Motivation to Enforce Patent Rights Does Not Make Case Exceptional

Checkpoint Systems, Inc. v, All-Tag Security S.A., [2016-1397] (June 5, 2017), the Federal Circuit reversed the award of attorneys fees.

Checkpoint sued under U.S. Patent No. 4,876,555 relates to improved anti-theft tags that are attached to merchandise.  After a jury trial, the patent was found not infringed, invalid, and unenforceable, and the court found the case to be “exceptional” because   Checkpoint’s expert witness based his infringement opinion on examination of imported tags that were manufactured by All–Tag in Switzerland, although the
accused tags were manufactured by All–Tag in Belgium.  The Federal Circuit reversed the attorney fee award because there was evidence that the Swiss products were made on the same machines and the Belgian products.  Certiorari was granted, and the case was remanded for further proceedings consistent with Octane Fitness and Highmark.  The district court agreed that Checkpoint’s claims were not frivolous, but nonetheless found the case to be exceptional, explaining: frivolousness is not required to find exceptionality under Section 285.  The district court’s determination was based upon three findings: (1) Checkpoint’s motivation in bringing the lawsuit, (2) inadequate pre-suit investigation, and (3) the failure of Checkpoint’s expert to inspect the correct accused product.

As the Checkpoints motivation, the Federal Circuit said that enforcement of the statutory right to exclude is not an “exceptional case” under §285.  While the Federal Circuit agreed that “motivation” to harass or burden an opponent may be relevant to an “exceptional
case” finding, “motivation to implement the statutory patent right by bringing suit based on a reasonable belief in infringement is not an
improper motive.”  The Federal Circuit found no evidence of harassment or abuse, and noted that Checkpoint’s claim survived summary judgment and a Daubert hearing.

The district court also found the expert’s failure to test an accused product supported the exceptional case finding and fee award.  The Federal Circuit noted that there no representation by All–Tag that the accused products were different from the tested products, and the district court did not so find.  Thus the failure to test the accused products did  not support an exceptional case ruling.