Litigation Costs Exceeding Potential Damages Is Not Exceptional Per Se

ATEN INTERNATIONAL CO., LTD. v. UNICLASS TECHNOLOGY CO., LTD.

Before Moore, Wallach, and Taranto.  Appeal from the United States District Court for the Central District of California.

Summary: A case is not per se exceptional under 35 U.S.C. § 285 just because (1) the cost of litigation exceeds plaintiff’s potential damages or (2) a party’s legal argument was rejected on summary judgment.

ATEN and Uniclass sell competing switch systems that allow a user to control multiple computers from a single keyboard, video device, and mouse.  After Uniclass stopped making payments under a license agreement, ATEN sued Uniclass for infringing two patents, seeking damages and an injunction.  The district court granted Uniclass’s motion for summary judgment on ATEN’s lost profits theory.  At trial, ATEN presented a reasonable royalty theory with damages of $678,000.  A jury found that Uniclass did not infringe the asserted claims and found the asserted claims of one of the patents invalid.  The district court denied Uniclass’s motion to declare the case exceptional under 35 U.S.C. § 285, and Uniclass appealed.

Uniclass argued that the district court abused its discretion in denying the motion for an exceptional case because (1) the cost of litigation was greater than ATEN’s potential recovery and (2) the district court failed to weigh ATEN’s baseless lost profits theory that was rejected on summary judgment.  The Federal Circuit held there was no abuse of discretion by the district court.  First, the Federal Circuit noted that there is no per se rule that a case is exceptional where litigation costs exceed the plaintiff’s potential damages.  The Federal Circuit listed several reasons patentees may file infringement suits, including competitive deterrence or to obtain an injunction.  Second, the Federal Circuit noted that the district court had considered ATEN’s lost profits theory in its decision.  The district court noted that there were shortcomings to ATEN’s positions, but these did not amount to an exceptional case determination.

Editor: Paul Stewart

Written by: Eric R. Malmgren & Kendall Loebbaka