Fees Awarded in Inventor Holdings v. BBB

Jason Bourgeois

IP Portfolio Manager

jason@ipval.com

On May 31st in the U.S. District Court for the District of Delaware, Judge Sleet granted Bed Bath and Beyond’s Motion for attorneys’ fees and costs under 35 U.S.C. 285. (1:14-cv-00448) The case was filed on April 8th, 2014, roughly two and a half months before the Supreme Court’s Decision in Alice (June 19th, 2014). Inventor Holdings was asserting U.S. Patent No. 6,381,582. The Court dismissed Inventor Holding’s claims on August 21st, 2015 and found the ‘582 patent invalid as claiming an abstract idea.

This case is notable because the ‘582 patent survived 12(b)(6) motions to dismiss based on the Mayo two prong test prior to Alice. The Court noted this, stating: “IH argues persuasively that IH’s assertion of the validity of the ‘582 patent had some merit at the outset of litigation…as IH points out, the ‘582 patent had already survived the motion to dismiss under Rule 12(b)(6) applying the two part test of Mayo.” That being said, the Court also stated that “the ‘582 patent was dubious even before the Alice decision.” Even though the patent had survived validity challenges in the past, “by the time of the Alice decision, IH was on notice that its claims, much like the claims in Bilski and Alice, covered an abstract idea and the introduction of a computer into these claims did not alter the analysis.” Accordingly, “IH had an obligation to reevaluate its case in light of subsequent decisions” (Citing Taurus IP v. DaimlerChrysler: “[A] party cannot assert baseless infringement claims and must continually asses the soundness of pending infringement claims.”)

The Court next determined that the case was exceptional and thus one that could support an award of attorneys’ fees. The Court noted, “it is the ‘substantive strength of the party’s litigating position’ that is relevant to an exceptional case determination, not the correctness or eventual success of that position.” (citing SFA Sys v. Newegg, Inc.) The Court then states that the “case at hand is an exceptional case because following the Alice decision, IH’s claims were objectively without merit. These facts alone…support a finding that the case ‘stands out from others’ and is exceptional under 285.'”

According to this holding then, any case brought by a patent owner who should have known (in the eyes of the court) that the patent was invalid under Alice is one that would support granting fees.  This essentially throws the presumption of validity out the window if the patent in suit is found invalid under 35 U.S.C. 101. We will be following this case closely as it goes to the Federal Circuit on Appeal. Check back for updates.