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Gaymar Industries, Inc. v. Cincinnati Sub-Zero Products, Inc.

United States Court of Appeals, Federal Circuit

June 25, 2015

GAYMAR INDUSTRIES, INC., Plaintiff-Appellee
v.
CINCINNATI SUB-ZERO PRODUCTS, INC., Defendant-Appellant

Appeal from the United States District Court for the Western District of New York in No. 1:08-cv-00299-WMSJJM, Chief Judge William Skretny.

JODYANN GALVIN, Hodgson Russ LLP, Buffalo, NY, argued for plaintiff-appellee. Also represented by ROBERT J. LANE, JR.

THOMAS J. BURGER, Wood, Herron & Evans, LLP, Cincinnati, OH, argued for defendant-appellant. Also represented by PAUL J. LINDEN; TIMOTHY J. GRABER, MELISSA M. MORTON, Gibson, McAskill & Crosby, LLP, Buffalo, NY.

Before PROST, Chief Judge, BRYSON, and DYK, Circuit Judges.

OPINION

Page 1370

Dyk, Circuit Judge.

Cincinnati Sub-Zero Products, Inc. (" CSZ" ), the prevailing party in this patent infringement case, appeals the district court's denial of attorney's fees under 35 U.S.C. § 285. In holding that this was not an " exceptional case," the district court found that plaintiff Gaymar Industries, Inc.'s (" Gaymar" ) litigation position was not objectively baseless. In assessing the totality of the circumstances, the district court relied on several instances of defendant CSZ's purported litigation misconduct as a basis for finding that the case was not exceptional. We affirm the district court's finding of a lack of objective baselessness. We reverse the exceptional case finding insofar as it was based on CSZ's purported misconduct, and remand.

Background

Gaymar is the owner by assignment of U.S. Patent No. 6,517,510 (" the '510 patent" ), which is directed to a patient temperature control system, including a blanket that can conductively warm or cool the patient.[1] On April 18, 2008, Gaymar sued CSZ, asserting that CSZ's Blanketrol III device infringed claims 1, 2, 5, 7-12, 19, 20,

Page 1371

23, 25-27, 29-31, 37, 38, 41, 43-45, 47-49, and 55 of the '510 patent. On July 15, 2008, Gaymar moved for a preliminary injunction against CSZ.

On July 31, 2008, CSZ filed an inter partes reexamination request with the United States Patent and Trademark Office (" PTO" ), asserting that all 134 claims of the '510 patent were invalid primarily based on the combination of the '510 patent's description of the Medi-Therm II device (" MT-II" ) and SARNS, a manual for a surgical blood-warming device. On September 9, 2008, CSZ moved to stay the district court action in light of the pending reexamination request. On October 24, 2008, the PTO granted the reexamination request and issued a first Office Action rejecting all claims of the '510 patent as anticipated or obvious over prior art cited in CSZ's request. On September 28, 2009, the district court denied Gaymar's motion for a preliminary injunction based on a substantial issue of patent validity, and granted CSZ's motion to stay the case pending the conclusion of the reexamination. On November 23, 2009, the PTO reaffirmed its rejection of all claims of the '510 patent.

Gaymar filed a notice of appeal with respect to the PTO's cancellation decision, but ultimately determined not to pursue it. Gaymar filed an express abandonment of all claims on April 16, 2010, and the PTO concluded the reexamination on July 13, 2010, cancelling all of the claims. The district court lifted the stay on January 20, 2012, and referred the case to a magistrate judge on February 21, 2012. Although the PTO's unappealed cancellation had resolved the merits of the district court action, the question of attorney's fees remained.

CSZ moved for attorney's fees under § 285, alleging that Gaymar's litigation position was frivolous and that Gaymar had engaged in litigation misconduct. On August 8, 2013, the magistrate judge issued a report (the " first report" ) recommending the denial of CSZ's § 285 motion. In the first report, the magistrate judge found that " CSZ has not proven by clear and convincing evidence that . . . Gaymar's claims were objectively baseless." J.A. 17. The magistrate judge further found that although Gaymar intentionally gave a misleading response to a discovery request relating to a prior art reference, that alone was insufficient to render the case exceptional. J.A. 24. Finally, the magistrate judge noted that he " would not recommend an award of attorney's fees even if the case was exceptional," J.A. 24, relying primarily on apparent litigation misconduct by CSZ based on four examples of purported " misrepresentations to the court" or " shifting legal theories," J.A. 26. The district court adopted in full the magistrate judge's recommendations on November 21, 2013, and denied the motion for attorney's fees.

Following the Supreme Court's April 29, 2014, decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 188 L.Ed.2d 816 (2014), CSZ moved for reconsideration of its attorney's fees motion. The magistrate judge issued a second report on July 3, 2014 (the " second report" ), recommending the denial of CSZ's motion for reconsideration. While the magistrate judge did not revisit his finding of a lack of objective baselessness, the magistrate judge " disagree[d]" that the primary focus under Octane was the objective reasonableness inquiry. J.A. 36. The magistrate judge denied fees relying on the litigation misconduct findings from the first report, stating that " [g]iven CSZ's own litigation misconduct, it does not have 'clean hands'

Page 1372

sufficient to render this an 'exceptional case.'" Id. (citing J.A. 25-27). The district court again adopted the magistrate judge's recommendations in full on September 30, 2014, concluding that Octane did not require a different result and denying reconsideration.

CSZ appeals the denial of its attorney's fees motion. We have jurisdiction under 28 U.S.C. § 1295(a)(1). We review de novo whether the district court applied the correct legal standard under § 285. Monolithic Power Sys. v. O2 Micro Int'l Ltd., 726 F.3d 1359, 1365 (Fed. Cir. 2013). We review the district court's factual findings underlying an exceptional case determination for clear error. Id. And we review the district court's determination of whether a case is " exceptional" for an ...


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