The Supreme Court Granted Cert to Explore Litigation Misconduct and Fee Shifting
O2 Micro International Ltd., a company that “develops and markets high performance integrated circuits for power management, and power saving applications for the computer, consumer, industrial, automotive and communications markets,” is a patent holder appealing a Federal Circuit ruling. The ruling against O2 Micro stated their misconduct in a case was so pervasive it infected the entire litigation.
To understand the Federal Circuit ruling and how O2 petitioned for cert, you need to know a little about O2’s litigious history.
This ruling comes in the midst of a series of suits taking place over the last twelve years. Most of the cases deal with O2 Micro alleging patent infringement by Monolithic Power Sys., Inc. Monolithic had filed for declaratory judgment alleging non-infringement of multiple patents. O2 also filed a complaint with the International Trade Commission (ITC), trying to block Monolithic from importing equipment. O2 then dropped some of the patents from the suit. In the remaining patent claim, O2 asserted they were entitled to an earlier conception date for the patent in dispute. Their assertion was based on a date found on a schematic drawing. Later, the date was proved to be altered. The parties submitted pretrial submissions and O2 granted a covenant not to sue. The district court dismissed the suit.
After being pulled in and out of the courtroom for years without a judgment against them, Monolithic Power moved for attorney fees and sanctions. The district court granted the fees and sanctions. O2 had brought many lawsuits (without victory) against customers, granted a covenant not to sue, and then altered the schematic drawings. The court determined these actions constituted vexatious litigation. The attorneys fees award was $8.4 million.
The Federal Circuit upheld the attorneys fees award. Explaining its decision, the Federal Circuit said Monolithic Power didn’t have to show “bad faith” or “objectively baseless” litigation in addition to “litigation misconduct” to prove the case was “exceptional” under the patent statute. An overall vexatious litigation strategy and numerous instances of litigation misconduct are sufficient to support a determination the case was exceptional. The award of fees for the ITC litigation was upheld since the parties had agreed the discovery would also be used in district court litigation.
Naturally, O2 Micro was unhappy with this award and enjoys litigation, so it petitioned for a writ of certioris to answer three questions:
“1.?Whether a court can vitiate the First Amendment right to petition by failing to require findings related to either “objective baselessness” or subjective “bad faith,” established as the standard for fee shifting cases by this Court in Professional Real Estate Investors, Inc., by merely labeling a party’s actions “litigation misconduct” when the district court did not do so.
2.?Whether there is a standard for finding “litigation misconduct” under 35 U.S.C. §285, and, if so, whether it requires culpability greater than negligence.
3.?Whether, under Fox v. Vice, __ U.S. __, 131 S. Ct. 2205 (2011) (holding that shifting of fees is improper for all fees that would nevertheless have been incurred absent the misconduct), a court may properly include in a sanction an award of attorneys’ fees incurred in a separate tribunal, such as the [International Trade Commission], in which there has been no finding of wrongdoing and where those fees would have indisputably been incurred regardless of the alleged wrongdoing.”