Fees Incurred in Voluntary Parallel IPR Unrecoverable

By Lisa Furby, Zachary Marshall-Carter, and Matt Johnson –

On May 20, the Federal Circuit held fees incurred in voluntary parallel IPR proceedings were not recoverable under 35 U.S.C. § 285.  Dragon Intell. Prop. LLC v. DISH Network L.L.C., No. 2022-1621, slip op. at 8 (Fed. Cir. May 20, 2024).  The decision affirmed the district court’s grant-in-part and denial-in-part of attorneys’ fees following a decade long dispute between Dragon Intellectual Property LLC (Dragon) and defendants DISH Network L.L.C. (DISH) and Sirius XM Radio Inc. (SXM).

In December 2013, Dragon sued DISH, SXM and eight other defendants alleging infringement of claims of U.S. Patent No. 5,930,444.  A year later, DISH filed a petition seeking inter partes review of the ’444 patent, which SXM joined after the PTAB instituted review.  After the PTAB held all asserted claims unpatentable and the district court entered judgment of noninfringement, DISH and SXM moved for attorneys’ fees under § 285.  The district court awarded fees due to the objectively baseless nature of Dragon’s infringement claims but denied the defendants’ requests for fees incurred in the parallel IPR proceedings.

On appeal, the Federal Circuit panel majority found no basis for awarding IPR fees when the defendants had voluntarily pursued parallel PTAB proceedings instead of arguing invalidity at the district court.  The majority noted this was consistent with the court’s holding in PPG Industries v. Celanese Polymer Specialties Co., 840 F.2d 1565 (Fed. Cir. 1988).  There, the court allowed recovery of § 285 fees incurred in reissue proceedings because the defendant’s participation in those proceedings was not optional.  The plaintiff had initiated the reissue proceedings and the defendant had no other option but to perform the same type of work before the PTAB that it would have performed at trial in the district court.  Unlike in PPG, here, DISH and SXM initiated the IPR and voluntarily participated in it.  As such, the defendants were not entitled to recovery of fees incurred in the voluntarily undertaken parallel IPR proceedings.

Judge Bencivengo, dissenting-in-part, argued it should be within the discretion of the district judge to award “fees incurred in an IPR that resolved any invalidity defenses that were required to be asserted in response to [a] baseless complaint.”  In her view, the IPR was not “parallel” to the district court litigation but rather a statutorily authorized substitute venue for the defendants to litigate their affirmative invalidity defenses.  Likewise, the defendants’ IPR was not “voluntary” but rather compelled by Dragon’s meritless infringement suit.  The majority rejected this argument, pointing to the eight other defendants that chose not to pursue proceedings before the PTAB.

In the same opinion, the Federal Circuit held that § 285 liability does not extend to counsel and that the district court did not abuse its discretion in granting-in-part the defendants’ request for fees.

Takeaway: 35 U.S.C. § 285 does not permit recovery of fees incurred during voluntary parallel IPR proceedings.  Defendants must bear the costs of IPR proceedings brought in response to district court litigation even when the district court case is stayed and the defendant prevails at the PTAB.