`EXHIBIT 2033
`
`
`EXHIBIT 2033
`
`
`
`United States Court of Appeals
`for the Federal Circuit
`______________________
`
`KILOPASS TECHNOLOGY, INC.,
`Plaintiff-Appellee,
`
`v.
`
`SIDENSE CORPORATION,
`Defendant-Appellant.
`______________________
`
`2013-1193
`______________________
`
`Appeal from the United States District Court for the
`Northern District of California in No. 10-CV-2066, Judge
`Susan Y. Illston.
`
`______________________
`
`Decided: December 26, 2013
`______________________
`
`DARALYN J. DURIE, Durie Tangri, LLP, of San Fran-
`cisco, California, argued for plaintiff-appellee. With her
`on the brief was EUGENE NOVIKOV.
`
`ROGER L. COOK, Kilpatrick Townsend & Stockton,
`LLP, of San Francisco, California, argued for defendant-
`appellant. With him on the brief were ROBERT D.
`TADLOCK and SARA B. GIARDINA. Of counsel on the brief
`was JOSHUA H. LEE, of Atlanta, Georgia.
`______________________
`
`
`
`2
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`Before RADER, Chief Judge, LOURIE and O’MALLEY,
`Circuit Judges.
`Opinion for the court filed by Circuit Judge O’MALLEY.
`Concurring opinion filed by Chief Judge RADER.
`O’MALLEY, Circuit Judge.
`This appeal arises from the United States District
`Court for the Northern District of California. The district
`court granted summary judgment in favor of Sidense
`Corporation (“Sidense”), holding that it did not infringe
`Kilopass Technology, Inc.’s (“Kilopass’s”) U.S. Patents
`6,940,751 (“the ’751 patent”), 6,777,757, and 6,856,540.
`Kilopass Tech., Inc. v. Sidense Corp., No. 10-2066, 2012
`WL 3545286 (N.D. Cal. Aug. 16, 2012). We summarily
`affirmed that decision under Federal Circuit Rule 36.
`Kilopass Tech., Inc. v. Sidense Corp., 501 F. App’x 980
`(Fed. Cir. 2013). While that appeal was pending, Sidense
`filed a motion in the district court seeking an award of
`attorneys’ fees under 35 U.S.C. § 285, which the district
`court denied. Kilopass Tech., Inc. v. Sidense Corp., No.
`10-02066, 2012 WL 6599428 (N.D. Cal. Dec. 18, 2012).
`Sidense now appeals from the district court’s denial of
`that motion. We vacate and remand for reconsideration
`consistent with this opinion.
`
`I
`Kilopass and Sidense are competitors in the embed-
`ded non-volatile memory (“NVM”) market. Memory cells
`use transistors to store information. NVM memory
`consists of memory devices that retain their information
`(or state) when power is removed. Kilopass markets
`technology used to create its 1.5T NVM memory technolo-
`gy. Sidense has a competing 1T-Fuse product, the design
`and technology of which it licenses to its customers, who
`in turn use those designs to build embedded memory cells.
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`3
`
`Kilopass’s patents cover a memory cell comprised of
`transistors located at the cross-points of a column bitline
`and a row wordline. Each transistor has a “gate” connect-
`ed to a column bitline and a “source” connected to a row
`wordline.
`’751 patent col. 5 ll. 32–40. Opposite the source
`is a “drain” that is not connected to any bitlines or word-
`lines. Id. Beneath the gate is a substrate separated from
`the gate by a dielectric oxide. Id. col. 7 l. 17. The dielec-
`tric oxide is engineered to “break down” when a sufficient
`voltage is applied to the gate. Id. col. 7 ll. 14–16. If the
`gate oxide breaks down, a conductive link forms between
`the source and drain, allowing current to flow through the
`transistor. Id. col. 7 ll. 16–20. The flow of current indi-
`cates that the transistor is in a programmed state, while
`the absence of current flow indicates that it is in a non-
`programmed state. Id.
