By Kevin E. Noonan –

Since the institution of inter parte review (IPR) proceedings under the Leahy-Smith America Invents Act in 2012, parallel proceedings before the Patent Trial and Appeals Board and district courts have become somewhat commonplace.  Frequently, the former proceedings arise after a patent infringement defendant is served, as a way to accomplish one of the asserted goals of IPRs: reducing the costs of defending against such lawsuits.  If the outcomes arise as expected, i.e., the PTAB invalidates some or all of the claims asserted before the district court, prevailing defendants can hope to recoup their attorneys’ fees and costs arising from the litigation but with less frequency from the IPR.  However, prevailing in actions to recoup are not routine; indeed, the statute depends on the court finding them to be exceptional under 35 U.S.C. § 285.  In Extremity Medical, LLC v. Nextremity Solutions, Inc. (nonprecedential), the Federal Circuit illustrates the difficulties that can arise in satisfying those statutory requirements for both types of proceedings.

The case arose involving Extremity Medical’s U.S. Patent No. 8,303,589, directed to orthopedic implant devices.  After a series of accusatory letters from Extremity and denials by Nextremity, Extremity brought suit with a complaint alleging that a particular Nextremity product, the InCore Lapidus System, infringed claim 59 of the ‘589 patent.  Within six months of being served, the PTAB instituted an IPR against the ‘589 patent and the District Court entered a stay upon the parties’ stipulation based on institution of the IPR.

Patent Challenger Nextremity asserted prior art references in support of its contentions that the asserted claims were invalid for obviousness, which references included U.S. Patent Nos. 4,622,959 (“Marcus”) and 6,579,293 (“Chandran”).  Extremity for its part submitted motions to amend asserted claim 59 without further submitting arguments in support of its patent claims’ continuing validity, to which the PTAB responded by a determination (in a Final Written Decision) under the preponderance of the evidence that claim 59 was invalid for obviousness using the two asserted references and a third unrecited reference.  Additionally, the PTAB found that Extremities’ proposed amended claims were also invalid for obviousness, the Board faulting IPR counsel for not providing arguments in support of these amendments.  This FWD being issued, the District Court lifted the stay on proceedings before it and dismissed the action with prejudice.  Nextremity then moved for attorneys’ fees and costs relating to actions before both the PTAB and the District Court.  The District Court found that the circumstances surrounding the litigation fulfilled these requirements and awarded Nextremity $52,573 in fees and costs but denied its demand for $343,660.86 for the IPR proceedings.  This appeal arose over Nextremity’s attempt to recoup its fees and costs for these IPR proceedings and Extremity’s cross-appeal challenging the District Court award to Nextremity for the fees and costs for the litigation.

The Federal Circuit affirmed on both decisions, in an opinion by Judge Lourie joined by Chief Judge Moore and Judge Cunningham.  With regard to Nextremity’s appeal, the panel opinion noted that the District Court relied on Dragon Intell. Prop. LLC v. DISH Network L.L.C., 101 F.4th 1366, 1371 (Fed. Cir. 2024) (citing Waner v. Ford Motor Co., 331 F.3d 851, 857 (Fed. Cir. 2003)), which held that a party could not collect attorneys’ fees and costs for a “voluntarily undertaken parallel IPR proceeding[]” under § 285.  That Court’s rationale was that the IPR proceedings were not “part and parcel” of the district court litigation but rather were “strategically pursued . . . in lieu of litigating invalidity before the district court.”  Additional precedent supporting this decision characterized IPRs as not being “cases” under § 285 under Amneal Pharms. LLC v. Almirall, LLC, 960 F.3d 1368, 1371–72 (Fed. Cir. 2020), and further did not have the benefit of district court proceedings wherein the court is “particularly well positioned to determine whether a case before it is exceptional because it ‘lives with the case over a prolonged period of time,’” quoting Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 564 (2014).  Nothing in the proceedings below compelled Nextremity to pursue its claims before the PTAB in an IPR in the panel’s opinion.

 The panel rejected Nextremity’s argument relying on Sullivan v. Hudson, 490 U.S. 877 (1989), that cases can be deemed exceptional under circumstances “where administrative proceedings 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, [wherein] they should be considered part and parcel of the action for which fees may be awarded.”  That is not the case here, according to the opinion, and the quote (according to the panel) has been taken out of context by Nextremity.  In Sullivan, the administrative proceedings at issue were mandatory (and on remand from a district court) and the resolution of the complaint depended on the outcome of the proceedings (although the parallels with the proceedings here are apparent).  But that is not this case, according to the Federal Circuit.  Finally, the Court rejected Nextremity’s argument that the costs from IPR proceedings were part of a “holistic, equitable approach” that requires consideration of the totality of the circumstances regarding exceptionality.

Turning to Extremity’s cross-appeal, the opinion enunciated the proper standard for a district court to apply under § 285 is whether the case “stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated,” citing Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014).  This determination is made on a case-by-case basis under the totality of the circumstances and reviewed for an abuse of discretion.  Here, the bases supporting the District Court’s finding this case exceptional in favor of Nextremity included that Extremity “conducted no prelitigation investigation, even though it was on notice of the Marcus and Chandran prior art; (2) did not defend claim 59 before the Board; and (3) put forth no substantive arguments in favor of its litigation position throughout the district court case.”  The Federal Circuit rejected Extremity’s arguments that the District Court had shifted the burden of proof and drew adverse inferences against Extremity, asserting that Extremity failed to rebut Nextremity’s evidence supporting its claim for attorneys’ fees and costs.  The panel also disagreed with Extremity regarding the District Court’s weighing of the evidence, finding that the District Court acted within the scope of its discretion in combining Nextremity’s pre-suit letter and Extremity’s lack of pre-suit investigation (“[d]espite [its] awareness of relevant prior art years before commencing the suit”) and failure to make its validity case before the District Court.  “Viewed together,” the opinion states, “the record reflects more than ordinary litigation weakness; it supports the district court’s conclusion that Extremity’s litigating position ‘stands out’ from typical patent disputes in which parties advance and defend colorable validity theories.”  Accordingly, the Federal Circuit affirmed the District Court finding awarding attorneys’ fees and costs to Nextremity.

Extremity Medical, LLC v. Nextremity Solutions, Inc. (Fed. Cir. 2026)
Nonprecedential disposition
Panel: Chief Judge Moore and Circuit Judges Lourie and Cunningham
Opinion by Circuit Judge Lourie