Certiorari Denied October 1, 1984. See 105 S.Ct. 172.
ORDER
RICH, Circuit Judge.
Crystal Chemical Company and Joe C. Eller (hereinafter Crystal), appellants, have filed:
We consider these two matters seriatim.
I. Attorney Fees
The application filed December 21, 1983, for attorney fees and expenses incurred on the appeal, decided by our opinion at 722 F.2d 1556, 220 USPQ 289 (Fed.Cir.1983), has been considered. Although appellee Rohm & Haas Company (R & H) was not directed by us to respond under Federal Circuit Local Rule 20,
Crystal's motion, filed pursuant to Rule 20, submits that 35 U.S.C. § 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party.") authorizes this court to award attorney fees for an appeal, and that the "exceptional" circumstances of this case merit such an award. For the reasons which follow, we decline Crystal's application for attorney fees, and its motion is hereby denied.
Crystal maintains that this is an exceptional case under § 285 because of our holding that the R & H patent in suit was invalid due to uncured "fraud in the patent office" by R & H during its prosecution of the application for the patent in the U.S. Patent and Trademark Office (PTO). In addition to fraud in the PTO, Crystal alleges that "Rohm and Haas' conduct during this appeal has unnecessarily increased the attorney fees, expenses and costs." These increased costs are attributed largely to an alleged attempt by R & H "to snow this Court with a `mountain of largely irrelevant' record designations," and to alleged attempts by R & H to "frustrate presentation of this case and drive up" expenses.
R & H denies the allegations of improper actions in its conduct of the appeal and that its actions in the PTO render the case exceptional. As to the latter, R & H submits that it attempted to cure earlier misrepresentations in the PTO by subsequently disclosing all of its relevant experimental data to the PTO. Our earlier opinion held, however, that the attempted cure by R & H of its intentional material misrepresentations was "insufficient as a matter of law," 722 F.2d at 1573, 220 USPQ at 302.
The awarding of attorney fees under § 285 for an "exceptional" appeal is a question of first impression in this court. It is also an issue that was rarely addressed by other circuits. Because of
The federal courts of the United States early adopted what has become known as the "American Rule" in the handling of attorney fee requests. Unlike countries which follow the "English Rule," our courts do not routinely assess attorney fees against the losing party. The American Rule was recognized by the Supreme Court as early as 1796 in Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, 1 L.Ed. 613, and, simply put, proscribes the award of fees absent statutory authorization or particularly compelling circumstances. The policy behind the Rule is fundamental — to avoid penalizing a party "for merely defending or prosecuting a lawsuit." Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718, 87 S.Ct. 1404, 1407, 18 L.Ed.2d 475 (1967).
The colonial courts in America frequently adopted the English Rule. Colonial and, later, state legislatures did, however, regulate this practice, by prohibiting the award of fees, or in some instances by adopting specified fee limits as noted in Day v. Woodworth, 54 U.S. (13 How.) 363, 372, 14 L.Ed. 181 (1851). Early federal statutes authorized the federal courts to adopt the attorney fee practice of their respective states. Act of September 29, 1789, § 2, 1 Stat. 93. Provisions for the award of attorney fees in federal law is a more modern occurrence.
The trend in statutory evolution since the mid-1800's has been toward specific authorization for the award of attorney fees. For example, the Interstate Commerce Act of 1887, 24 Stat. 379; the Clayton Act of 1914, 15 U.S.C. § 15; and the Toxic Substances Control Act of 1976, 15 U.S.C. § 2618(d) have all contained such provisions. Many of these statutes allow the award of attorney fees for the purpose of encouraging suits to vindicate congressional policy by "private attorneys general." Notwithstanding the general American policy, particular circumstances have been held to justify an equitable award of attorney fees absent explicit statutory authorization. Such circumstances include instances involving a party acting in contempt or bad faith, or where a contractual agreement for fees existed between parties. See generally, Derfner and Wolf, Court Awarded Attorney Fees, ¶ 1.02 (1983).
Other statutory provisions have been enacted so as to further equitable considerations, in suits where encouragement of citizen suits is not applicable, as in the case of the present patent statute, § 285, and its predecessor for the purpose of enabling a court to prevent gross injustice.
Prior to 1946, the Supreme Court, following the American Rule, had held that the award of attorney fees based upon equitable considerations was not available in patent cases.
The Senate Report concerning this provision noted its applicability to prevailing patentees as well as to prevailing alleged infringers, and emphasized that the award should not become "an ordinary thing":
Subsequent to the 1946 amendments, attorney fee awards were granted by the courts, in their discretion, primarily upon findings of extraordinary circumstances. An early and leading decision ably summarized the policy behind this statutory waiver of the American Rule for attorney fees in the patent law context:
The next and most recent revision of the pertinent section of the patent statutes, the Patent Act of 1952, codified the attorney fee provision in 35 U.S.C. § 285, which omits explicit reference to the court's discretion but adds the qualifier that the court may award reasonable attorney fees in "exceptional cases." The Revision Note to this section, as restated later by its author, shows that:
Cases decided under § 285 have noted that "the substitution of the phrase `in exceptional cases' has not done away with the discretionary feature." Hoge Warren Zimmerman Co. v. Nourse & Co., 293 F.2d 779, 783, 130 USPQ 382, 386 (6th Cir.1961).
Cases awarding attorney fees to prevailing patentees have typically found "exceptional" circumstances in willful and deliberate infringement by an infringer, or in the prolongation of litigation in bad faith.
