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Federal Circuit Upholds Landmark Attorneys’ Fee Award at Government’s Expense

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On May 1, 2020, in Hitkansut LLC v. United States, the U.S. Court of Appeals for the Federal Circuit (“CAFC” or “the Federal Circuit”) affirmed a $4.4 million attorneys’ fee award issued by the Court of Federal Claims (“CFC” or “the Claims Court”) against the federal government.1 The three-judge panel’s precedential opinion, penned by Chief Judge Prost, upheld what is likely the first time an award for attorneys’ fees has been granted under 28 U.S.C. § 1498(a). Appellees, Hitkansut LLC and Acceledyne Technologies, Ltd., LLC, secured the first-in-kind award upon motion after the CFC found the government liable for patent infringement.

28 U.S.C. § 1498(a) authorizes claims of patent infringement against the U.S. government under the exclusive jurisdiction of the CFC. Section 1498(a)’s rarely exercised attorneys’ fees provision allows successful plaintiffs to recover “reasonable fees for expert witnesses and attorneys” only if: (1) the patent owner is “an independent inventor, a nonprofit organization, or an entity that had no more than 500 employees” and (2) they can demonstrate that “the position of the United States” was not “substantially justified.”2

Hitkansut are owners of U.S. Patent No. 7,175,722 (“the ‘722 patent”) directed to a method for easing stress in large, manufactured metals through the concurrent application of multiple types of energy.3 While the ‘722 patent was still a pending application, Hitkansut entered into a non-disclosure agreement with Oak Ridge National Laboratory, a government-funded laboratory, and disclosed the method as described in the application. Oak Ridge’s researchers went on to obtain funding, author publications, and receive awards based on the disclosed method without Hitkansut’s involvement or permission. Hitkansut filed suit before the CFC in 2012, alleging the U.S. government’s infringement of the ‘722 patent and seeking $5.6 million in damages.4 This culminated in a finding that the government infringed the ‘722 patent, though the royalty award was limited to $200,000.

Following the Federal Circuit’s affirmance on the merits, Hitkansut moved to recover attorneys’ fees back at the Claims Court, pursuant to Section 1498(a). In its March 2019 ruling, the CFC handed down a $4.4 million award – over 20 times the amount in damages, finding that the government’s position was not substantially justified.5 In making its determination, the CFC concluded that “the position of the United States,” as used in Section 1498(a), includes both the position taken by the U.S. during the course of the civil action as well as pre-litigation conduct such as the acts or omissions of the agency upon which the action is based.6 The government appealed the award to the CAFC.

As a matter of first impression, the CAFC rejected the CFC’s statutory interpretation as too broad – choosing instead to adopt the narrower reading that “the position of the United States,” as used in the statute, refers only to the litigation positions taken by the government in the civil action and not the pre-litigation conduct that gave rise to the action. Despite rejecting the CFC’s interpretation, the Federal Circuit nevertheless determined that the position of the United States was not substantially justified under a correct definition of the term. Relying on the lower court’s findings of fact regarding the government’s litigation positions, the CAFC found that the government maintained non-infringement positions that were “factually inconsistent” with the actions of the Oak Ridge researchers.

[Oak Ridge] provided interrogatory responses that were contrary to both documentary evidence and the deposition testimony of its employees. Its obviousness arguments ‘failed to address an essential element of each of the three asserted claims or to demonstrate any motivation to combine the prior art.’ And its enablement argument was contradicted by its own expert witness . . . 7

The Federal Circuit further refused to find an abuse of discretion by the CFC’s failure to reduce or limit Hitkansut’s attorneys’ fees award because the $200,000 damages awarded on the merits was only a fraction of the $5.6 million Hitkansut originally sought, stating the Claims Court “has broad discretion to determine the amount of a fee award.”8

While the exercise of Section 1498(a)’s attorneys’ fees provision will likely remain limited, it remains to be seen whether the Federal Circuit’s opinion represents a watershed moment for similarly situated patent claimants at the Court of Federal Claims or an outlier.

1 Hitkansut LLC v. United States, 958 F.3d 1162 (Fed. Cir. 2020).

2 28 U.S.C. § 1498(a).

3 U.S. Patent No. 7,175,722

4 Hitkansut LLC v. United States, 130 Fed. Cl. 353 (2017), aff’d, 721 F. App’x 992 (Fed Cir. 2018).

5 Hitkansut LLC v. United States, 142 Fed. Cl. 341 (2019), aff’d, 958 F.3d 1162 (Fed. Cir. 2020).

6 Id.

7 958 F.3d at 1169.

8 Id.

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