`Kilopass’s ’751 patent, which is representative of the
`patents in suit, is directed to a programmable memory
`cell utilizing a transistor at the intersection of a column
`bitline and a row wordline.
`’751 patent Abstract. Repre-
`sentative claim 1 reads as follows:
`in a
`1. A programmable memory cell useful
`memory array having column bitlines and row
`wordlines, the memory cell comprising:
`a transistor having a gate,
`a gate dielectric between the gate and over a sub-
`strate,
`and first and second doped semiconductor regions
`formed in said substrate adjacent said gate
`and in a spaced apart relationship to define a
`channel region there between and under said
`gate;
`and wherein the second doped semiconductor re-
`gion of the transistor is connected to one of said
`row wordlines,
`
`
`
`4
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`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`and wherein said gate dielectric is formed such
`that the gate dielectric is more susceptible to
`breakdown near the first doped semiconduc-
`tor region than said second doped semicon-
`ductor region.
`Id. col. 14 ll. 30–44 (emphases added).
`Claim 1 of the ’751 patent requires a first and second
`doped semiconductor region of the memory cell where the
`second doped region is connected to one of the wordlines.
`Id. Sidense’s 1T-Fuse cells, however, utilize a shallow
`trench isolation (“STI”) region for the transistor drain
`instead of a first doped region. Kilopass, 2012 WL
`3545286, at *10; J.A. 10604. The claim also requires the
`second doped region to be connected to a row wordline,
`but Sidense’s 1T-Fuse product connects the second doped
`region to the column bitline. Kilopass, 2012 WL 3545286,
`at *7; J.A. 10604–05. These differences formed the basis
`of the district court’s noninfringement determination,
`which we affirmed. Kilopass, 2012 WL 3545286, at *7–11,
`aff’d, 501 F. App’x 980 (Fed. Cir. 2013).
`II
`In 2005, Kilopass’s founder and an inventor on all
`three of Kilopass’s patents, Jack Peng, reviewed an inter-
`national patent application submitted by Sidense that
`was directed to protecting Sidense’s competing 1T-Fuse
`memory cell. Peng believed that the 1T-Fuse was similar
`to Kilopass’s patented cells, except that Sidense used a
`split gate implementation. Kilopass, 2012 WL 3545286,
`at *9. Peng contacted a patent attorney at the law firm
`Perkins Coie to discuss potential infringement.
`In an e-
`to the Perkins attorney, Peng explained that
`“[Kilopass] did not file [a] dedicated patent for this split
`gate implementation” and that “we should [have] . . . a
`long time ago even though we were very busy.”
`J.A.
`10576, 10580. According to Peng, it was not a priority to
`Kilopass at
`that
`time because Sidense’s “split gate
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`5
`
`[memory cell] is not self-aligned, so their practical cell size
`will be larger than [Kilopass’s] 1.5T cell.” J.A. 10576.
`The Perkins counsel nonetheless believed that there
`was a sufficient basis to challenge Sidense with infringe-
`ment contentions “in a friendly way . . . to see what their
`reaction is.” J.A. 10578. On November 28, 2005, the
`Perkins counsel sent a letter to Sidense advising that it
`“should be interested in obtaining a license to Kilopass’s
`patents” or otherwise “provide [Kilopass] with an expla-
`nation of how these products avoid the claims” of the
`patents-in-suit, inter alia. J.A. 10583–86.
`Sidense responded on January 20, 2006, stating, “[I]t
`is our opinion that no products produced by Sidense, nor
`their methods of operation, fall within the scope of the
`claims.” J.A. 10590. Specifically, Sidense noted:
`[E]ach [claim] require[s] that the transistor have
`(1) first and second doped semiconductor regions
`formed in the substrate adjacent the gate; and (2)
`a second doped semiconductor region connected to
`the row wordline . . . . Such elements are not pre-
`sent in Sidense’s memory cell transistors. For at
`least these reasons, . . . we do not believe any li-
`cense of these patents is necessary.
