Danger! Heed Warnings or Risk Fees

Litigators, beware: bad behavior during litigation may lead to unexpected—and undesirable—results under fee-shifting statutes. Two cases illustrate that under certain fee-shifting provisions, persistent misconduct and repeated failure to heed court warnings may result in paying your opponent’s attorney fees, denial of your own attorney fees, monetary sanctions, and disciplinary action.

$600,000 Fee Award in “Exceptional” Patent Case

In Drop Stop LLC v. Zhu, the U.S. Court of Appeals for the Federal Circuit considered the propriety of a $600,000 fee award under 35 U.S.C. § 285, which allows the prevailing party in patent infringement actions to recover reasonable attorney fees “in exceptional cases.” Drop Stop owned a patent for a product that prevents items from falling between a car’s front seat and the center console. It sent a cease-and-desist letter requesting the defendants to stop selling a competing product, alleging infringement. The defendants did not comply with the request, relying on an attorney’s informal non-infringement opinion, but omitted the attorney’s disclaimer that his “informal opinion cannot be relied upon definitely” and that further analysis was required for a “reliable outcome.”