Federal Circuit Affirms $8.4 Million Fee Award for Litigation Misconduct

In Monolithic Power Systems v. O2 Micro, No. 2012-1221 (Fed. Cir. 2013), a patent infringement case, the Federal Circuit upheld the lower court’s exceptional case finding and award of $8.4 million in attorney’s fees, based solely upon the Plaintiff, O2 Mirco’s, misconduct during the course of the litigation. (An exceptional case finding pursuant to Section 285 of the Patent Statute, entitles the winning party to recover its attorney’s fees and costs of suit.) Per the Federal Circuit, an exceptional case finding does not require that a lawsuit be objectively baseless and filed in bad faith. Rather, a party’s misconduct during the course of the litigation alone may be sufficient to support such a finding.

The Court’s ruling begs the question of just what kind of litigation conduct would justify an exceptional case finding, where the case was, at least initially, not objectively baseless and not filed in bad faith. In Monolithic v. O2 Micro, O2 Micro submitted falsified evidence in the form of circuit schematics backdated by the inventor of the patent-in-suit. The inventor backdated the circuit schematics in order to antedate clearly invalidating prior art. O2 Micro repeatedly misrepresented the creation date of the schematics and produced three witnesses, each of whom testified to the false date.

After the falsification was uncovered by Monolithic’s expert, O2 Micro supplemented its verified interrogatory response regarding the date of the schematics with a convoluted paragraph in which it obfuscated the fact that the inventor had backdated the documents. Thereafter, O2 Micro filed three motions deemed baseless by the district court, i.e. a motion to strike Monolithic’s expert’s report and expert testimony regarding the schematics and two motions for summary adjudication to foreclose further litigation as to the authenticity of the schematics and the conception date of the subject matter claimed in the patent-in-suit. The district court found that, “[r]ather than straightforwardly admit the truth, O2 Micro dissembled and sought, through motion practice, to mask its proffer of false testimony.” The district court then concluded that this misconduct, along with O2 Micro’s generally vexatious litigation strategy, warranted designating the case exceptional. On the record before it, the Federal Circuit affirmed.

The moral of the story here is: if your seemingly good case when filed goes south, don’t try to rescue it by submitting false evidence. If you do make such an error, don’t compound it by trying to discredit the opposition when the false evidence is brought to light.