Rohm & Haas Co. v. Crystal Chemical Co.

• Decision Date: 29 May 1984
• Docket Number: No. 83-599,83-599
• Citation: 736 F.2d 688,222 USPQ 97
• Parties: ROHM & HAAS COMPANY, Appellee, v. CRYSTAL CHEMICAL COMPANY and Joe C. Eller, Appellants. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 688

736 F.2d 688

222 U.S.P.Q. 97

ROHM & HAAS COMPANY, Appellee, v. CRYSTAL CHEMICAL COMPANY and Joe C. Eller, Appellants.

Appeal No. 83-599.

United States Court of Appeals, Federal Circuit.

May 29, 1984.

Ned L. Conley, Houston, Tex., argued for appellants. With him on the brief were William E. Shull, Jon E. Hokanson and Jeffrey W. Tayon, Houston, Tex.

Rudolph E. Hutz, Wilmington, Del., argued for appellee. With him on the brief were Januar D. Bove, Jr., F.L. Peter Stone and Jeffrey B. Bove, Wilmington, Del.

George W.F. Simmons, Philadelphia, Pa., of counsel.

Before RICH, KASHIWA, MILLER, SMITH and NIES, Circuit Judges.

ORDER

RICH, Circuit Judge.

Crystal Chemical Company and Joe C. Eller (hereinafter Crystal), appellants, have filed:

(1) Appellants' Application for Attorney Fees and Expenses Incurred on Appeal Pursuant to 35 U.S.C. Sec. 285.

(2) Appellants' Motion for Costs on Appeal Pursuant to FRAP Rule 39 and for Reconsideration of Assessment of Costs.

We consider these two matters seriatim.

I. Attorney Fees

The application filed December 21, 1983, for attorney fees and expenses incurred on the appeal, decided by our opinion at 722 F.2d 1556, 220 USPQ 289 (Fed.Cir.1983), has been considered. Although appellee Rohm & Haas Company (R & H) was not directed by us to respond under Federal Circuit Local Rule 20, ¹ its opposition to the application has been considered, as have Crystal's reply to the opposition and R & H's response to the reply, both also unsolicited. In the future, however, parties before this court will be expected to adhere to the rule.

Crystal's motion, filed pursuant to Rule 20, submits that 35 U.S.C. Sec. 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party.") authorizes this court to award attorney fees for an appeal, and that the "exceptional" circumstances of this case merit such an award. For the reasons which follow, we decline Crystal's application for attorney fees, and its motion is hereby denied.

Crystal maintains that this is an exceptional case under Sec. 285 because of our holding that the R & H patent in suit was invalid due to uncured "fraud in the patent office" by R & H during its prosecution of the application for the patent in the U.S. Patent and Trademark Office (PTO). In addition to fraud in the PTO, Crystal alleges that "Rohm and Haas' conduct during this appeal has unnecessarily increased the attorney fees, expenses and costs." These increased costs are attributed largely to an alleged attempt by R & H "to snow this Court with a 'mountain of largely irrelevant' record designations," and to alleged attempts by R & H to "frustrate presentation of this case and drive up" expenses.

R & H denies the allegations of improper actions in its conduct of the appeal and that its actions in the PTO render the case exceptional. As to the latter, R & H submits that it attempted to cure earlier misrepresentations in the PTO by subsequently disclosing all of its relevant experimental data to the PTO. Our earlier opinion held, however, that the attempted cure by R & H of its intentional material misrepresentations was "insufficient as a matter of law," 722 F.2d at 1573, 220 USPQ at 302.

The awarding of attorney fees under Sec. 285 for an "exceptional" appeal is a question of first impression in this court. It is also an issue that was rarely addressed by other circuits. Because of The federal courts of the United States early adopted what has become known as the "American Rule" in the handling of attorney fee requests. Unlike countries which follow the "English Rule," our courts do not routinely assess attorney fees against the losing party. The American Rule was recognized by the Supreme Court as early as 1796 in Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, 1 L.Ed. 613, and, simply put, proscribes the award of fees absent statutory authorization or particularly compelling circumstances. The policy behind the Rule is fundamental--to avoid penalizing a party "for merely defending or prosecuting a lawsuit." Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718, 87 S.Ct. 1404, 1407, 18 L.Ed.2d 475 (1967).

these circumstances, we first review the evolution of the statutory and case law on this subject and examine its public policy underpinnings, before considering the merits of Crystal's application for attorney fees.

