That is not the case if the settlement offers show the case was litigated in an unreasonable manner. Federal Rule of Evidence 408 protects settlement communications. The purpose being to encourage litigants to communicate and work on resolving the claims of the case. Like most rules, there are exceptions.
Enter Blackbird Tech LLC v. Health in Motion LLC, 2018-2393 (Fed. Cir. Dec. 16, 2019). Blackbird sued Health in Motion (“HIM”) and Leisure Fitness Equipment LLC (“Leisure”) for patent infringement regarding exercise equipment. After 19 months of litigation, Blackbird voluntarily dismissed the lawsuit, with prejudice, and executed a covenant not to sue. Shortly thereafter, the Defendants moved for attorneys’ fees under 35 U.S.C. 285, which allows an award of attorneys’ fees in patent cases to the prevailing party in “exceptional cases”. The District Court granted attorneys’ fees and expenses in the amount of $363,243.80, which Blackbird appealed.
The Federal Circuit, which streamlines patent decisions of the district courts, affirmed the decision, holding the District Court did not abuse its discretion due to the way Blackbird litigated the case. During the course of the litigation, Blackbird had a peculiar settlement strategy of decreasing offers that stood out. The first offer was $80,000, then $50,000, then $15,000, and finally a walk-away offer of zero. Defendants rejected all the offers. The Federal Circuit analyzed the settlement offers and the nature of the decreasing offers, each of which were “significantly less than the cost of litigation.” The Federal Circuit viewed the offers with suspicion.
The District Court also found that Blackbird unreasonably “delayed in producing documents, withheld many documents until after [Appellees] took [Blackbird’s] deposition[,] and completely failed to produce other responsive documents.” Lastly, Blackbird unreasonably “filed a notice of dismissal, covenant not to sue, and motion to dismiss without first notifying [Appellees’] counsel, on the same day pretrial submissions were due and shortly before [Appellees’] motion for summary judgment was to be decided.”
While all of the issues led to the exceptional fee award due to Blackbird’s abusive litigation, the unique aspect was the court’s ability to open the window into settlement offers to demonstrate the abusive litigation tactics. Blackbird’s settlement demands were far less that the anticipated cost of defense, which Blackbird admitted, and equated to mere “nuisance value settlement offers.” While most settlement offers and negotiations are closed from public view, the court may open that door to assess whether attorneys fees can be awarded in exceptional cases.
For any questions about trademarks, patents, or copyrights, contact Greg Popowitz.
Registered Patent Attorney / Partner
Intellectual Property Litigation
213 East Sheridan Street, Suite 3
Dania Beach, Florida 33004