Inequitable Conduct and its Influence on Attorney’s Fees and Expert Fees: Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352 (Fed. Cir. June 17, 2008)

Inequitable Conduct and its Influence on Attorney’s Fees and Expert Fees: Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352 (Fed. Cir. June 17, 2008)


In Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352 (Fed. Cir. June 17, 2008), the Court of Appeals for the Federal Circuit affirmed the lower court’s orders denying plaintiff’s motion for expert witness fees and granting defendant’s motion for attorney’s fees based on a finding that plaintiff’s inequitable conduct and frivolous case made the case an exceptional one.
 
Plaintiff, an owner and principal inventor of over 200 patents, many of which deal with fluorescent lighting, brought an action alleging that light bulbs and ballasts manufactured and sold by Osram infringed on certain of defendant’s patents. Of the 26 patents listed in the complaint, only 11 were at issue at the bench trial.   At the conclusion of the trial, the district court found that plaintiff had engaged in inequitable conduct, thus rendering unenforceable the 11 patents.   The inequitable conduct found by the court included misclaiming small entity status, improperly paying small entity maintenance fees, failing to disclose related litigation, misclaiming the priority of earlier filing dates, withholding material prior art, and submitting misleading affidavits to the Patent and Trademark Office.
 
After the trial, the defendant sought to recover its attorney’s fees. Plaintiff responded with a motion to recover its expert deposition fees. The district court granted Osram’s motion for attorney’s fees finding three specific reasons that the case was “exceptional”: (1) plaintiff’s conduct was inequitable, (2) the nature of the lawsuit as frivolous, and (3) plaintiff engaged in litigation misconduct.
 
On appeal, the circuit court noted that there is no per se rule of exceptionality in cases involving inequitable conduct.  Plaintiff argued that the lower court’s ruling was in error because exceptionality, in their view, required a showing of fraud.   Plaintiff further argued that the inequitable conduct was “benign” and had little impact on patentability and was therefore not fraudulent. The appellate court refused to make a distinction noting that they gave great deference to the trial court who was there to see the misconduct first hand. “It ill behooves an appellate court to overrule a trial judge concerning litigation misconduct when the litigation occurred in front of the trial judge, not the appellate court.”
 
Plaintiff’s conduct also cost him the recovery of his expert fees.   Federal Rule of Civil Procedure 26(b)(4)(C) requires the party seeking discovery to reimburse an expert the reasonable fee for the time spent responding to discovery. The only exception is in reimbursement would result in “manifest injustice. The district court ruled that paying plaintiff’s experts would result in manifest injustice given the frivolity of its claims and plaintiff’s inequitable conduct. The Federal Circuit held the district court’s ruling was well within its discretion.