Federal Circuit Rules No "Prevailing Party" for Attorneys' Fees under § 285 after Plaintiff's Voluntary Dismissal — Even Where Defendant Invalidates Patent-in-Suit

A defendant facing a newly filed lawsuit has options when deciding how to respond to the complaint. Some responses automatically excuse the defendant from answering the complaint temporarily (e.g., a motion to dismiss under Fed. R. Civ. P. 12(b)(6)), while other responses request relief from the Court that may have the same effect (e.g., a motion to stay). But a recent decision of the Federal Circuit underscores why it is often worth filing an answer even when doing so is not yet required under the rules.

In a decision issued April 13, 2020, the Court of Appeals for the Federal Circuit affirmed a district court's denial of a motion for attorneys' fees under 35 U.S.C. § 285. O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC, No. 19-1134, slip op. (Fed. Cir. April 13, 2020). The district court granted the defendant's motion to stay that it filed in lieu of an answer. The stay remained in place for years—through several rounds of inter partes and ex parte reexamination until the Patent Trial and Appeal Board ultimately affirmed the invalidity of all active claims of the asserted patent. The plaintiff then filed a notice of voluntary dismissal under Rule 41(a)(1)(A)(i) and dismissed its claims without prejudice.

When the defendant responded with a motion to declare the case exceptional in pursuit of attorneys' fees, the district court denied the motion. The Federal Circuit affirmed that decision, explaining that neither a district court's order staying a case nor an order following a voluntary dismissal by the plaintiff under FED. R. CIV. P. 41(a)(1)(A)(i) could make the plaintiff a "prevailing party" under § 285. Mossberg, No. 19-1134 at 4, 6.

The court made this determination despite its recent decision in Raniere v. Microsoft Corp. that a defendant "need not prevail on the merits to be classified as a prevailing party.'" 887 F.3d 1298 (Fed. Cir. 2018). Indeed, the Mossberg court noted that, according to Raniere, the relevant inquiry "considers whether the district court's decision—'a judicially sanctioned change in the legal relationship of the parties'—effects or rebuffs a plaintiff's attempt to effect a 'material alteration in the legal relationship between the parties.'" See Mossberg, No. 19-1134 at 4 (citing id.).

Applying this analysis, the Federal Circuit in Mossberg nevertheless concluded that neither a stay nor a Rule 41(a)(1)(A)(i) dismissal constitutes a "material alteration" of the relationship of the parties "marked by judicial imprimatur." A stay, it explained, "is simply not a final court decision capable of establishing the judicial imprimatur required." More importantly, a voluntary dismissal under Rule 41(a)(1)(A)(i) "becomes effective immediately upon plaintiff's filing of the notice." Thus, any dismissal order entered after the notice "ha[s] no legal effect."

But Rule 41(a)(1)(A)(i) is unavailable once the defendant has served an answer. And unlike Rule 41(a)(1)(A)(i), dismissals under Rule 41(a)(2) require a court order granting the motion, likely supplying the "judicial imprimatur" found lacking in Mossberg.

This decision underscores that it may be worth filing an answer even when not required. If an answer is not on file, a plaintiff can avoid attorneys' fees under § 285.

Authors: Robert Ehrlich, David Conrad, Ricardo Bonilla