Today, March 25, 2013, in Checkpoint Systems, Inc. v. All-Tag Security S.A., No. 2012-1085, the Federal Circuit (Newman, Lourie, and Schall) reversed both the district court’s award of $6.6 million in attorneys’ fees and the determination of an “exceptional case” under Section 285 of the Patent Act. The awarding of attorneys’ fees has received more attention of late due to the recently re-introduced SHIELD Act, which would implement more fee-shifting in cases involving certain non-practicing entities (NPEs).
The parties in this case are competitors in the market for resonance tags — anti-shoplifting devices used by retailers. The defendant, All-Tag, had manufactured resonance tags in Switzerland, but later moved production to Belgium. The plaintiff, Checkpoint, accused tags made in Belgium of infringement, but provided its expert with tags that were made in Switzerland for use in the expert’s infringement analysis.
The district court found that the case was exceptional because, “despite having ample opportunity to do so,” Checkpoint’s expert never inspected the Belgium-made resonance tags accused of infringement.
On appeal, the Federal Circuit explained that under Section 285, an award of attorneys’ fees is appropriate only where the litigation is brought in “subjective bad faith” and is “objectively baseless” — i.e., “no litigant could reasonably expect success on the merits.” The Federal Circuit noted that All-Tag did not provide any evidence at trial that its Belgian-produced tags differed from the tested Swiss-produced tags, and that Checkpoint also reasonably relied on admissions and disclosures from All-Tag in forming its infringement claims. Thus, the court found that Checkpoint’s infringement claims were not “objectively baseless” or made in bad faith.