By: Karin C. Khan

            In a rather cursory appellate opinion, the Court of Appeals considered whether the District Court’s decision awarding attorney fees to the Defendant, Splash! Medical Devices, LLC. (“Splash”), was justified under 35 U.S.C. §285.  According to section 285, “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”  However, in this case, the Court of Appeals found that the District Court did not provide adequate justification for a finding of “exceptional circumstances.”

            Plaintiff Innovation Technologies, Inc. (“Innovation”) brought suit against Splash for infringement of its patent for a method of irrigating wounds.  While various events occurred in the case, a Markman hearing had not yet been conducted, even though both parties strongly disputed certain claim language.  Instead, Innovation decided to dismiss its case against Splash and executed a covenant not to sue.  Afterwards, Splash sought attorney fees, for which it was granted over $140,000 by the District Court.

            The District Court’s brief reasoning supporting its decision that “exceptional circumstances” warranted granting attorney fees hinged mainly on its finding that “Innovation knew or, on reasonable investigation, should have known, that its claims of infringement were baseless.”  (emphasis added).  However, whenever a court attempts to determine whether “exceptional circumstances” exist, the particular factual findings must be sufficiently articulated and based upon clear and convincing evidence.  The District Court’s reasoning leading to an award of attorney fees was only speculative at best.

            There were several questions before the District Court that would have required a more detailed finding than its brief statement awarding attorney fees.  One query in particular was whether Innovation had a sufficient basis for bringing the infringement action against Splash in the first place.  This depended on whether Innovation’s own construction of the disputed claim language  was “sufficiently plausible to justify filing suit” and whether Innovation’s construction also justified its position that Splash infringed the patent’s claims. 

            Because the District Court did not make any detailed findings to support its decision, the Court of Appeals was not able to perform a proper review.  Although the Court of Appeals vacated the decision awarding attorney fees, it only required the District Court to make findings on the issues it would consider in making a determination of an “exceptional case.”