The Software IP Report

Fee Award Under 35 U.S.C. § 285 Supported by Evidence of Subjective Bad Faith and Objective Baselessness

Awards of attorneys fees under 35 U.S.C § 285 may seem difficult to obtain, given the dual requirement of proving a party’s subjective bad faith, as well as the objective baselessness of its position.  However, as demonstrated in Gabriel Technologies Corp. v.  Qualcomm Inc., No. 2013-1205 (Mar. 18, 2014), some conduct is so egregious that significant awards may be justified.

Gabriel, the plaintiff, had acquired rights to a 1999 license agreement to which a company later acquired by Qualcomm was also party.  The present suit, as the Federal Circuit described it, was essentially Gabriel’s investors’ attempt to recoup some benefit from the 1999 license agreement. Accordingly, the plaintiffs filed a complaint in 2008 that included 11 claims, including “for correction of inventorship, breach of the 1999 license agreement, fraud/fraudulent inducement, unfair competition, and misappropriation of trade secrets.”  However, at the root of each claim was “the contention that individuals affiliated with [plaintiffs’ predecessor] conceived of the inventions disclosed in several Qualcomm patents.”

The plaintiffs had proceeded with their claims even after the district court suggested a “strong likelihood” of defendants’ recovery of fees under 35 U.S.C. § 285, and required them to post an $800,000 bond.  The problem for the plaintiffs was that they were never able to produce “any evidence that individuals affiliated with [their predecessor] made an inventive contribution to the disputed Qualcomm patents.”  After deciding the inventorship issue, the district court declared “the case exceptional under section 285 and [awarded] the Qualcomm defendants more than $12 million in attorneys’ fees.”

An exceptional case determination under 35 U.S.C. § 285, as noted above, requires a finding both of objective baselessness and subjective bad faith.  Noting that the standard of review for objective baselessness is presently before the US Supreme Court, the court stated that “even applying de novo review – as opposed to a more deferential standard” it would uphold the district court’s finding of objective baselessness here.

Gabriel did not know who the allegedly omitted inventors were when it first filed suit in 2008, nor later.  Gabriel tried repeatedly to put forth various persons as inventors.  However, every time Gabriel identified a purportedly omitted inventor, that person’s deposition testimony made it abundantly clear that the person was not an inventor.  Because “there was no evidence that anyone affiliated with [plaintiffs’ predecessor] made any inventive contribution to the Qualcomm patents,” claims to correct inventorship were objectively baseless.

Further, the facts that the plaintiffs posted an $800,000 bond, and that they found an attorney to take their case on a contingency basis, did not demonstrate that the district court committed clear error in finding subjective bad faith.  In fact, emails demonstrated that Gabriel had maintained the suit long after recognizing that its “claims were without merit.”  Further, finding one attorney to take a case on a contingent fee basis after failing to persuade many others to do so did not demonstrate subjective good-faith.  (The court also noted in a footnote that that law firm had settled separately with the defendants.)  Further, the fact that Gabriel maintained its suit “even after being specifically warned about the obvious shortcomings in their claims – strongly supports the trial court’s conclusion that they maintained this litigation in bad faith.”

Moreover, Gabriel had engaged in litigation misconduct, which by itself could justify a finding of an exceptional case under 35 U.S.C. §285.  Among other things, Gabriel tried “to reassert fraud claims which had previously been dismissed with prejudice,” and tried to avoid posting the $800,000 bond by asserting that its corporate address was in California when its website identified its corporate headquarters as being in Omaha.

Finally, attorneys’ fees were justified under the California Uniform Trade Secrets Act.  Gabriel maintained trade secret claims long after it was clear that they were time-barred, and without ever being able to do more than vaguely identify allegedly misappropriated trade secrets.