Last Week In The Federal Circuit (July 25-29): Following The Letter But Not The Spirit Of The Rules

Sometimes just because the rules permit something doesn't mean doing it is a good idea. As our latest case-of-the-week shows, the result could be an award of attorney fees.

Case of the week:Realtime Adaptive Streaming v. Netflix, Inc., No. 21-1484

Panel: Judges Newman, Reyna, and Chen, with Judge Chen writing the opinion

You should read this case if: you have a matter involving attorney fees

Our case-of-the-week began when the plaintiff, Realtime, filed a patent-infringement action in Delaware. The action produced the now-standard petitions for inter partes reviews to the Patent Trial and Appeal Board, which the Board granted. Realtime's complaint also produced a Section 101 motion to dismiss, which a magistrate judge recommended granting in "a thorough report." The same Delaware district court had also just granted a Section 101 motion to dismiss against Realtime's related patents in parallel actions. But before the Delaware district court could rule on the magistrate judge's recommendation in this case, Realtime voluntarily dismissed the Delaware action.

The day after its dismissal, Realtime sued the same defendant (Netflix) on the same patents in the Central District of California. It did so even though it had previously told the Delaware court that transferring the original Delaware action across the country to the Northern District of California would be inconvenient and unfair. Realtime's change of heart may have been prompted by a recent favorable ruling from the CDCal court on subject-matter eligibility for some of the asserted patents.

The CDCal action prompted a motion for attorney fees and to transfer the case back to Delaware. Realtime initially opposed transfer, then voluntarily dismissed its case before the CDCal court could rule. But the CDCal court awarded attorney fees anyway under 35 U.S.C. § 285 and, in the alternative, under its inherent equitable powers, although it declined to award the maximum fees sought.

The Federal Circuit affirmed Realtime's appeal of that award. The Court declined to reach the issue of whether back-to-back voluntary dismissals made the defendant a prevailing party, as Section 285 requires. The Court explained that the district court's inherent-powers alternative was sufficient to sustain the award: "A district court may rely on its inherent equitable powers to award attorneys' fees even if there is a statutory provision creating an alternative vehicle."

Applying Ninth Circuit law because the issue "is not a substantive patent question," the Federal Circuit explained that a court may use its inherent powers to sanction a party that "acted in bad faith, vexatiously, wantonly, or for oppressive reasons." In the Ninth Circuit, a party acts in bad faith when it "has engaged in willful actions with an improper purpose." The Federal Circuit held that the district court had reasonably found that Realtime acted in bad faith based on three factors: (1) the Delaware magistrate judge had already recommended holding Realtime's claims invalid before Realtime's dismissal there; (2) Realtime knew that the Delaware court had also invalidated several related patents in parallel actions; and (3) the Board had instituted reviews of all asserted patents, indicating a reasonable likelihood that the patent claims were invalid. These facts showed Realtime acted in bad faith in dismissing in Delaware and refiling in CDCal. And Realtime only added to that bad faith when it fought transfer back to its originally preferred forum and then again dismissed its case. Such conduct supported the district court's "finding of impermissible forum shopping."

The Federal Circuit rejected Realtime's argument that there was no bad faith because the rules permitted Realtime's actions. The Court agreed "that it is generally permissible under Rule 41(a)(1)(A)(i) for a plaintiff to voluntarily dismiss an action and refile the case in another forum." But that was "a woefully incomplete description of the circumstances of this case." Realtime had "misuse[d]" the ability to refile in an attempt "to wipe the slate clean" after the writing was on the wall in Delaware. In these circumstances, the district court acted well within its discretion in awarding fees.

OTHER WEEKLY STATS

Precedential opinions: 2

Non-precedential opinions: 5

Rule 36: 0

Longest pending case from argument:Realtime Adaptive Streaming v. Netflix, Inc., No. 21-1484 (169 days)

Shortest (non-Rule 36) pending case from argument: Podlucky v. US, No. 22-1319 and No. 22-1328 (20 days) (companion cases)

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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