`J.A. 10590 (emphases added). Sidense also proposed that
`it was “prepared to consider a third-party examination, on
`a confidential basis” to confirm whether Sidense’s prod-
`ucts infringed, “provided [Kilopass] agreed to pay the
`costs of same and to be bound by any findings in this
`regard.” J.A. 10593.
`After reviewing Sidense’s response, the Perkins coun-
`sel sent the following e-mail to Peng and Kilopass’s CEO:
`Here is my report on Sidense’s response to our
`charge of infringement.
`I still believe given our
`knowledge of Sidense’s technology, that they in-
`fringe our patents. Please keep in mind that I am
`
`
`
`6
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`assuming that their memory design is the same as
`detailed in their patent application . . . . Note that
`it is possible that Sidense may have changed their
`memory design to be different from what is shown
`. . . . In speaking with Jack [Peng] earlier today,
`we speculated that Sidense may have eliminated
`the first doped region and replaced it with a shal-
`low trench isolation [STI] of some sort. . . . [I]f in
`fact they have eliminated the first dope region,
`then they would NOT infringe our claims literally.
`If that is the case, then we would have to go
`through a “reissue” proceeding in the patent office
`that may take 2 years in order to modify our
`claims to include the situation where there is no
`first doped region . . . . The most crucial bit of in-
`formation we need to find out is the design of their
`memory cell. We have been . . . assuming that their
`patent application shows their memory cell. This
`is not always the case and it would be good if we
`could find out definitively how their memory cell is
`constructed.
`I still feel strongly about our case if
`they are using the memory cell described in their
`patent application.
`J.A. 10601 (emphasis in original). That e-mail made clear
`that: (1) the analysis by Perkins counsel up to that point
`had been based on the assumption that the design of
`Sidense’s 1T-Fuse cell was the same as the cell described
`in Sidense’s international patent application; and (2) if
`that assumption was incorrect and Sidense had in fact
`replaced the first doped region (i.e., the drain) with an STI
`region, then Sidense “would NOT infringe [the] claims
`literally.” Id.
`In June 2007, a Kilopass employee obtained a dia-
`gram of Sidense’s 1T-Fuse cell at a presentation, which
`confirmed that Sidense had replaced the drain with an
`STI. The Perkins counsel then sent the following e-mail
`to Kilopass officials: “My preliminary review of all the
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`7
`
`Sidense materials indicates that they have redesigned
`their memory cell to avoid infringement of our patents. Or
`at least make our case much tougher.” J.A. 10604 (em-
`phasis added). Counsel also noted that Sidense employed
`an opposite wordline and bitline configuration, viz., the
`gate of each transistor was connected to a row wordline
`and the source was connected to a column bitline. Coun-
`sel stated that he was “not so worried about the inter-
`change of the bit line and word line,” but that he was
`“more worried about the fact that [Sidense’s cell] uses an
`[STI] on one side of the gate and not a [drain].”
`Id. at
`10604–05.
`Despite that advice from its Perkins patent counsel
`that Sidense did “NOT infringe [the] claims literally,” and
`that Kilopass’s case was “much tougher,” Kilopass re-
`tained the law firm of Morrison Foerster (“MoFo”) to
`conduct another analysis. On March 19, 2008, counsel
`from MoFo e-mailed Kilopass’s CEO the following:
`As we mentioned during the meeting, assuming
`Sidense’s NVM product uses . . . [an] STI region[]
`(as opposed to two N+ regions) to define the chan-
`nel below the gate . . . Kilopass appears to have a
`valid claim that Sidense’s NVM product is at least
`“equivalent” to the invention claimed by claim 1 of
`Kilopass’s ’751 patent, and therefore that Sidense
`infringes that patent.
`As we also discussed, the next step is for us to con-
`duct a more detailed investigation and analysis to
`confirm our initial impressions, which you asked
`us to complete before your April 2nd meeting with
`Kilopass’s Board.
`J.A. 11487 (emphases added).
