its precedent provided wide discretion to district courts to award fees in inequitable conduct cases.

Dennis Crouch of Patently-O points out that there was no "individual smoking gun" here and agrees with the appellants' argument that their actions were reasonable given that Osram was represented by Kirkland & Ellis, "well known for its relentless bull dog litigation style."
The Patent Hawk also provides an overview of the case.
Filewrapper features an overview as well, complete with a timeline of the case.

The Federal Circuit additionally affirmed the district court's denial of appellants' motion for expert fees under Fed. R. Civ. P. 26(b)(4)(C). The court found that the district court had not abused its discretion in refusing appellants' request for fees, and agreed that such a reward would result in "manifest injustice."

Judge Newman dissented. In her opinion, the majority "promotes unexceptional trial procedures and non-culpable prosecution errors into an ‘exceptional case' of such severity as to warrant the award of attorney fees" as uncontemplated by statute, precedent, or policy. She argued that the type and manner of the inequitable conduct was critical to determining an award of attorney fees and that the clearly erroneous standard requires appellate attention to the facts. Judge Newman concluded that the majority had misapplied the law and departed from precedent by refusing to consider the nature of the conduct and limiting the attorney fee award to major infractions, warning that "[a]ny patent prosecution, and indeed any litigation, is vulnerable in its detail."

In response to the dissent's concern that each instance of inequitable conduct could not individually justify the exceptional label, the Federal Circuit further noted that the multiplicity of these occurrences, in conjunction with the litigation misconduct, could justify the district court's ruling. The court concluded its analysis with the note that "the key to the affirmance of the district court in this case is the standard of review."