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Energy Heating v. Heat On-the-Fly

decided on May 4, 2018 by the Court of Appeals for the Federal Circuit

review by J. Matt Buchanan | published May 7, 2018 | updated May 7, 2018

tags: inequitable conduct, on sale bar, public use, experimental use, invention disclosure form, tortious interference, attorney fees

In Energy Heating v. Heat On-the-Fly, the Court of Appeals for the Federal Circuit considered an inequitable conduct issue along with related on sale and public use issues under 35 U.S.C. 102 as it existed before enactment of the America Invents Act (AIA). Applying the en banc Federal Circuit decision in Therasense v. Becton, Dickinson & Co. to its review of the district court's conclusion that the patent-in-suit, U.S. Patent No. 8,171,993 [text], was unenforceable for inequitable conduct, the court concluded that the district court "did not abuse its discretion in determining that HOTF procured the ’993 patent through inequitable conduct, rendering the patent unenforceable." Supporting this conclusion, the court concluded that the district court's findings on materiality and intent were not clearly erroneous because the record supported a conclusion that the patentee's prior commercial sales and public uses were not experimental. The court also remanded the district court's refusal to award attorney fees under 35 U.S.C. 285 based solely on a failure by the district court to clearly articulate its reasoning for the denial. In doing so, though, the Federal Circuit noted that, in the wake of the heightened standard for ineuquitable conduct established by Therasense, district courts have tended "to grant attorneys' fees following a finding of inqequitable conduct," which "makes sense."

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Notes

inequitable conduct

Tendency to award attorney's fees following a finding of inequitable conduct "makes sense" in wake of the heightened standard for inequitable conduct established by Therasense

After affirming the district court's finding that the patentee "procured the ’993 patent through inequitable conduct, rendering the patent unenforceable," the court turned its attention to the district court's denial of attorney fees under 35 U.S.C. 285. The court carefully explained that it reviews the denial for abuse of discretion, which is, of course, highly deferential. But, the court also noted that, even before Therasense established a heightened standard for inequitable conduct, "[d]istrict courts have often awarded attorneys’ fees under § 285 following a finding of inequitable conduct, and this court has upheld such awards."

This trend continued, of course, following Therasense:

"Following Therasense, district courts have continued to tend to grant attorneys’ fees following a finding of inequitable conduct. Given Therasense’s heightened standard for intent in finding inequitable conduct, this tendency makes sense." (internal citation omitted)

inequitable conduct

A district court must articulate a basis for denying attorneys’ fees following a finding of inequitable conduct

After noting that the tendency to award attorney fees under 35 U.S.C. 285 following a finding of inequitable conduct "makes sense" in the wake of the heightened standard for inequitable conduct established by Therasense, the Federal Circuit cautioned that this trend should not be viewed as a rule. Discretion on the issue properly remains with the district courts and the Supreme Court's guidance in Octane Fitness v. ICON Health & Fitness, which "emphasized that there are no per se rules and rather a determination should be made based on the totality of circumstances," should be followed.

With discretion comes responsibility, though. The Federal Circuit stressed the need for a clear record from the district court, including an articulation of the basis for the award or denial of attorney fees:

"Nonetheless, given the strict standard in Therasense, we are of the view that a district court must articulate a basis for denying attorneys’ fees following a finding of inequitable conduct. Just as it is incumbent on a trial court to articulate a basis for finding a case exceptional, it is equally necessary to explain why a case is not exceptional in the face of an express finding of inequitable conduct." (emphasis added)

The district court failed to clearly explain its decision here, leaving the Federal Circuit unable to "determine whether the district court abused its discretion in denying attorneys’ fees."

So, back we go to the District Court for the District of North Dakota. Will that court, on remand, simply articulate its basis for denying attorney fees, or will it succumb to peer pressure and follow the trend?

We'll see.