`MoFo then immediately began its “more detailed in-
`vestigation” in order to meet Kilopass’s deadline. Howev-
`er, eight days later, on March 27, 2008, Kilopass
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
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`8 i
`
`nstructed MoFo to stop all work on the project. The
`reason is unclear, but MoFo subsequently sent Kilopass
`an invoice for 44 hours of work “relating to Kilopass’s
`investigation of potential
`infringement claims against
`Sidense.” J.A. 11490. The invoice was accompanied by “a
`preliminary infringement chart for the ’751 patent reflect-
`ing [MoFo’s] analysis.” Id.
`The infringement chart provided an analysis concern-
`ing the doctrine of equivalents and concluded that
`“Kilopass appears to have a reasonable argument that
`Sidense’s field oxide region is equivalent to the doped
`region in claim 1 of the ’751 patent, and therefore satisfies
`this limitation.” J.A. 11497. With regard to literal in-
`fringement, the MoFo counsel opined:
`[I]f “doped region” is defined as an area on the
`semiconductor where the electrical properties
`have been changed, it may be difficult to argue
`that the field oxide region is a doped region . . . .
`If, however, “doped region” could reasonably be
`defined more broadly as simply an area to which a
`dopant is applied, then we may be able to argue
`that the field oxide region is a “doped region.” De-
`termining the potential viability of this argument
`will require additional
`investigation,
`technical
`feedback from Kilopass and possibly input from
`an independent expert.
`
`Id.
`
`chart
`Although MoFo’s preliminary infringement
`opined favorably to Kilopass regarding the doctrine of
`equivalents, there is no evidence in the record that MoFo’s
`analysis was complete at that time, nor is there any
`evidence that Kilopass considered MoFo’s preliminary
`infringement chart in deciding to bring suit against
`Sidense. Kilopass retained MoFo to conduct an infringe-
`ment analysis but terminated that relationship only eight
`days later. It does not appear that Kilopass was aware of
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`9
`
`how much work MoFo had done up to that point or that
`MoFo was even in the process of completing an infringe-
`ment chart.
`In other words, it appears that Kilopass
`officials had already set their mind prior to learning of
`MoFo’s infringement analysis.
`In 2008, a team of engineers led by Kilopass’s CTO
`sent an exemplary Sidense memory device to a third-
`party for reverse-engineering. After receiving the results,
`the CTO created a slide presentation for a meeting of
`Kilopass’s board noting that Kilopass had retained the
`law firm SNR Denton to investigate potential infringe-
`ment against Sidense. The CTO also stated that Denton
`“[a]ttorneys don’t have a conclusion yet as to the reading
`of 1st doped region and STI region” and that their “formal
`analysis [was] in progress.” J.A. 11296. However, in the
`CTO’s opinion, “[f]rom an engineer’s perspective,” Sidense
`infringed under the doctrine of equivalents. Id.
`III
`On May 14, 2010, Kilopass filed suit against Sidense
`in the United States District Court for the Northern
`District of California, alleging both literal infringement
`and infringement under the doctrine of equivalents.
`During the course of the proceedings, the district
`court discovered that Kilopass was making claim con-
`struction arguments to the United States Patent and
`Trademark Office Board of Patent Appeals and Interfer-
`ences (the “Board”) that were directly contrary to those
`being made to the court in order to distinguish over a key
`piece of prior art during a concurrent inter partes re-
`examination. Kilopass, 2012 WL 3545286, at *6. The
`district
`court admonished Kilopass for engaging in
`“gamesmanship.” J.A. 5990–91.
`Additionally, the district court ruled that Kilopass
`had attempted to amend its infringement contentions and
`advance previously undisclosed theories under the doc-
`
`
`
`10
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`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`trine of equivalents long past the applicable deadline and
`without the court’s approval. Kilopass, 2012 WL 3545286,
`at *8. The district court noted that “Kilopass’s assertion
`of a new theory of equivalence is particularly inappropri-
`ate in light of evidence that Kilopass has known for many
`years that Sidense does not literally infringe its patents.”
`Id. at n.8 (emphasis added).
`After ruling that Kilopass had disavowed claim scope
`and striking evidence relating to Kilopass’s theory of
`equivalence, the district court granted Sidense summary
`judgment of noninfringement.