The colonial courts in America frequently adopted the English Rule. Colonial and, later, state legislatures did, however, regulate this practice, by prohibiting the award of fees, or in some instances by adopting specified fee limits as noted in Day v. Woodworth, 54 U.S. (13 How.) 363, 372, 14 L.Ed. 181 (1851). Early federal statutes authorized the federal courts to adopt the attorney fee practice of their respective states. Act of September 29, 1789, Sec. 2, 1 Stat. 93. Provisions for the award of attorney fees in federal law is a more modern occurrence.

The trend in statutory evolution since the mid-1800's has been toward specific authorization for the award of attorney fees. For example, the Interstate Commerce Act of 1887, 24 Stat. 379; the Clayton Act of 1914, 15 U.S.C. Sec. 15; and the Toxic Substances Control Act of 1976, 15 U.S.C. Sec. 2618(d) have all contained such provisions. Many of these statutes allow the award of attorney fees for the purpose of encouraging suits to vindicate congressional policy by "private attorneys general." Notwithstanding the general American policy, particular circumstances have been held to justify an equitable award of attorney fees absent explicit statutory authorization. Such circumstances include instances involving a party acting in contempt or bad faith, or where a contractual agreement for fees existed between parties. See generally, Derfner and Wolf, Court Awarded Attorney Fees, p 1.02 (1983).

Other statutory provisions have been enacted so as to further equitable considerations, in suits where encouragement of citizen suits is not applicable, as in the case of the present patent statute, Sec. 285, and its predecessor for the purpose of enabling a court to prevent gross injustice.

Prior to 1946, the Supreme Court, following the American Rule, had held that the award of attorney fees based upon equitable considerations was not available in patent cases. ² However, in that year Congress amended Sec. 4921 of the Revised Statutes to alter the type of damages recoverable for infringement, and added an attorney fee provision to that section:

The court may in its discretion award reasonable attorney's fees to the prevailing party upon the entry of judgment on any patent case.... ³

The Senate Report concerning this provision noted its applicability to prevailing patentees as well as to prevailing alleged infringers, and emphasized that the award should not become "an ordinary thing":

It is not contemplated that the recovery of attorney's fees will become an ordinary thing in patent suits, but the discretion given the court in this respect Subsequent to the 1946 amendments, attorney fee awards were granted by the courts, in their discretion, primarily upon findings of extraordinary circumstances. An early and leading decision ably summarized the policy behind this statutory waiver of the American Rule for attorney fees in the patent law context:

                in addition to the present discretion to award triple damages, will discourage infringement of a patent by anyone thinking that all he would be required to pay if he loses the suit would be a royalty.  The provision is also made general so as to enable the court to prevent a gross injustice to an alleged infringer.    [Emphasis added.] 4
                

Thus, the payment of attorney's fees for the victor is not to be regarded as a penalty for failure to win a patent infringement suit. The exercise of discretion in favor of such an allowance should be bottomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which makes it grossly unjust that the winner of the particular law suit be left to bear the burden of his own counsel fees which prevailing litigants normally bear. [Emphasis added.] ⁵

The next and most recent revision of the pertinent section of the patent statutes, the Patent Act of 1952, codified the attorney fee provision in 35 U.S.C. Sec. 285, which omits explicit reference to the court's discretion but adds the qualifier that the court may award reasonable attorney fees in "exceptional cases." The Revision Note to this section, as restated later by its author, shows that:

Section 285, providing for the recovery of attorney fees by the prevailing party, is substantially the same as the corresponding sentence of the old statute, with the addition of "in exceptional cases" to express the intention of the old statute as shown by its legislative history and as interpreted by the courts. ⁶

Cases decided under Sec. 285 have noted that "the substitution of the phrase 'in exceptional cases' has not done away with the discretionary feature." Hoge Warren Zimmerman Co. v. Nourse & Co., 293 F.2d 779, 783, 130 USPQ 382, 386 (6th Cir.1961).

Cases awarding attorney fees to prevailing patentees have typically found "exceptional" circumstances in willful and deliberate infringement by an infringer, or in the prolongation of litigation in bad faith. ⁷ When prevailing alleged infringers are awarded attorney fees, "exceptional" cases have involved litigation in bad faith by the patentee, or fraud or other inequitable conduct during prosecution before the Neither Sec. 285 nor its legislative history distinguishes between awarding attorney fees in the district court and in the appellate court. We recognize that the district court is the forum in which requests for attorney fees are almost invariably made. We also recognize that the American rule against the award of attorney fees, in the absence of a statute or compelling circumstances, developed...