Federal Circuit Vacates Exceptional Case Finding and Over $6 million Dollar Award of Attorneys Fees

Catching up on my reading, I notice that in May, the Federal Circuit affirmed in-part, remanded, and vacated in-part a judgment entered following a two-week bench trial here in Seattle between TALtech Limited and Esquel Apparel, Inc. involving US Patent No. 5,568,779, a patent covering a seam for "wash-and-wear" dress shirts that solved the problem of puckering when laundered (WDWa Case No. 04-cv-974).

Judge Zilly entered findings of fact and conclusions of law in March 2007 invalidating the '779 patent on a rarely successful best mode argument (use of a preferred adhesive was apparently not disclosed), and he also found the patent unenforceable due to inequitable conduct for failure to disclose a prior art raincoat seam that had "inspired" the invention. The patent was also found not to be infringed by Defendants. (How is that for a complete defense victory? Makes one wonder why plaintiffs did not demand a Jury, especially after some of the pre-trial rulings in the case, providing a rather narrow claim interpretation and failing to find literal infringement as a result, which should have indicated which way the wind was blowing. But, I know hindsight is 20/20.)

Over $6 million dollars in attorneys fees were awarded to the Defendant under 35 U.S.C. 285 because the case was deemed "exceptional" as a result of the inequitable conduct and misconduct of Plaintiffs during litigation.

The Federal Circuit affirmed findings of invalidity and non-infringement, but vacated the finding of inequitable conduct, and the over $6 million dollar award of attorneys fees because it was based "at least in part" upon a finding of inequitable conduct. The case was remanded so the Court could consider whether the undisclosed prior art was cumulative of other art before the examiner.

I would expect some supplemental briefing on the "cumulative" issue. The Federal Circuit definitely left the door open for a finding that the undisclosed prior art was not cumulative, and given the highly factual nature of this finding, it may prove difficult to overturn on appeal. Further, exceptional case findings could be revised, finding independent basis in litigation misconduct, although this would probably receive very close scrutiny by the Federal Circuit.