`Id. at *10. The district
`court reasoned that Kilopass ignored “numerous differ-
`ences” between the patent claims and Sidense’s accused
`products and that Peng, a named inventor on all three
`patents in suit, admitted before Kilopass filed suit that
`Kilopass had actually considered using Sidense’s design
`but chose not to because it resulted in a larger cell size.
`Id. at *9.
`Kilopass appealed the district court’s grant of sum-
`mary judgment to this court, and we summarily affirmed
`pursuant to Federal Circuit Rule 36. Kilopass, 501 F.
`App’x at 980. While that appeal was pending, Sidense
`filed a motion in the district court for an award of attor-
`neys’ fees pursuant to 35 U.S.C. § 285. Relying on the
`standard set forth by a panel of this court in Brooks
`Furniture Manufacturing v. Dutailier, Inc., 393 F.3d 1378
`(Fed. Cir. 2005), the district court denied the motion,
`stating:
`Although Sidense was the prevailing party on the
`patent claims, the Court concludes that Sidense
`has not met its burden of establishing with “clear
`and convincing evidence” that Kilopass brought or
`maintained the prosecution of
`its patent
`in-
`fringement in bad faith. Kilopass performed sub-
`stantial pre-filing investigation and was able to
`obtain opinions from two different law firms that
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`11
`
`claim against
`Kilopass had a non-baseless
`Sidense. In addition, Kilopass’s Chief Technology
`Officer performed his own independent analysis
`based on the results of an outside intellectual-
`property forensics firm to determine that a pa-
`tent-infringement suit was appropriate.
`Kilopass, 2012 WL 6599428, at *3 (citations omitted).
`Sidense now appeals the district court’s denial of its
`motion for § 285 attorneys’ fees. We have jurisdiction
`pursuant to 28 U.S.C. § 1295(a)(1).
`IV
`A determination of whether to award attorneys’ fees
`under § 285 involves a two-step process. First, a district
`court must determine whether the prevailing party has
`proved by clear and convincing evidence, Ruiz v. A.B.
`Chance Co., 234 F.3d 654, 669 (Fed. Cir. 2000), that the
`case is “exceptional.” 35 U.S.C. § 285; Cybor Corp. v. FAS
`Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc).
`Under Brooks Furniture,
`A case may be deemed exceptional when there has
`been some material inappropriate conduct related
`to the matter in litigation, such as willful
`in-
`fringement, fraud or inequitable conduct in pro-
`curing the patent, misconduct during litigation,
`vexatious or unjustified litigation, conduct that
`violates [Federal Rule of Civil Procedure] 11, or
`like infractions. See, e.g., Cambridge Prods. Ltd.
`v. Penn Nutrients, Inc., 962 F.2d 1048, 1050–51
`(Fed. Cir. 1992); Beckman Instruments, Inc. v.
`LKB Produkter AB, 892 F.2d 1547, 1551 (Fed. Cir.
`1989). Absent misconduct in the litigation or in
`securing the patent, sanctions may be imposed
`against the patentee only if both (1) the litigation
`is brought in subjective bad faith, and (2) the liti-
`gation is objectively baseless. Professional Real
`
`
`
`12
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`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`Estate Investors v. Columbia Pictures Industries,
`508 U.S. 49, 60–61 . . .
`(1993); see also Forest
`Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1329–
`31 (Fed. Cir. 2003).
`393 F.3d at 1381.
`We review de novo whether the court applied the
`proper legal standard under § 285, and review the court’s
`factual findings for clear error. Brasseler, U.S.A. I, L.P. v.
`Stryker Sales Corp., 267 F.3d 1370, 1378 (Fed. Cir. 2001).
`A finding is clearly erroneous when, despite some sup-
`porting evidence, “the reviewing court on the entire
`evidence is left with the definite and firm conviction that
`a mistake has been committed.” United States v. U.S.
`Gypsum Co., 333 U.S. 364, 395 (1948). Second, if the
`district court finds the case to be exceptional, it must then
`determine whether an award of attorneys’ fees is appro-
`priate. Cybor, 138 F.3d at 1460. We review that deter-
`mination for an abuse of discretion. Id.
