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Since the U.S. Supreme Court’s twin 2014 decisions in Highmark Inc. v. Allcare Health Management System, Inc. and Octane Fitness, LLC v. ICON Health & Fitness, Inc. attorney’s fees awards are becoming more common in patent cases.  35 U.S.C. § 285 allows attorney fees “in exceptional cases.”  Before 2014, this meant a court awarded attorney’s fees only if a party’s litigation position was objectively baseless.  This standard proved to be a high bar, and courts rarely awarded fees.  However, the aforementioned Supreme Court cases liberalized the standards for finding a patent case to be “exceptional” and instituted an abuse-of-discretion review standard.  Specifically, the Supreme Court: (1) defined an exceptional case in which reasonable attorney fees may be awarded to the prevailing party to be “one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated;” (2) reduced the evidence required from clear and convincing to a preponderance of evidence; and (3) increased the deference given the trial court during appellate review of such awards from de novo to abuse of discretion.

A recent attorney’s fees award in Alzheimer’s Institute of America v. Eli Lilly & Co. et al., case number 3:10-cv-00482, in the U.S. District Court for the Northern District of California included pre-suit attorney’s fees, which illustrates the impact of the recent Supreme Court holdings.  In Alzheimer’s Institute of America, the Court awarded almost $8,000,000 in attorneys’ fees, including $235,780 in pre-suit fees, to the defendants after findings that plaintiff Alzheimer’s Institute of America’s (“AI”) patent infringement lawsuit misrepresented the true owner of patents covering Alzheimer’s detection.  Specifically, the court awarded defendant Eli Lilly & Co. (“Eli Lilly”) $4,445,492 and defendant Elan Pharmaceuticals Inc. (“Elan”) $3,435,130.  This recent ruling concerned only the amount of attorneys’ fees the Court would award the defendants because the Court had already ruled last summer that AI’s patent infringement suit was “exceptional” under 35 U.S.C. § 285 and the recent Supreme Court precedent.

The lawsuit traces back to February 2010 when AI filed its patent infringement complaint against Eli Lilly and Elan.  The complaint alleges that Eli Lilly and Elan infringe U.S. Patent Numbers 5,455,169 (the “’ 169 Patent”) and 7,538,258 (the “’258 Patent”), which involve technology related to “the Swedish mutation,” one of the known genetic causes of Alzheimer’s disease.  AI filed a second patent infringement lawsuit in November 2010 in the Eastern District of Pennsylvania, alleging the University of Pennsylvania (“Penn”) and Eli Lilly subsidiary Avid Radiopharmaceuticals Inc. (“Avid”) also infringe the ’169 and ’258 Patents.  AI contended that Penn and Avid had infringed the two asserted patents by relying on a protected type of transgenic mice to develop breakthrough Alzheimer’s imaging technology.

In the Eastern District of Pennsylvania action, an issue arose as to whether AI was in fact the proper owner by assignment of the two patents in suit.  AI asserted it was assigned the rights to the patents by Michael Mullan, the sole listed inventor on both patents, who was employed by the University of South Florida (“USF”) at the time.  Thus, there was an issue as to whether the patents were owned by USF because of Mr. Mullan’s employment status.  In addition, there was an issue as to whether Mr. Mullan was actually the sole inventor, or whether his collaborator, John Hardy, had also made a substantial contribution to the innovation.

In August 2011, the Court in the Eastern District of Pennsylvania found that under Florida law the patents were owned by USF, but the issue was further complicated because there was a factual dispute as to whether USF had waived its ownership rights.  The Court thus ordered a jury trial on the waiver issue.  In May 2012, the jury found that USF had not in fact waived its right to the asserted patents and that Mr. Mullan was not the sole inventor of the technology covered by the two patents.  The Federal Circuit later affirmed the jury verdict on appeal, and when remanded back to the Eastern District of Pennsylvania, the District Court found the case to be “exceptional” on a motion for attorney’s fees.  The Court found the evidence at trial showed that AI’s principal conspired with two other individuals to misrepresent the true owner of the Swedish mutation inventions and to defraud two universities, and that this “conduct was rare and beyond common decency . . . . [and] motivated by ego and greed . . . . [and] [b]ringing this action was nothing more than a perpetuation of the conspiracy.”

In the meantime, the suit against Eli Lilly and Elan in the Northern District of California had been stayed in December 2011 pending the outcome of the jury trial in the Eastern District of Pennsylvania.  In August 2012, after the jury finding that AI was not the true owner of the asserted patents, the Court dismissed the suit against Lilly and Elan, applying collateral estoppel that AI lacked standing to pursue its patent claims.  Then, in June 2015, after the Federal Circuit appeal and the exceptional finding in the Eastern District of Pennsylvania action, the Court in the Northern District granted the defendants’ motions for attorneys’ fees, finding that, as in the Eastern District of Pennsylvania case, the suit was exceptional and attorneys’ fees were justified.

