Unusual is Not Exceptional; Moving Party Has Burden to Show a Case is Exceptional for an Award of Attorneys Fees

Digeo, Inc. v. Audible, Inc., [2007-1133] (November 1, 2007) [MICHEL, Moore, Cote] The Federal Circuit found no clear error in the district court's determination that the case was not exceptional, and that the district did not abuse its discretion in denying additional discovery.
SIGNIFICANCE: The moving party has the burden to show a case is exceptional under 285 by clear and convincing evidence.
BRIEF: Digeo purchased U.S. Patent No. 5,734,823 from IPDN, successor to Microtome, Inc., "as is" at a bankruptcy sale in 2002. There were considerable irregularities in the execution of the Power of Attorney and assignments, where were purportedly signed by Oliver Chang on behalf of himself, and as executor for his deceased brother Edward. During discovery it was revealed that Edward was alive and well, and that Oliver did not even sign the documents. Audible claimed that the case was exceptional, and sought attorneys fees. The determination of whether a case is exceptional and thus eligible for an award of attorneys fees under 285 is a two step process in which the court must determine (1) whether there is clear and convincing evidence that the case is exceptional (a factual determination reviewed for clear error), and (2) whether, in its discretion, an aware of attorneys fees is justified (a discretionary act reviewed for abuse). The district court concluded that there was not clear and convincing evidence that Digeo know or should have known of the defect in its title to the '823 patent. On appeal Audible complained that it was improperly assigned the burden of proof, but the Federal Circuit distinguished between a Rule 11 motion, in which the burden shifts to the non-moving party to justify its conduct, and a motion under Rule 285, where the burden remains on the moving party to show the case is exceptional. The Federal Circuit also declined to find a heightened standard of investigation when a patent is purchased "as is", and reiterated that merely negligent conduct does not suffice to establish that a case is exceptional.