`Sidense argues that the district court erred in not
`finding this case “exceptional” under Brooks Furniture
`because Kilopass’s claims were objectively baseless and
`brought in subjective bad faith.
`In the alternative,
`Sidense urges us to change the standard for assessing
`exceptionality under § 285 as set out in Brooks Furniture
`and cases that followed. Kilopass responds that, as the
`trial court found, it had a good faith basis for bringing and
`pursuing its infringement claims against Sidense’s prod-
`ucts. Kilopass also argues that we should not alter our
`exceptional case standard.
`
`V A
`
`Sidense first faults the district court for its reliance on
`our decision in MarcTec, LLC v. Johnson & Johnson, 664
`F.3d 907 (Fed. Cir. 2012), which, in Sidense’s view, re-
`quires too great a showing to establish subjective bad
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
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`13
`
`faith. Quoting iLOR, LLC v. Google, Inc., 631 F.3d 1372,
`1377 (Fed. Cir. 2011), MarcTec stated that, when a de-
`fendant seeks fee shifting under § 285 based on the alle-
`gation that the plaintiff’s claims were objectively baseless,
`the “patentee’s case ‘must have no objective foundation,
`and the plaintiff must actually know this.’” MarcTec, 664
`F.3d at 916 (emphasis added).
`Requiring actual
`knowledge that claims are baseless, according to Sidense,
`sets too high a bar for establishing that a case is excep-
`tional. These concerns are echoed in the recent successful
`petition for a writ of certiorari in Octane Fitness, LLC v.
`Icon Health & Fitness, Inc., 496 F.3d 57 (Fed. Cir. 2012),
`cert. granted, 81 U.S.L.W. 3567 (U.S. Oct. 1, 2013) (No.
`12–1184). Petitioners argued that requiring defendants
`to prove actual knowledge results in impermissibly dis-
`parate treatment of plaintiffs and defendants under § 285
`because a plaintiff can demonstrate exceptionality by
`proving willful infringement, which only requires a show-
`ing of recklessness. See Petition for Writ of Certiorari,
`Octane Fitness, LLC v. Icon Health & Fitness, Inc., 2013
`WL 1309080, at *28–29 (U.S. Mar. 27, 2013) (No. 12–
`1184); see also Fogerty v. Fantasy, Inc., 510 U.S. 517, 534
`(1994) (stating that “[p]revailing plaintiffs and prevailing
`defendants are to be treated alike” in the context of as-
`sessing entitlement to attorneys’ fees under 17 U.S.C.
`§ 505); Eltech Sys. Corp. v. PPG Indus., Inc., 903 F.2d
`805, 811 (Fed. Cir. 1990) (“[T]here is and should be no
`difference in the standards applicable to patentees and
`infringers who engage in bad faith litigation.”).
`It is unclear whether the district court, in its brief
`analysis, required Sidense to demonstrate that Kilopass
`had actual knowledge that its claims were baseless. But,
`to the extent that the district court did require actual
`knowledge of objective baselessness, it erred. The lan-
`guage from iLOR and MarcTec that Sidense interprets as
`
`
`
`14
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`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`requiring actual knowledge does not reflect this court’s
`law governing § 285,1 and is dictum.2 As we made clear
`in Highmark, Inc. v. Allcare Health Management, 687
`F.3d 1300 (Fed. Cir. 2012), subjective bad faith only
`requires proof that the “lack of objective foundation for
`the claim ‘was either known or so obvious that it should
`have been known’ by the party asserting the claim.” Id.
`at 1309 (emphases added) (quoting In re Seagate Tech.,
`LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc)).
`Thus, actual knowledge of baselessness is not required.