Therefore, the only issue outstanding was the amount of attorney’s fees to award defendants in the Northern District action.  Although the Court considered many issues, including reasonableness of hourly rates, adequacy of documentation, overlapping counsel, standard fees for patent litigation, the effect of multiple litigations, and recovery for paralegal time, one issue of particular note is the Court’s awarding of pre-suit fees to defendants.  In reaching its ruling, the Court noted that defendants’ billing entries reflected that it engaged counsel during its pre-suit investigation “to perform an analysis of Plaintiff’s patents and of potential damages.”  Specifically, the Court noted, “Elan states that it ‘foresaw litigation’ based on a letter from [AI] indicating that ‘[AI] believes that it is now appropriate for licensing discussion with Elan to re-commence’ and that ‘it appears that a substantial portion of Elan’s drug discovery efforts for Alzheimer’s Disease are entirely reliant on the unauthorized use of [AI’s] patented technology.’”  Therefore, the Court reasoned, “as Elan reasonably anticipated that this litigation would occur, its reasonable fees incurred prior to the initiation of this case are recoverable.”

This case illustrates that the courts will take strong action when faced with baseless claims, hidden or altered evidence, and misleading statements made to the court or opponents.  It also serves as a strong reminder to consider your counsel carefully, and the advice that they provide, or a plaintiff may have to pay its own fees and those of the defendant, which in this case amounted to another $8 million.

Section 2(a) of the Lanham act bars the registration of “scandalous, immoral or disparaging trademarks.” The USPTO has used this applied this provision to refuse the registration of marks such as F**K PROJECT, PORNO JESUS, ASSJACKED and NO $#!+.  The USPTO also invoked this provision when it upheld an examiner’s refusal to register the mark THE SLANTS for a musical band on the grounds that it was offensive to Asian-Americans.  The band appealed the refusal to register to the Federal Circuit.

The question on appeal was whether Section 2(a)’s prohibition on scandalous, immoral or disparaging trademarks is constitutional. The government defended the prohibition on the grounds that it disapproves of the messages conveyed by disparaging marks.   The Federal Circuit noted that this prohibition does not further the Lanham Act’s purpose and preventing consumers from being deceived. This reason for denial of registration is for “reasons quite separate from any ability of the mark to serve the consumer and investment interest underlying trademark protection.”

The Federal Circuit found that Section 2(a)’s prohibition on registering disparaging marks is a content-based regulation which is presumptively invalid. Content-based laws – those laws that target speech based on its communicative content – are presumptively unconstitutional and maybe justified only if the government proves that the laws are narrowly tailored to serve a compelling state interest.  The refusal to register a trademark because it is disparaging results from the government making a moral judgment based solely on the mark’s expressive content.   The Federal Circuit found that the government’s desire to prohibit disparaging marks and the messages they convey is not a legitimate and compelling state interest.  Based on this analysis, the Federal Circuit found this provision of Section 2(a) to be unconstitutional.

Subsequent to the Federal Circuit’s opinion, the band pushed the USPTO to immediately register its mark.  In response, the USPTO said that it would suspend the registrations of all disparaging trademarks while it considered appealing the Federal Circuit’s ruling to the United States Supreme Court. Commentators believe that the US PTO will likely appeal the Federal Circuit’s ruling to the Supreme Court.

The Federal Circuit’s opinion may open the door for the registration of marks that may be potentially disparaging and new applications for marks previously refused registration based on Section 2(a).  Further, the Federal Circuit’s opinion may have an impact on the case of Washington Redskins football team which is appealing the 2014 revocation of its REDSKINS trademark on the grounds that it was offensive to Native Americans.

When you hear the name of someone you can’t place or don’t know much about, what do you do?  Chances are, you “Google” them.  Well that is what attorneys are doing to learn more about prospective jurors too!  But they are not stopping there.  They are looking at a number of social media sites, such as Facebook, Twitter, and LinkedIn to learn about the profiles, likes, dislikes, friends, hobbies, biases, religion, and preferences of individuals in the jury pool.  This practice has raised a number of issues related to ethics, privacy, and responsibility.  To date, courts have taken positions ranging from banning these searches to practically requiring them.

