Munchkin, Inc. v. Luv N’ Care, Ltd., Appeal No. 2019-1454 (Fed. Cir. June 8, 2020)

In its only precedential patent opinion issued this week, the Federal Circuit reversed an award of attorneys’ fees for patent, trademark, and trade dress infringement claims pertaining to spill-proof cups. The case presented an unusual case for a fee award, as none of the claims had been adjudicated on the merits, and the Federal Circuit found that the district court abused its discretion in granting fees without making the detailed, fact-based analysis required to establish that the claims were so substantively meritless as to render the case exceptional.

Concerning the award of patent fees under 35 U.S.C. § 285, the district court’s fee award was predicated in part on appellant Munchkin’s defense of the patent’s validity despite allegedly “glaring” weaknesses. During a co-pending inter partes review, the asserted patent was found unpatentable over the same prior art references asserted in the defendant’s district court invalidity contentions, and the Federal Circuit had affirmed. The district court concluded that Munchkin should have realized its claim was substantively weak after receiving those contentions and the IPR petition, and in light of the high rate of claim cancellation in instituted IPRs. However, the IPR unpatentability decision rested on a broadest reasonable interpretation that the district court had rejected in its Markman order, instead adopting Munchkin’s narrower construction and raising a substantial hurdle to the district court invalidity case. The Federal Circuit found that the district court failed to adequately explain why Munchkin’s validity position was unreasonable in light of these facts, and flatly rejected the relevance of IPR claim cancellation rates, as the merits outcomes of other IPR cases were immaterial to the reasonableness of the validity position in this case.

The district court had also credited defendant’s assertion that Munchkin failed to disclose certain prior art cups to the USPTO during prosecution, finding that the cups represented “another indication of substantive weakness.” The Federal Circuit found that whether styled as an invalidity or inequitable conduct theory, in the absence of any details explaining how the cups invalidated the patent claims or why it would be reasonable to suggest otherwise, the court’s “wholly conclusory” finding that Munchkin knew about the cups and other prior art was insufficient to support a finding of exceptionality.

The Federal Circuit also reversed the trademark and trade dress fee award under 15 U.S.C. § 1117(a), finding the district court’s opinion similarly lacking in support. Among other shortcomings, the district court had granted Munchkin’s opposed motion for leave to amend its complaint to add the trade dress infringement claim and to assert a different trademarked logo than originally asserted. Noting that the district court’s criticism of Munchkin’s positions mirrored objections that defendant had raised to amendment; that the district court had granted the motion finding no grounds for prejudice, bad faith, or futility; and that the district court pointed to no new facts that were not considered at that time, the Federal Circuit found that Munchkin could not be faulted for litigating claims it was granted permission to pursue.

The opinion can be found here.

Author: Jason Wrubleski

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