May 16th, 2019
SUMMARY: A court may grant a prevailing party’s motion for attorney’s fees in exceptional cases in which the court determines that the non-prevailing party failed to conduct an adequate pre-suit investigation. In particular, a court may grant a prevailing party’s motion for attorney’s fees in cases in which the non-prevailing party failed to examine an accused infringer’s publicly available products and product labels and further failed to test such products using simple tests.
In ThermoLife International LLC v. GNC Corp. (ThermoLife II), Nos. 2018-1657, 2018-1666, 2019 U.S. App. LEXIS 13135 (Fed. Cir. May 1, 2019), the Court of Appeals for the Federal Circuit affirmed the decision of the United States District Court for the Southern District of California to grant Hi-Tech Pharmaceuticals, Inc.’s (“Hi-Tech”) and Vital Pharmaceuticals, Inc.’s (“Vital”) motion for attorney’s fees under 35 U.S.C. § 285, which authorizes the award of fees in “exceptional” cases. Id. at *2-3. In so doing, the Federal Circuit concluded that the district court acted within its discretion in determining the exceptionality of the case based on ThermoLife International LLC’s (“ThermoLife”) failure to conduct an adequate pre-suit investigation. Id. at *3.
Section 285 of the Patent Act states that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285 (2012). An exceptional case under 35 U.S.C. § 285 has been construed as a case that “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014). Further, district courts “may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id. Even in cases in which an infringement allegation has not been adjudicated, the Federal Circuit has determined that a district court can make a determination of exceptionality when “allegations of infringement were ill-supported.” Lumen View Tech. LLC v. Findthebest.com, Inc., 811 F.3d 479, 481-83 (Fed. Cir. 2016).
Turning to the present case, ThermoLife licensed four patents from the Board of Trustees of the Leland Stanford Junior University (“Stanford”) that included method claims and composition claims involving the amino acids arginine and lysine for “enhanc[ing] vascular function and physical performance.” ThermoLife II, 2019 U.S. App. LEXIS 13135, at *1-3. In the district court, ThermoLife filed suits against a set of defendants, including Hi-Tech and Vital, alleging infringement of the patents licensed from Stanford. Id. at *2. In particular, ThermoLife alleged that the defendants directly infringed the composition claims by making and selling the accused products and the method claims by administering the accused products to consumers. Id. at *8. In support of its allegations, Thermolife directed the court to Hi-Tech’s and Vital’s labels and advertisements. Id. at *8-9. The district court bifurcated the proceedings into a consolidated trial on invalidity and unenforceability that would be followed, if necessary, by separate proceedings on infringement. Id. at *11. After a bench trial on invalidity, the district court held that all four of the patents were invalid for being anticipated or obvious. ThermoLife Int’l, LLC v. Myogenix Corp., No. 13-cv-651 JLS (MDD), 2016 U.S. Dist. LEXIS 129181, at *83 (S.D. Cal. Sept. 21, 2016).
Following the holding of invalidity by the district court, Hi-Tech and Vital moved for attorney’s fees under 35 U.S.C. § 285, arguing the cases were exceptional because ThermoLife failed to conduct an adequate pre-suit investigation that would have revealed the accused products did not infringe claim 1 of asserted U.S. Patent No. 5,891,459 (“the ’459 Patent”). ThermoLife II, 2019 U.S. App. LEXIS 13135, at *11-12. Claim 1 of the ’459 patent required an administration of L-arginine or L-arginine hydrochloride “in an amount sufficient to enhance endogenous endothelial [nitric oxide].” Id. at *4. In a prior litigation, the term “amount sufficient” was construed to mean “an amount typically administered to a subset of mammalian organisms for the purpose of the administration.” Unither Pharma, Inc. v. Daily Wellness Co., No. 02-cv-05284, 2005 WL 6220096, at *10 (N.D. Cal. Nov. 30, 2005). In the present case, ThermoLife’s own validity expert testified that studies published before ThermoLife filed the present suits showed that less than one gram of L-arginine or its hydrochloride salt was ineffective to enhance nitric oxide production and provide physiologically efficacious results. ThermoLife II, 2019 U.S. App. LEXIS 13135, at *12.
Meanwhile, Hi-Tech and Vital argued that the accused products contained less than one gram of L-arginine or its hydrochloride salt per serving. Id. at *12. Because the accused products were publicly available, Hi-Tech and Vital further argued that ThermoLife would have discovered that the accused products did not infringe if only they had read the labels on the accused products and conducted simple tests. Id. In fact, neither ThermoLife nor Stanford denied the existence of simple tests to determine the chemical composition of the accused products or their failure to conduct any such tests. Id. at *12-13.
With respect to the argument that ThermoLife failed to conduct an adequate pre-suit investigation, the district court found that ThermoLife either “did not examine the accused products’ labels before filing or, if they did, they ignored clear label indications” that the accused products contained less than one gram of L-arginine. Id. at *14-15 (citation omitted). The district court also found that the “plaintiffs relied only on the defendants’ advertising statements, even while disparaging the statements as ‘bombastic.’” Id. at *15 (citation omitted). Further, the district court concluded that “this was a case in which it was unreasonable to dispense with (undisputedly available) testing to identify ingredients and their amounts in the accused products, which were ‘publicly available.’” Id. (citation omitted).
On appeal, the Federal Circuit determined that the district court committed no reversible error in determining that ThermoLife failed to conduct adequate pre-suit investigations because ThemoLife failed to examine the product labels and failed to test whether the accused products contained the minimum amount of one gram of L-arginine or its hydrochloride salt even though the products were publicly available. Id. at *27-28.
With respect to examination of the product labels, the Federal Circuit determined that the district court committed no reversible error in determining there was scant evidence that ThermoLife had examined the labels of the accused products. Id. at *29-32. In particular, the Federal Circuit noted that at least some of the labels of the accused products indicated that they contained less than one gram of L-arginine while at least one product did not list L-arginine or its hydrochloride salt as an ingredient at all. Id. at *29-30.
With respect to testing of the products, the Federal Circuit noted that determining whether testing is necessary depends on factors including the availability of the accused products, the existence and costs of testing, and whether other sufficiently reliable information about the accused products exists. Id. at *28. In this case, the Federal Circuit determined that the district court did not abuse its discretion in determining that there was no adequate substitute for testing of the publicly available products given the deficiencies in ThermoLife’s examination of the accused product labels and other information, such as advertising. Id. at *28-29.
Accordingly, when determining whether to file a suit for patent infringement, a party should consider taking steps to conduct an adequate pre-suit investigation of an alleged infringer’s product. In particular, when an alleged infringer’s product is publicly available, a party should consider examining the actual product and information associated with the product, such as labeling, before filing suit.