Ironically, the use of social media to screen jurors is a key issue in current litigation where Oracle is suing Google in the Northern District of California for allegedly violating the copyright on its Java API code.  Originally, the parties wanted potential jurors to fill out a two-page questionnaire.  Then the parties would spend a day or two evaluating the questionnaires before actually selecting a jury.  But Judge Alsup was suspicious as to why it would take so long to evaluate two-page forms, so he asked the parties if they were planning to use social media to investigate potential jurors based on the information provided.  Bingo!  That is exactly what they were planning to do.  As a result, the questionnaire was scrapped, but that still left open the question of what Internet searches would be permitted during jury selection and the trial.

Judge Alsup addressed these issues in his order last week noting that the “American Bar Association issued an opinion that, within limits, it is ethical for counsel to conduct Internet searches on prospective jurors.”   But the ABA cautioned that judges may limit the scope of searches if necessary under certain circumstances.  California has not issued a rule on the ethical scope of such Internet searches, and the California State Bar has not issued an opinion.

While Judge Alsup stopped short of banning social media searches during jury selection, he expressed misgivings and implored Oracle and Google to voluntarily refrain from scouring the jurors’ social media activity before and during the trial.  Judge Alsup cited three primary arguments against the searches.  “The first reason is anchored in the danger that upon learning of counsel’s own searches directed at them, our jurors would stray from the Court’s admonition to refrain from conducting Internet searches on the lawyers and the case.”  Second, the parties may use information about the jurors to create analogies or make arguments that are targeted at specific jurors.  Judge Alsup noted that “if a search found that a juror’s favorite book is To Kill A Mockingbird, it wouldn’t be hard for counsel to construct a copyright jury argument (or a line of expert questions) based on an analogy to that work and to play upon the recent death of Harper Lee, all in an effort to ingratiate himself or herself into the heartstrings of the juror.  The same could be done with a favorite quote or with any number of other juror attitudes on free trade, innovation, politics, or history.”  Third, Judge Alsup acknowledged the need to protect the privacy of the potential jurors, who “are not celebrities or public figures.”

If Oracle and Google agree to the voluntary ban, then they will be given more time to question the potential jurors during jury selection.  If they do not agree, then each side will have to explain to the potential jurors the “specific extent to which it (including jury consultants, clients, and other agents) will use Internet searches to investigate and to monitor jurors, including specifically searches on Facebook, LinkedIn, Twitter, and so on, including the extent to which they will log onto their own social media accounts to conduct searches and the extent to which they will perform ongoing searches while the trial is underway.”  The potential jurors “will then be given a few minutes to use their mobile devices to adjust their privacy settings, if they wish.”  Then until the trial is over, each side will be permitted to view online only what it told the potential jurors it would review and nothing more.

But, is looking at someone’s public presence on social media really any different than driving by their house on a public street or asking them questions about likes and dislikes during jury selection?  It could be.  For example, do the potential jurors know that their social media posts and profiles are publicly accessible, or do they think that only their “friends” can see them?  Do they even know how to limit access to their social media accounts so that only their friends can see them?  What if their account allows friends of a friend to see their posts?  Who knows, one of the lawyers could fortuitously be a friend of a friend of a potential juror.  Also, will there be a chilling effect that causes large numbers of jurors to avoid jury service for fear that something in their social media accounts will be revealed in court?

On the other hand, failure to perform social media searches raises the risk of seating a juror who lied during voir dire or of failing to identify online juror misconduct during a trial.  For example, in Sluss v. Commonwealth, 381 S.W.3d 215, 226-227 (Ky. 2012), two jurors lied about their relationships to the victim’s mother.  A later review of their Facebook profiles revealed that both jurors were “friends” with her.  As another example, review of online posts during a trial can reveal instances where jurors are improperly talking about or researching the case.

In addition, some court have penalized parties who did not timely use searches to ferret out jury bias.  For example, after the trial in Burden v. CSX Transp., Inc., No. 08-cv-04-DRH, 2011 WL 3793664 (S.D. Ill. Aug. 24, 2011), the defendant’s online searches revealed that certain jurors failed to disclose relevant information on questionnaires and during voir dire.  But the Court said it was too late stating “defendant’s motion for a new trial based on juror dishonesty must be dismissed because the basis of defendant’s objections might have been known or discovered through the exercise of reasonable diligence.”  In another case, Johnson v. McCullough, 306 S.W.3d 551 (Mo. banc 2010), the Missouri Supreme Court suggested that competent representation in light of advances in technologies imposes a duty to conduct certain types of online searches during voir dire. Specifically, the court stated that “[l]itigants should not be allowed to wait until a verdict has been rendered to perform a Case.net search for jurors’ prior litigation history when, in many instances, the search also could have been done in the final stages of jury selection or after the jury was selected but prior to the jury being empanelled.”

Given the variation in rules across jurisdictions and judges, attorneys need to be keenly aware of the applicable rules for investigating potential and actual jurors in their cases and the risks associated with failure to perform the allowable searches.