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Uphill Challenges for Parties Seeking Attorney Fees in Federal Circuit Appeals of PTAB Decisions

As any involved party can confirm, patent litigation is often not the most economical method of resolving a dispute. Typically, the “American Rule” is that each party must pay for its own litigation costs, but 35 U.S.C. § 285 allows for a court to award attorney fees to the prevailing party in “exceptional” cases. The question before the court in Amneal v. Almirall was whether this statute is broad enough to cover those fees incurred by the prevailing party for work done before the PTAB. Under the facts of the case, the Federal Circuit concluded that it is not.

The parties were involved in PTAB proceedings as well as district court litigation regarding two of Almirall’s Orange Book patents covering its marketed acne treatment, ACZONE®, namely, US 9,161,926 (the ‘926 patent) and US 9,517,219 (the ‘219 patent). Specifically, Amneal filed separate IPRs in 2018 challenging each of Almirall’s Orange Book patents. Almirall subsequently sued Amneal in district court for allegedly infringing the ‘219 patent following the filing of Amneal’s Abbreviated New Drug Application for its generic version of ACZONE® in February 2019. Amneal counterclaimed that the ‘926 patent was invalid and not infringed.

In April 2019, the parties engaged in settlement discussions through which Almirall offered to enter a covenant not-to-sue on the ‘926 patent if the corresponding IPR was dismissed. The parties did not reach final agreement and thus, the IPR involving the ‘926 patent went to PTAB trial in June 2019. The Board found the claims not unpatentable, deciding in favor of Almirall. Amneal appealed to the Federal Circuit in October 2019, and subsequently moved to voluntarily dismiss its own appeal in March 2020. Almirall argued that it should be able to recoup any costs incurred over the one month between its offer for the covenant not-to-sue and the date of the IPR trial before the Board (i.e., from April 29, 2019 through June 5, 2019), as well as the costs for filing an opposition to Amneal’s motion to dismiss. According to Almirall, “Amneal litigated this matter in an unreasonable manner by continuing to litigate the IPR after the covenant-not-to-sue was offered.”

The Federal Circuit found that § 285 did not authorize the court to award attorney fees in circumstances where the costs incurred were associated with PTAB proceedings that occurred before the case had even commenced at the Federal Circuit.

In reaching its holding, the Federal Circuit distinguished both cases advanced by Almirall to support its position that attorney fees can be awarded under § 285 for administrative proceedings that are “intimately tied” to the resolution of the proceeding. The court first distinguished over Sullivan v. Hudson, 490 U.S. 877 (1989) in which the Supreme Court held that attorney fees could be awarded “for administrative proceedings that are ‘intimately tied to the resolution of the judicial action and necessary to the attainment of the results Congress sought to promote by providing for fees.’” However, the court noted that Hudson referred to a “narrow class of administrative proceedings” where (a) a suit has been brought in a court and (b) there is a pending complaint filed within the jurisdiction of the court and its resolution depends “upon the outcome of the administrative proceedings.” The court noted that under the present facts “Almirall is impermissibly seeking fees that were incurred for work at the Patent Office before this case was commenced,” i.e., before the court had even asserted its jurisdiction.

The court also dismissed Almirall’s reliance on Therasense, Inc. v. Becton, Dickenson & Co., 745 F.3d 513 (Fed. Cir. 2014) as the court in that decision was “clearly only referring to district court and appellate court proceedings” as being encompassed by reference to “case” in the statutory language of § 285.

The Federal Circuit also distinguished PPG Indus., Inc. v. Celanese Polymer Specialties Col, 840 F.2d 1565, 1569 (Fed. Cir. 1988) (not cited by Almirall). The court in PPG did allow for an award of attorney fees for Patent Office proceedings where they “substituted for the district court litigation on all issues considered by the PTO and the Board” but limited those fees to only those fees incurred after the district court action had commenced. The court acknowledged that the facts under PPG were not the circumstances in the present case.

In a footnote, the court also noted that the Board has its own methods of regulating litigation misconduct, including imposing sanctions that may include attorney fees.

The Federal Circuit thus granted the motion to dismiss, rejecting Almirall’s request for § 285 attorney fees because they were “incurred for work at the Patent Office before this case was commenced.”