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Federal Circuit Further Clarifies The Meaning Of “Prevailing Party”
09/23/2025On September 9, 2025, the United States Court of Appeals for the Federal Circuit (“CAFC”) issued a precedential opinion vacating-in-part, affirming-in-part, and remanding a district court decision that denied motions for sanctions, fees, costs, and discovery request. Future Link Sys., LLC v. Realtek Semiconductor Corp., No. 2023-1056, __F.4th__ (Fed. Cir. Sept. 9, 2025). In its decision, the CAFC concluded, inter alia, that Appellant was a prevailing party under 35 U.S.C. § 285 and Rule 54, and that the district court did not abuse its discretion by refusing to impose Rule 11 sanctions, fees and costs under 28 U.S.C. § 1927. Id.
Plaintiff-Appellee and patent owner, Future Link Systems, LLC (“Future Link”), sued Defendant-Appellant, Realtek Semiconductor Corporation (“Realtek”), in the U.S. District Court for the Western District of Texas, alleging patent infringement in two separate cases—Case Nos. 6:21-cv-363 (the “363 case”) and 6:21-cv-1353 (the “1353 case”). In the 363 case, Realtek sought dismissal for improper service and lack of personal jurisdiction and later moved for Rule 11 sanctions. In the 1353 case, Realtek sought dismissal for improper service, failure to state a claim, and lack of personal jurisdiction. Notably, during litigation, Future Link produced a licensing agreement it entered into with MediaTek—a nonparty to the cases and a Future Link competitor—that provided that MediaTek would pay Future Link a lump sum amount if it sued Realtek. Nevertheless, Realtek and Future Link entered into a license agreement covering Realtek’s accused products, followed by Future Link’s voluntary dismissal of both cases without prejudice.
Realtek then filed motions asserting that Future Link had filed objectively baseless suits and requested attorneys’ fees and costs in both cases. After briefing, the district court denied: (1) Realtek’s motion for attorneys’ fees as sanctions under Rule 11 in the 363 case; (2) Realtek’s motion for attorneys’ fees under 35 U.S.C. § 285 in the 363 case; and (3) Realtek’s motion for attorneys’ fees and costs under 28 U.S.C. § 1927 in both cases. The district court then granted-in-part Realtek’s motions for sanctions and ordered that the voluntary dismissals by Future Link be modified to dismissals with prejudice in both cases. Realtek appealed.
On appeal, the CAFC addressed, inter alia, the following issues: (1) whether the district court erred in denying fees under § 285 and not addressing the costs request under Rule 54(d); (2) whether the district court erred in denying Rule 11 sanctions in the 363 case; and (3) whether the district court erred in denying fees and costs under § 1927 in both cases.
Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party,” 35 U.S.C. § 285, and Rule 54(d) provides that, “[u]nless a federal statute, [the Federal Rules of Civil Procedure], or a court order provides otherwise, costs—other than attorney’s fees—should be allowed to the prevailing party.” Fed. R. Civ. P. 54(d)(1). The CAFC found that Realtek was a prevailing party because both of Future Link’s cases ended “with dismissal of [its] patent infringement claims with prejudice”; thus, Realtek “successfully rebuffed [Future Link’s] lawsuit[s] and ensured that [Future Link] can never again assert the same patents against [Realtek’s] same accused products.” The CAFC then turned to the issue of the district court not addressing Realtek’s costs request under Rule 54(d)(1), and found that, under Fifth Circuit law, the district court abused its discretion because it did not address costs.
The CAFC, thus, vacated the district court’s decision and remanded for the district court to consider whether the case is exceptional and whether fees are appropriate, and to address Rule 54 costs and explain its decision.
“Rule 11[(b)] requires that attorneys certify that their claims are well-grounded in fact and in law, and that their filings are not being presented for any improper purpose,” Edwards v. Gen. Motors Corp., 153 F.3d 242, 245 (5th Cir. 1998); Fed. R. Civ. P. 11(b), and is reviewed under the law of the regional circuit. Realtek argued that the district court erred in determining that Future Link’s pre-filing investigation was adequate and that Future Link’s improper motive in bringing the case could not have been the but-for cause of the suit. But the CAFC found that Future Link “filed a plausible patent infringement case based on what it believed to be an implemented, optional feature” and that “[another entity’s] non-frivolous settlement payment shows that another serious party believed the case [to] be non-frivolous.” And, the CAFC held that counsel met their Rule 11 obligations by doing a pre-suit investigation because “the key factor in determining whether a patentee performed a reasonable pre-filing inquiry is the presence of an infringement analysis” and that the “most important[]” aspect of the investigation is a “compar[ison] [of] the claims of the patent with the accused product.”
The CAFC, thus, affirmed the district court’s denial of Rule 11 sanctions in the 363 case.
Last, the CAFC turned to whether the district court erred in denying fees and cost under § 1927. Section 1927 provides that “Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” Id. Section 1927 is reviewed under regional circuit law, and, in the Fifth Circuit, it requires a higher “standard of culpability than” Rule 11 sanctions. The CAFC found that Realtek failed to meet the Fifth Circuit’s standard and that nothing showed that Future Link wrongfully persisted in litigation or vexatiously multiplied the proceedings. The CAFC, thus, affirmed the district court’s § 1927 decisions.
The CAFC considered the parties’ remaining arguments and was unpersuaded. And, it thus vacated-in-part, affirmed-in-part, and remanded to the district court for further proceedings consistent with the CAFC’s opinion.
