Yesterday, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Munchkin, Inc. v. Luv N’ Care LTD., No. 2019-1454 (June 8, 2020), holding the district court abused its discretion in finding the case “exceptional,” and reversing the district court’s award of attorney’s fees in favor of Luv N’ Care (LNC).
Munchkin filed suit against LNC asserting claims of trademark and trade dress infringement, unfair competition, and patent infringement directed to LNC’s CLIK IT! brand spillproof cups. LNC petitioned the Patent Trial and Appeal Board to conduct an inter partes review (IPR) of the asserted Munchkin patent. Before the Board instituted the IPR, Munchkin dropped all of its non-patent claims asserting a desire to streamline the litigation. The Board instituted the IPR, and found all of the asserted Munchkin patent claims unpatentable. After the Federal Circuit affirmed the Board’s decision in the IPR, Munchkin dropped its patent claim in the district court. LNC moved for attorney’s fees under 35 U.S.C. § 285 (for the patent infringement claim) and 15 U.S.C. § 1117(a) (for the trademark and trade dress claims). The district court granted the fee motion, determining that Munchkin’s claims for trademark, trade dress, and patent infringement were all so substantively weak as to render the case “exceptional.” Munchkin appealed.
The Federal Circuit reversed. The Court began by explaining that Octane Fitness sets out the standard for exceptional case determinations, and that an exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated.” The Court noted that the district court’s findings here rested on an examination of issues that were not fully litigated, and determined that neither LNC nor the district court had made the sort of detailed, fact-based analysis of Munchkin’s litigating positions necessary to show that they were wholly lacking in merit. Concerning the patent infringement claim, for example, the Court explained that the district court’s claim construction decision undermined LNC’s invalidity arguments, and that the mere fact the Board found the claims unpatentable in an IPR cannot support an exceptional case determination. Concerning trademark and trade dress infringement, the Court similarly concluded the record simply did not reflect a full enough inquiry to demonstrate that Munchkin’s claims were unreasonable.