`Like a plaintiff seeking to recover attorneys’ fees under
`§ 285 based on alleged willful infringement, a defendant
`need only prove reckless conduct to satisfy the subjective
`component of the § 285 analysis. See Highmark, 687 F.3d
`at 1309; Seagate, 497 F.3d at 1371 (“[T]o establish willful
`infringement, a patentee must show by clear and convinc-
`ing evidence that the infringer acted despite an objective-
`ly
`high
`likelihood
`that
`its
`actions
`constituted
`infringement of a valid patent.”).
`
`Indeed, if iLOR had attempted to increase the re-
`1
`quired showing for demonstrating subjective bad faith, it
`would have been unable to do so as a panel decision
`because such a change would contravene this court’s
`established precedent. See Eltech, 903 F.2d at 810–11
`(stating that actual knowledge of baselessness is not
`required to prove subjective bad faith).
`In iLOR, we resolved the appeal on the objective
`2
`prong and never reached the subjective prong. See iLOR,
`631 F.3d at 1374. In MarcTec, we not only found that the
`plaintiff did know during the course of the litigation that
`its claims were baseless, we also relied on litigation
`misconduct as an alternative ground to support the § 285
`fee award. See MarcTec, 664 F.3d at 917–20. The court’s
`discussion of the level of knowledge required under the
`subjective prong was not critical to either holding.
`
`
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`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
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`15
`
`In addition to any errors the district court may have
`made by requiring too great a showing of subjective bad
`faith, the court erred by taking too narrow a view of the
`proof that can satisfy the subjective prong of the § 285
`analysis. The court rejected Sidense’s request for fees
`based solely on Sidense’s purported failure to establish
`subjective bad faith. Kilopass, 2012 WL 6599428, at *3
`(“[T]he Court concludes that Sidense has not met its
`burden of establishing with ‘clear and convincing evi-
`dence’ that Kilopass brought or maintained the prosecu-
`tion of its patent infringement in bad faith.”). The court
`reached this determination, however, without addressing
`the objective merits of Kilopass’s claims. Id. Instead, it
`focused exclusively on evidence it considered to be indica-
`tive of good faith on Kilopass’s part—including opinions of
`counsel and Kilopass’s own independent infringement
`analysis.
`Id. This focus was inappropriately narrow,
`rendering the district court’s analysis incomplete.
`Our case law has long held that, “in considering a par-
`ty’s subjective state of mind, we are ‘to take into account
`the totality of the circumstances.’” Highmark, 687 F.3d at
`1311 (quoting Mach. Corp., 774 F.2d at 473).
`In Eltech,
`we examined the difficulty of proving what a party actual-
`ly knew or did not know, explaining:
`The “should know” rubric obviously applies when
`a party attempts to escape the consequences of its
`conduct with the bare statement, “I didn’t know.”
`A party confronted with the difficulty of proving
`what is in an adversary’s mind must be at liberty
`to prove facts establishing that that adversary
`should have known, i.e. to prove facts that render
`the “I didn’t know” excuse unacceptable.
`903 F.2d at 810. Thus, focusing first and only on subjec-
`tive factors, as the district court did here, is inadequate to
`obtain the justice that § 285 is intended to achieve.
`Subjective bad faith is difficult to prove directly, essential-
`
`
`
`16
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`ly requiring the discovery of a smoking gun, and evidence
`of a lack of subjective bad faith is easy to provide, as
`occurred here. Kilopass, knowing that it had no literal
`infringement case, i.e., that Sidense’s product was not
`within the scope of its claims, was able to overcome
`Sidense’s § 285 fee motion simply by showing that it had
`consulted counsel who opined about the possibility of
`prevailing on an infringement claim under the doctrine of
`equivalents. Lack of direct proof of subjective bad faith
`should not alone free a party from the threat of assess-
`ment of attorneys’ fees under § 285, however. The district
`court prematurely ended the § 285 inquiry without de-
`termining whether Kilopass’s doctrine of equivalents
`theory was objectively baseless and whether that fact or
`other circumstantial evidence would support an inference
`of bad faith on the part of Kilopass.
