Absence of Findings Requires Reversal of "Exceptional Case" Determination

In Innovation Tech., Inc. v. Splash! Medical Devices, LLC, ( No. 2007-1424; June 16, 2008), a Federal Circuit panel reverses a district court's ruling that the accused infringer was entitled to an award of attorney fees because the patent infringement suit qualified as an "exceptional case" under section 285 of the Patent Act. The only stated basis for the award was the district court's conclusion that the patentee knew, or should have known, that its infringement claims were baseless and that "[i]t appears to me that the lawsuit was filed solely for the purpose of harassing a small competitor." More than a year after the suit had been filed, the patent owner executed a covenant not to sue the accused infringer under the patent in suit with regard to the medical device involved in the case and also moved to dismiss the case with prejudice. The motion was granted, whereupon the accused infringer sought over $140,000 in attorney fees and over $4000 in expenses. That motion was also granted.

One of the four issues raised in the district court with regard to the attorney fee application was the meaning of certain claim language. During the pendency of the case, that court had not held a Markman hearing or construed the patent claims. On one hand, says the panel, the district court was not required definitively to determine the meaning of the claims in considering whether this is an exceptional case. But, on the other hand, it was required to make a sufficient analysis of the claims' "probable meaning" to determine whether the patent owner's proposed construction of the disputed language was sufficiently plausible to justify filing the lawsuit based on that construction. Also, it is appropriate upon remand for the district court to take additional evidence and consider why the patent owner executed the covenant not to sue and dismissed the case before the claims had been construed. The district court need, however, only make findings to support those issues upon which it bases its determination, not every issue raised by the parties.