Neither § 285 nor its legislative history distinguishes between awarding attorney fees in the district court and in the appellate court. We recognize that the district court is the forum in which requests for attorney fees are almost invariably made. We also recognize that the American rule against the award of attorney fees, in the absence of a statute or compelling circumstances, developed in order to avoid penalizing parties for asserting their legal rights. In section 285 we have an exception to the American rule, and it was enacted to further a different policy, that of preventing injustice to a party involved in a patent suit, as detailed above. We construe the language of § 285 as applicable to cases in which the appeal itself is exceptional, in furtherance of the latter policy.
There exists limited judicial precedent in support of our ability to award attorney fees under § 285. For example, Crystal relies on Tidewater Patent Development Co. v. Kitchen, 371 F.2d 1004, 152 USPQ 36 (4th Cir.1966), modified in part and pet. for reh. denied, 371 F.2d 1013, 152 USPQ 656, cert. denied, 389 U.S. 821, 88 S.Ct. 46, 19 L.Ed.2d 74 (1967). In Tidewater, the Fourth Circuit reversed a trial court which had held the patent in suit valid and had found infringement, and declared the case "exceptional" under § 285 because the patentee had brought suit on a patent that had been "conclusively" demonstrated to be invalid in two other lawsuits. The Fourth Circuit stated that "Whether or not Tidewater had the naked right to relitigate, ... to sue again in the circumstances was an abuse of that right, especially in seeking to recover on grounds renounced [previously] .... To leave appellants ... to bear the expense of defending Tidewater's accusations of infringement upon these facts would be to saddle them with an unjust hardship."
The Tenth Circuit, in contrast however, has deferred to the trial court by remanding for a determination as to whether attorney fees were merited in a particular case.
To date, our experience in this court with the award of attorney fees under § 285, although limited, is representative of the developed case law for this section of the Patent Act. None of the cases so far has dealt with attorney fees on the appeal. We have upheld a district court's awarding of attorney fees under § 285 to patentees where willful infringement had been proved. Rosemount, Inc. v. Beckman Instruments, Inc., 727 F.2d 1540, 221 USPQ 1 (Fed.Cir.1984); and Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 219 USPQ 670 (Fed.Cir.1983). Section 285 also permits the prevailing party to recover certain disbursements incurred during preparation for a case. Central Soya Co. v. Geo. A. Hormel & Co., 723 F.2d 1573, 220 USPQ 490 (Fed.Cir.1983).
Attorney fee awards have also been affirmed by this court when the basis for finding the case to be "exceptional" was "fraud" in procuring the patent sued upon as well as misconduct during suit and a bad faith assertion of infringement. Hughes v. Novi American, Inc., 724 F.2d 122, 125, 220 USPQ 707, 710 (Fed.Cir.1984). Additionally, we have held that cases may be deemed exceptional for reasons other than inequitable conduct during prosecution, Orthopedic Equipment Co. v. All Orthopedic Appliances, 707 F.2d 1376, 1384, 217 USPQ 1281, 1287 (Fed.Cir.1983), such as persisting with a suit in the face of knowledge that the asserted patent is invalid, Hughes, supra, or "some finding of unfairness, bad faith, or inequitable conduct on the part of" a patentee unsuccessfully bringing an infringement suit, Stevenson (supra note 9).
We have affirmed the denial of attorney fees in several cases as well. For instance, the denial of fees has been affirmed on the basis that a motion, although meritless, was neither frivolous nor brought only for harassment or delay. CTS Corp. v. Piher International Corp., 727 F.2d 1550, 221 USPQ 11 (Fed.Cir.1984). See also, Stickle v. Heublein, Inc., 716 F.2d 1550, 1564, 219 USPQ 377, 388 (Fed.Cir.1983), in which an attorney fee award was vacated because the record did not show that numerous defenses had been used vexatiously or for dilatory purposes. Also in Stickle, part of the award related to work on non-patent issues, the fees for which are not allowable under § 285.
On the basis of the preceding review of the state of the law regarding the award of attorney fees under § 285, we now address the present case. We recognize that our previous holding on the merits, that, as a matter of law, R & H had not cured its earlier fraud in the prosecution of the application for the patent asserted on appeal, breaks new ground on the subject of fraud in the PTO and sets new standards in this area of the law. Under the circumstances of this case, we cannot hold that R & H's failure to follow this new standard makes it unjust for Crystal to bear its own counsel fees on this appeal from the lower court's decision in favor of R & H. We furthermore do not agree with Crystal that the record designations of R & H have "snowed" this court with a mountain of irrelevant information, nor do we feel that the conduct of R & H has frustrated presentation of this case.
We hold, therefore, that Crystal shall bear its own attorney fees on this appeal and its request is denied. We do not decide here whether or not attorney fees may be warranted for the trial below, because considerations other than the invalidity of the R & H patent may bear on the propriety of awarding attorney fees, and we cannot be as familiar with the proceedings below as is the district court. Thus, any question of attorney fees below must be decided, in the first instance, by that court, exercising its own discretion.
II. Costs
Crystal's "Motion for Costs on Appeal Pursuant to FRAP Rule 39 and for Reconsideration
That was a decision under FRAP Rule 39 on the question of who should bear the costs — costs were not to be assessed against either party.
With respect to costs on appeal, therefore, what the motion now before us actually presents is a request for reconsideration of that decision. Reconsideration is granted to the extent that the several arguments presented in Crystal's motion papers and the response thereto by R & H have been carefully reviewed. In all other respects Crystal's motion is denied.
CONCLUSION
In view of the foregoing, it is HEREBY ORDERED THAT appellants' application for attorney fees and motion for costs on appeal, as recited at the beginning hereof, are DENIED.
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