Background
Carnegie Institution of Washington and its licensee, M7D Corporation, sued Fenix Diamonds LLC for infringing two patents covering methods for producing and treating lab-grown diamonds. After claim construction and discovery concerning the manufacturing process used by Fenix’s Indian supplier, the district court granted Fenix summary judgment of noninfringement. The parties later stipulated to dismissal of the merits appeal, and the case returned to the district court for resolution of Fenix’s request for fees and expenses.
The district court found the case exceptional under 35 U.S.C. § 285 because Carnegie and M7D continued pursuing objectively baseless infringement positions after receiving evidence from the supplier. It also invoked its inherent power to award nontaxable expenses based on findings of bad-faith and vexatious conduct. The court held Carnegie and M7D jointly and severally liable for $2,547,594.94 in attorney fees and $693,119.72 in nontaxable expenses incurred after July 14, 2020, totaling $3,240,669.66, plus post-judgment interest. It denied Fenix’s request for prejudgment interest.
The Court’s Holding
The Federal Circuit affirmed the exceptional-case determination. The district court did not abuse its discretion in finding the infringement positions objectively baseless as of July 14, 2020. For the ’078 patent, the plaintiffs’ theory conflicted with the governing claim construction and failed to address evidence of extensive non-monocrystalline growth. For the ’189 patent, the supplier’s process operated outside the claimed pressure range, and the plaintiffs presented no infringement evidence. Because objective baselessness independently supported the § 285 ruling, the panel did not reach the district court’s separate finding that the plaintiffs litigated unreasonably.
The panel also affirmed the award of nontaxable expenses, the amount awarded, and joint and several liability. The record supported findings of bad-faith or vexatious conduct, and all post-July 14 expenses satisfied the required but-for relationship because the litigation should have ended once the claims became baseless. Carnegie and M7D had a sufficiently close and intertwined relationship to justify shared liability. On Fenix’s cross-appeal, the court affirmed the denial of prejudgment interest because Fenix did not request it in its original fee motion and failed to answer Carnegie’s opposition to it in the supplemental briefing.
Key Takeaways
- Continuing to press an infringement theory that conflicts with a court’s claim construction can support an exceptional-case finding under 35 U.S.C. § 285.
- A court may shift all fees and nontaxable expenses incurred after the point when continued litigation became objectively baseless and vexatious.
- A patent owner and its licensee may face joint and several liability when they jointly prosecute the case, share counsel and arguments, and maintain a closely intertwined litigation relationship.
- A party seeking prejudgment interest on a fee award should request it in the initial fee motion, even if the precise amount cannot yet be calculated.
Why It Matters
The nonprecedential decision underscores the financial risk of continuing patent litigation after discovery eliminates a viable infringement theory, particularly when the remaining theory depends on disregarding an adverse claim construction. It also confirms that inherent-power sanctions may encompass expert fees and other nontaxable expenses when supported by bad-faith or vexatious conduct.
The ruling further warns patent owners that licensing litigation to another entity does not necessarily insulate them from fee liability. Active alignment through shared counsel, joint filings, consultation rights, consent rights, and a financial stake in recovery may support joint and several liability for a substantial award.