Federal Circuit Affirms Attorneys’ Fees Award Against Patentee PersonalWeb
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  • Federal Circuit Affirms Attorneys’ Fees Award Against Patentee PersonalWeb

    On November 3, 2023, the U.S. Court of Appeals for the Federal Circuit affirmed an award of $5.2 million in attorneys’ fees entered against PersonalWeb Technologies LLC under 35 U.S.C. § 285.  In re PersonalWeb Techs. LLC, Nos. 2021-1858, 2021-1859, 2021-1860 (Fed. Cir. Nov. 3, 2023).  The court (Reyna, Dyk, and Lourie) reviewed the district court’s exceptional case determination and fee calculation for abuse of discretion.

    PersonalWeb owns patents generally directed to a technology the inventors termed “True Names” for identifying data items.  True Names are unique identifiers that depend on the content of the data item.

    In 2011, PersonalWeb sued Amazon for infringing its True Names patents but stipulated to dismissal with prejudice of all claims after claim construction in that litigation.  Years later, PersonalWeb asserted the same True Names patents against 85 Amazon customers for their use of Amazon’s S3 storage service.  Amazon filed a declaratory judgment action asserting that PersonalWeb’s new lawsuits were barred under the Kessler doctrine, which generally precludes a patentee from pursuing follow-on infringement suits against the customers of a manufacturer that previously prevailed against the patentee on the same allegedly infringing products.  Amazon also argued that the suits were barred by claim preclusion based on the prior litigation.

    The district court agreed with Amazon, granting summary judgment, which the Federal Circuit affirmed in a precedential decision, holding that the stipulated dismissal in the prior litigation operated as a final judgment on the merits that triggered Kessler and claim preclusion doctrines.  PersonalWeb Technologies LLC v. Amazon.com Inc., 961 F.3d 1365 (Fed. Cir. 2020).

    On remand, the district court awarded over $5 million in attorneys’ fees to Amazon and Twitch (a customer defendant), finding the case exceptional based on:  (1) PersonalWeb’s objectively unreasonable arguments relating to Kessler and claim preclusion, (2) PersonalWeb’s shifting infringement theories, (3) PersonalWeb unnecessarily prolonging the case after claim construction, (4) PersonalWeb’s other unreasonable positions in the customer cases, and (5) PersonalWeb’s inaccurate declarations.

    A divided panel of the Federal Circuit affirmed.  The majority held that the district court acted within its discretion in finding PersonalWeb’s claims against Amazon’s customers objectively baseless under Kessler and claim preclusion, rejecting PersonalWeb’s reliance on later Solicitor General views sought by the Supreme Court (views that PersonalWeb and Judge Dyk in dissent argue support PersonalWeb’s position).  The court also found no abuse of discretion in the district court’s findings that PersonalWeb engaged in unreasonable litigation tactics, such as “flip-flopping infringement theories” and failing to stipulate to non-infringement following an adverse claim construction that shifted the lawsuit from “weak” to “baseless.”  Last, the court affirmed the district court’s fee calculation, rejecting challenges to specific categories of fees.

    Judge Dyk dissented, arguing that PersonalWeb’s position on Kessler could not be objectively baseless because the Solicitor General later agreed with PersonalWeb’s interpretation in an amicus brief to the Supreme Court.  As Judge Dyk put it, “[t]he Solicitor General is not in the habit of making objectively baseless arguments to the Supreme Court.”  The dissent asserted that the majority effectively punished PersonalWeb for making an argument on which it did not succeed rather than one that was unsupported.

    Despite the dissent, this case underscores courts’ discretion to sanction unreasonable arguments and litigation tactics under § 285.  As the Federal Circuit majority stated, “Counsel, as officers of the court, are expected to assist the court in the administration of justice, particularly in difficult cases involving complex issues of law and technology.” (internal citations and quotations omitted).  Parties should carefully apply existing law or articulate reasoned bases for changes to avoid exceptional case findings.

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