NPE Attorney Liable for Defendant’s Attorney Fees

The Federal Circuit recently affirmed an award of over $200,000 against a non-practicing entity (NPE) and its attorney for “a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims.”

The ruling stems from a patent infringement complaint filed by VDPP LLC against Volkswagen Group of America in the Southern District of Texas. The case ended early in the litigation when the court granted Volkswagen’s Rule 12(b)(6) motion to dismiss for failure to state a claim in the complaint. And notably, VDPP was not given the opportunity to amend the complaint.

Following the dismissal, Volkswagen filed a motion to recover its attorney fees under 35 U.S.C. §285 and 28 U.S.C. §1927. The former authorizes recovery of attorney fees in “exceptional” patent cases, while the latter authorizes recovery of attorney fees for unreasonable and vexatious litigation tactics.

Both the district court and the appellate court noted a plethora of missteps made by VDPP, including improper venue allegations, legally unavailable remedies, and the failure to disclose prior settlement agreements. But both courts also considered “repeat litigation” as a factor when considering a request for attorney fees. As the district court noted:

Courts have also identified repeat litigation filed by a patentee as one indication of exceptionality, especially when, as here, the plaintiff made repeated settlement demands far less than the costs of defense and unrelated to any damages theory. See, e.g., Rothschild Connected Devices Innovations LLC v. Guardian Protection Servs. Inc., 858 F.3d 1383, 1389 (Fed. Cir. 2017).

On appeal, VDPP criticized the district court for considering repeat litigation. But the appellate court rejected this criticism:

To be sure, “filing a large number of suits does not, by itself, justify an inference of … an improper motive,” Thermolife Int’l LLC v. GNC Corp., 922 F.3d 1347, 1363 (Fed. Cir. 2019), and “[t]he mere existence of these other suits does not mandate negative inferences about the merits or purpose of this suit,” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1351 (Fed. Cir. 2015). But we have also recognized that “a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under [35 U.S.C.] §285,” and “a district court should consider a patentee’s pattern of litigation where adequate evidence of an abusive pattern is presented.” SFA, 793 F.3d at 1350, 1352 (emphases added).

Because courts consider the “totality of the circumstances” in evaluating whether a given case is sufficiently “exceptional” to warrant an award of attorney fees, it is impossible to say whether “repeat litigation” was a major factor in the district court’s decision to award attorney fees or merely one factor in an accumulation of factors. But one thing seems clear: The possibility that a court would consider an NPE’s repeat litigation tactics in imposing attorney fees could alter the settlement dynamics by increasing the NPE’s financial exposure and decreasing the ultimate settlement costs.

The Federal Circuit’s full opinion can be found here.

Bill Cramer frequently represents defendants in patent lawsuits brought by non-practicing entities in Texas and throughout the U.S.