District Judge Kinkeade of the Northern District of Texas recently authored an interesting opinion showcasing the interplay between 35 U.S.C. § 101 and 35 U.S.C. § 285. Granting in part SAP’s requested attorney fees under § 285, Judge Kinkeade rejected InvestPic’s argument that the award should be limited to fees for activities underlying the court’s finding of exceptionality. Instead, the Court concluded that “InvestPic’s threats of suit against SAP combined with InvestPic’s failure to recognize the weaknesses in its § 101 position therefore led SAP to incur all of the reasonable and necessary fees incurred in this case.”
Prior to filing suit against SAP, InvestPic was involved in protracted litigation in Delaware involving the same asserted U.S. Patent 6,349,291 (the “’291 Patent”). During a stay of the Delaware litigation, the PTO reexamined and invalidated the ’291 Patent under 35 U.S.C. §§ 102 and 103. On appeal, the Federal Circuit disagreed with some of the PTO’s determinations, ultimately remanding the case back to the PTO for further examination. In the interim, however, the PTO filed an appeal brief with the Federal Circuit in November 2015, in which the Director observed that:
“[T]hese claims might fail to qualify as patent-eligible subject matter under case law that has developed after the close of examination in this case. . . the claims would be difficult to distinguish from that in Parker v. Flook, 437 U.S. 584 (1978) (cited with approval in Alice v. CLS Bank, 134 S. Ct. 2347, 2358-59 (2014)), because they appear to cover little more than providing input to a processor and performing a mathematical operation on that input to provide an output. InvestPic may wish to consider addressing this § 101 issue in its currently pending reissue application.”
InvestPic did not heed the Director’s suggestion. Instead, in September 2016, InvestPic accused SAP of infringing the ’291 patent.  In response, SAP initiated the declaratory judgment action in N.D. Tex. and shortly thereafter filed a motion for judgment on the pleadings on the § 101 issue. Ultimately, the Court found that claims of the ’291 patent were “directed toward the abstract idea of mathematical calculations and data manipulation with no additional inventive concept” and thus invalid under Alice Step 1. In later finding the case exceptional under § 285, Judge Kinkeade concluded that the case “stood out from the others” because “InvestPic was specifically warned by the USPTO that it looked very unlikely that these claims were directed toward patentable subject matter [but] [i]nstead of addressing this issue, after the USPTO created a serious cloud on the of the claims, InvestPic ignored it and continued to assert its patent against companies like SAP.”
On December 4, 2018, Judge Kinkeade granted SAP’s Renewed and Supplemental Motion for Recovery of Attorney’s Fees awarding a total $679,420.46 in attorney fees. In doing so, the Court rejected InvestPic’s argument that “the time used to determine the fee award should be limited to the time that SAP’s attorneys worked on §101 invalidity issues and on the discovery issue, which where the two grounds for finding this case exceptional.” Judge Kinkeade found that an “award for fees under 35 U.S.C. § 285 is not governed by the “exacting standards as a sanction under the Federal Rules of Civil Procedure, Rule 37(b).” Instead, a “court may make an award of all of the reasonable and necessary fees in a case, considering the circumstances of the case [but] there must be some relation between the amount of the award and the extent of the conduct that made the case exceptional.”
In this case, Judge Kinkeade found that because “InvestPic’s threats of suit against SAP combined with InvestPic’s failure to recognize the weaknesses in its § 101 position  led SAP to incur all of the reasonable and necessary fees incurred in this case” awarding all reasonable and necessary attorney fees was therefore appropriate. Judge Kinkeade also found InvestPic’s weak § 101 validity position to be “readily apparent”, particularly in light of the Federal Circuit’s affirmation of his earlier § 101 invalidity order, first by a three-judge panel decision and then second after a request for rehearing.
Interestingly, Judge Kinkeade determined that while attorney fees associated with inter partes and ex parte reexaminations related to the ’291 Patent that were never filed were recoverable and properly included in the lodestar, fees associated with the preparation of a covered business method petition that was also never filed were not. The Court did not fully explain its reasoning other than to say that unlike inter partes and ex parte reexaminations “a covered business method review is an entirely different proceeding than this case.”
SAP America Inc v. InvestPic LLC, 3-16-cv-02689, Dkt. 164 at 8 (N.D. Tex. December 4, 2018).
See InvestPic LLC v. Algorithmics (US) Inc., et al., Case No. 1:10-cv-1028-RGA.
In re Varma, 816 F.3d 1352, 1355 (Fed. Cir. 2016).
 Corrected Brief for Appellee-Director of the United States Patent & Trademark Office in Fed. Cir. Appeal No. 2015-1502 (Reexamination No. 90/012,366) at p. 32, fn. 7 (Nov. 9, 2015).
SAP America Inc v. InvestPic LLC, 3-16-cv-02689, Dkt. 86 at 6 (N.D. Tex. June 1, 2017).
SAP America Inc v. InvestPic LLC, 3-16-cv-02689, Dkt. 78 at 18 (N.D. Tex. May 18, 2017).
SAP America Inc v. InvestPic LLC, 3-16-cv-02689, Dkt. 128 at 4 (N.D. Tex. February 21, 2018).
SAP America Inc v. InvestPic LLC, 3-16-cv-02689, Dkt. 164 (N.D. Tex. December 4, 2018).
The opinions expressed are those of the authors on the date noted above and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes only and is not intended to be and should not be taken as legal advice. No attorney-client relationship is formed.
Michael Ellis is an Associate in Fish & Richardson’s Dallas office. Prior to joining the firm, Mr. Ellis served as an Active Duty Navy JAG attorney with a broad litigation practice. He has extensive courtroom experience, having tried numerous contested jury and bench trials, litigated dozens of pre-trial motions, and represented nearly...