Patent law allows recovery of attorneys’ fees only if (1) your side wins and (2) the case qualifies as "exceptional".  35 U.S.C. 285.  A decision today by the Federal Circuit illustrates the difficulty of satisfying the second requirement.

In Innovation Technologies, Inc. v. Splash! Medical Devices, LLC, No. 07-1424 (Fed. Cir. June 16, 2008), Innovation sued Splash! for infringing a patent on irrigating wounds.  The case proceeded, but before the Markman hearing Innovation signed a covenant not to sue Splash! again for infringing the patent and moved the district court to dismiss the case with prejudice.  After dismissal, Splash! asked for fees and costs under section 285.  The district court concluded:

Splash has shown by clear and convincing evidence that Innovation knew, or, on reasonable investigation, should have known, that its claims of infringement were baseless.  It appears to me that the lawsuit was filed solely for the purpose of harassing a small competitor.

The Federal Circuit held the district court’s analysis insufficient, vacated the $144,000 award, and remanded the case for findings on the adequacy of Innovation’s pre-suit investigation, Innovation’s reasons for filing the suit, whether Innovation committed "improprieties" during litigation, the meaning of claims terms that the parties disputed, and why Innovation abandoned the case.

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