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Rothschild Connected Devices Innovations, LLC v. Guardian Protection Services, Inc.

Failure to Declare Exceptionality was Abuse of Discretion, Notwithstanding Plaintiff’s Attempt to Withdraw Complaint

Rothschild Connected Devices Innovations, LLC v. Guardian Protection Services, Inc., 2017 U.S. App. LEXIS 9876 (Fed. Cir. June 5, 2017) (Prost, Mayer (concurring), WALLACH) (E.D. Tex.: Gilstrap) (3 of 5 stars)

Fed Cir reverses denial of motion to declare case exceptional under § 285. The opinion describes how Rothschild had maintained “willful ignorance” of prior art cited by appellant ADS in a post-complaint email, even after ADS filed for attorney fees. That Rothschild had voluntarily moved to dismiss its own action prior to the fees motion did not make the case non-exceptional, particularly because Rothschild submitted affidavits to the district court (in opposing fees) stating that it continued to believe its claims valid, and had still not considered the art tendered by ADS. The opinion states, “It is unclear how Rothschild’s counsel and founder could reasonably believe that claim 1 is valid if neither analyzed the purportedly invalidating prior art provided by ADS.” Op. at 8. The district court’s failure to address these “incongruous statements” was abuse of discretion per Atlantic Research, 659 F.3d 1345 (Fed. Cir. 2011). The opinion also identifies other problems in the district court’s review of the record. The district court also failed to properly consider Rothschild’s conduct in other litigations (where it had settled the vast majority of its fifty-eight filed cases for nuisance value). The district court also erred in reasoning that an exceptionality finding would interfere with the operation of Rule 11 (which, the district court reasoned, had encouraged Rothschild to voluntarily withdraw its complaint). Per Octane Fitness, 134 S. Ct. 1749 (2014), litigation conduct may support exceptionality even if it is not on its own sanctionable under Rule 11.

Concurrence: Judge Mayer writes separately to note that Rothschild’s infringement complaint was “frivolous on its face” due to obvious § 101 problems, and thus supported exceptionality under Octane Fitness even absent Rothschild’s problematic affidavits and willful ignorance.

KEYWORDS: ATTORNEY FEES; EXCEPTIONAL CASE; SECTION 285