Section 285 attorneys’ fees are not available for pure IPRs. How much does that matter?
Zachary Silbersher
On June 4, the Federal Circuit issued a precedential decision holding that § 285 under the Patent Statute is inapplicable for awarding attorneys’ fees to the prevailing party in a proceeding for inter partes review. The case is Amneal Pharmaceuticals, LLC v. Almirall, LLC, Case No. 2020-1106 (Fed. Cir. Jun. 4, 2020). While the Court’s decision dispenses rather cleanly with the possibility of collecting fees for prevailing in an IPR, the Court nonetheless left open the door to collecting fees if the IPR is intimately tied to a pending parallel district court case. How much does that matter?
Almirall sells ACZONE®, which was previously protected by two patents listed in the Orange Book, namely U.S. Patent Nos. 9,161,926 and 9,517,219. In February 2018, before filing its ANDA for ACZONE®, Amneal filed an IPR challenging the ‘926 patent. One year later, in February 2019, Amneal filed its ANDA, including Para. IV certifications for the ‘926 patent.
In April 2019, after Almirall commenced a Hatch-Waxman litigation, the parties entered settlement discussions. As part of those discussions, Almirall offered a covenant-not-to-sue Amneal with respect to the ‘926 patent in exchange for Amneal’s agreement to dismiss the IPR. (Almirall also appears to have requested removal of the ‘926 patent from the Orange Book.) Despite this, the IPR proceeded to trial, and in August 2019, the PTAB issued a Final Written Decision finding the challenged claims not unpatentable.
Almirall argued that Amneal was unreasonable to continue litigating the IPR from April 2019 through the IPR trial despite Almirall’s offer for a covenant-not-to-sue on the ‘926 patent. It therefore asked for fees under § 285 for work related to defending its patent in the IPR from April through June 2019 (when the oral argument occurred).
The Federal Circuit rejected Almirall’s request. It held that fees are not applicable in this instance. The Court stated, “[w]hether or not this court can award fees for work on appeal from a decision in an IPR, section 285 does not authorize this court to award fees for work that was done before the agency on appeal from an IPR.” (Slip Op. at 4). The Court relied upon earlier decisions from the Court of Customs and Patent Appeals, which previously heard appeals from the Patent Office, where the Court refused to apply § 285 to administrative proceedings before that Office, such as interference cases. The Court also noted that the Board has its own provisions for sanctioning litigants within IPR proceedings.
The Federal Circuit’s ruling nonetheless appears to have left open some questions, which are likely to arise in the future. The Court did not expressly rule out the possibility that it could award fees for work within the appeal before the Federal Circuit arising out an appeal from an IPR proceeding. That may not be too controversial given that the Federal Circuit’s rules provide their own mechanisms for policing frivolous appeals. In this case, the Court denied Almirall’s requests for fees for work before the Federal Circuit given that the entirety of the alleged unreasonable conduct by Amneal occurred before the Board, rather before than the appellate court.
The more pressing question is whether § 285 fees can be awarded in connection with an IPR proceeding that was parallel to a district court action, and the two proceedings were interpreted as part of an inclusive whole. The Court cited to Sullivan v. Hudson, 490 U.S. 877 (1989), Therasense v. Becton Dickinson & Co., 745 F.3d 513 (Fed. Cir. 2014), and PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565 (Fed. Cir. 1988), as potentially justifying the award of fees for work within an administrative proceeding, such as an IPR, where that work was intimately tied to resolution of a parallel district court action. For instance, Hudson suggested fees could be awarded for an administrative proceeding where a parallel district court case is pending, and resolution of that case depends on the outcome of the administrative proceeding.
This is a potentially important distinction. Most, but not all, IPRs arise as parallel to pending district court actions. Nevertheless, the outcome of the pending district court action is not always dependent on the outcome of the IPR, especially where the district court decision was not stayed. (And perhaps, especially even more so when the district court disagrees with the PTAB’s decision to invalidate the patent.) Given all this, the reach of Amneal may be limited.