Consideration Under Octane Fitness Requires Fresh Case Analysis

The US Court of Appeals for the Federal Circuit reversed and remanded a district court decision for proper application of the exceptional case standard set forth in Octane Fitness v. Icon Health & Fitness ( IP Update, Vol. 18, No. 8), finding that the district court is required to reconsider the record under the Octane Fitness standard instead of relying upon the findings in the original decision. AdjustaCam, LLC v. Newegg, Inc., Case No. 16-1882 (Fed. Cir., July 5, 2017) (Reyna, J).

AdjustaCam owns a patent directed to a camera clip that supports a camera on a flat surface or when attached to a computer monitor. AdjustaCam sued Newegg, among other defendants, for patent infringement, ultimately moving to dismiss its claims against Newegg just prior to summary judgment briefing, contingent on Newegg's right to seek fees after dismissal. A key dispute among the parties was whether the ball and socket joint of Newegg's products could meet the claim limitation of the asserted patent, which requires the hinge member to be rotatably attached to the camera in a single axis of rotation. Newegg moved for a declaration that the case was exceptional under 35 USC § 285 and an award of fees, arguing that AdjustaCam brought an objectively baseless lawsuit in bad faith to extract nuisance-value settlements unrelated to the merits and far below the cost of the defense, prolonging the litigation in bad faith even after the Markman order. After the district court denied Newegg's motion, Newegg filed a first appeal to the Federal Circuit.

In the first appeal, Newegg challenged the district court's denial of its motion, and the Federal Circuit remanded the case for reconsideration in light of Octane Fitness, noting in its order that Octane Fitness (IP Update, Vol. 17, No. 5) substantially changed the analysis under § 285 and that "Newegg's arguments appear to have significant merit"

On remand, the case was assigned to a new judge, and the parties re-briefed the § 285 issue under the Octane Fitness standard. The district court again denied Newegg's motion for fees, relying heavily on the findings of the original judge in order to avoid hindsight bias, noting that the original trial judge was in the best position to evaluate the merits of the case. The district court found that AdjustaCam's infringement and validity arguments were not so weak, nor its litigation conduct so poor, as to constitute an exceptional case. Newegg again appealed.

In this appeal, the...