Arthrex, Inc. v. Smith & Nephew, Inc. et al

Filing 354

MEMORANDUM OPINION AND ORDER, denyinig 317 SEALED MOTION for Attorney Fees filed by Arthrex, Inc. Signed by Magistrate Judge Roy S. Payne on 1/25/17. (mrm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
ARTHREX, INC.,

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§ Case No. 2:15-CV-01047-RSP
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Plaintiff,
v.
SMITH & NEPHEW, INC.,
ARTHROCARE, CORP.,

Defendants.

MEMORANDUM OPINION AND ORDER
This patent infringement action proceeded to jury trial on December 2, 2016. At the
conclusion of the five-day trial, the jury rendered a verdict finding that Defendants Smith &
Nephew, Inc. and ArthoCare Corp. willfully infringed claims 10 and 11 of United States Patent
No. 8,821,541, and claims 4, 8, 16, and 27 of United States Patent No. 9,179,907, and that the
asserted claims are not invalid. See Dkt. No. 299. The jury awarded Arthrex, Inc. $17,400,000.00
as a reasonable royalty. Id. Arthrex now moves for attorney fees under 35 U.S.C. § 285. Dkt. No.
317. For the reasons explained below, Arthrex’s motion is DENIED.
DISCUSSION
Section 285 provides that a “court in exceptional cases may award reasonable attorney
fees to the prevailing party.” An exceptional case is one that “stands out from other with respect
to the substantive strength of the party’s litigating position (considering both the governing law
and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane
Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). Assessing whether a
case is exceptional is left to the Court’s discretion, considering the “totality of the

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circumstances.” Id. Factors that the Court may consider include “frivolousness, motivation,
objective unreasonableness (both in the factual and legal components of the case) and the need in
particular circumstances to advance considerations of compensation and deterrence.” Id. at 1756
n.6. To be considered exceptional, conduct need not be “independently sanctionable” or bad faith
behavior. Id. “[A] case presenting either subjective bad faith or exceptionally meritless claims”
may justify an award of fees. Id. at 1757.
Arthrex does not suggest that Defendants engaged in bad faith litigation behavior. Rather,
Arthrex first argues that the fact that the jury found willful infringement is by itself sufficient for
a fees award. Dkt. No. 317 at 2-4. The Court disagrees.
The Federal Circuit cases supporting Arthrex’s argument, such Modine Mfg. Co. v. Allen
Grp., Inc., 917 F.2d 538 (Fed. Cir. 1990), significantly predate the Supreme Court’s decision in
Octane Fitness. See Dkt. No. 317 at 2-3. Modine, for example, concluded that “[a]n express
finding of willful infringement is a sufficient basis for classifying a case as ‘exceptional,’ and
indeed, when a trial court denies attorney fees in spite of a finding of willful infringement, the
court must explain why the case is not ‘exceptional’ within the meaning of the statute.” 917 F.2d
at 543. Since Octane Fitness, the Federal Circuit has acknowledged that a finding a willfulness
does not necessarily make a case exceptional. See Stryker Corp. v. Zimmer, Inc., 837 F.3d 1268,
1279 (Fed. Cir. 2016).
While Arthrex cites one decision from this district referring to the Modine standard as
late as 2016, see Georgetown Rail Equip. Co. v. Holland L.P., No. 6:13-CV-366, 2016 WL
3346084, at *21 (E.D. Tex. June 16, 2016), the Court did not rely upon it but made extensive
findings concerning the defendant’s “objectively unreasonable” positions which “needlessly
multiplied the proceedings at the expense of the opposing side and the Court.” Modine is also

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arguably inconsistent with Octane Fitness to the extent that it does not permit a court to consider
the “totality of the circumstances” and instead allows focus solely on one element of a jury
finding, a finding that incidentally is not even mentioned as a relevant factor by Octane Fitness.
See 134 S. Ct. at 1756 n.6 (not including willful infringement in the non-exclusive list of factors
to consider). Even Modine, however, recognizes that if a finding of willfulness makes a case
exceptional, an award of attorney fees is within the discretion of the Court but is not required.
Modine, 917 F.2d at 543.
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Arthrex’s second ground for attorney fees is the substantive weaknesses in Defendants’
litigating positions. Dkt. No. 317 at 4-6. The Court does not agree. Having carefully listened to
the testimony during the five-day trial in this case, it cannot be said that Defendants’ litigating
positions were uniformly weak or without merit.
CONCLUSION
Considering the totality of the circumstances, the Court finds that this case is not
exceptional and does not otherwise warrant an award of attorney fees under § 285. Accordingly,
Arthrex’s motion (Dkt. No. 317) is DENIED.
SIGNED this 3rd day of January, 2012.
SIGNED this 25th day of January, 2017.

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ROY S. PAYNE
UNITED STATES MAGISTRATE JUDGE

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