`The primacy of objective evidence over assertions of
`subjective good faith or lack of knowledge is well estab-
`lished in our § 285 case law.3 The totality of the circum-
`stances does include an evaluation of subjective good
`faith, but mostly as a negative. If a smoking gun is found,
`revealing that a patentee knew that he had no chance of
`winning a lawsuit, then subjective bad faith is easily
`shown. But one’s misguided belief, based on zealousness
`rather than reason, is simply not sufficient by itself to
`show that a case is not exceptional in light of objective
`
`3 Because objective baselessness is an independent
`requirement under Brooks Furniture and can influence
`assessment of the subjective component under § 285, it is
`in the interests of judicial economy for a court to consider
`the objective merits of a case first, and then assess the
`parties’ proofs of subjective intent. See Prof’l Real Estate
`Investors, 508 U.S. at 60 (“Only if challenged litigation is
`objectively meritless may a court examine the litigant’s
`subjective motivation.”).
`
`
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`17
`
`evidence that a patentee has pressed meritless claims.
`Thus, we have observed that, where “the patentee is
`manifestly unreasonable in assessing infringement, while
`continuing to assert infringement in court, an inference is
`proper of bad faith.” Eltech, 903 F.2d at 811.
`In discussing the requirement of bad faith to support
`a finding of exceptionality under § 285, Brooks Furniture
`did not speak at all to the type of proofs that are adequate
`to establish bad faith. Brooks Furniture thus did nothing
`to discourage courts from drawing an inference of bad
`faith from circumstantial evidence thereof when a patent-
`ee pursues claims that are devoid of merit. Factors such
`as the failure to conduct an adequate pre-suit investiga-
`tion, vexatious or unduly burdensome litigation tactics,
`misconduct in procuring the patent, or an oppressive
`purpose are factors which can be indicative of bad faith.
`The wide variety of ways available to establish bad faith
`is why our case law has long required a party seeking fees
`under § 285 “to prove the other guilty of bad faith litiga-
`tion by clear and convincing evidence in light of the totali-
`the circumstances.”
`Eltech, 903 F.2d at 811
`ty of
`(emphasis added); see also Highmark, 687 F.3d at 1311
`(quoting Mach. Corp., 774 F.2d at 473); Forest Labs., Inc.
`v. Abbott Labs., 339 F.3d 1324, 1330 (Fed. Cir. 2003)
`(considering the record as a whole in determining whether
`the patentee maintained its infringement counterclaim in
`bad faith). Thus, we vacate the district court’s judgment
`denying fees and remand for consideration of whether
`Kilopass acted in bad faith in light of the totality of the
`circumstances—with particular attention paid to the
`objective merits of Kilopass’s claims and other objective
`evidence indicative of bad faith.
`B
`Sidense also argues that it should not even be re-
`quired to prove that Kilopass acted in bad faith to show
`exceptionality.
`Proof of objective baselessness,
`in
`
`
`
`18
`
`KILOPASS TECHNOLOGY, INC. v. SIDENSE CORPORATION
`
`Sidense’s view, should be enough to demonstrate excep-
`tionality under § 285. Sidense does not contend that a
`finding of exceptionality predicated on objective baseless-
`ness would demand that the district court shift fees, only
`that it should permit it to do so in its discretion in light of
`the totality of the circumstances. Sidense’s argument is
`not without some force.
`In 1946, Congress amended the then patent remedy
`statute, section 4921 of the Revised Statutes of 1874, to
`state that the “court may in its discretion award reasona-
`ble attorney fees to the prevailing party.” Mach. Corp.,
`774 F.2d at 471 (quoting Patent Act of August 1, 1946,
`§ 1, 60 Stat. 778, 35 U.S.C. § 70 (1946 ed.)). The legisla-
`tive history indicates that a key aim of this provision was
`“‘to enable the court to prevent a gross injustice to an
`alleged infringer.’” See Mathis v. Spears, 857 F.2d 749,
`755 (Fed. Cir. 1988) (quoting S. Rep. No. 1503, 79th
`Cong., 2d Sess. (1946), reprinted in 1946 U.S. Code Cong.
`Serv. 1386, 1387). This statute was interpreted by the
`circuit courts of appeals as giving district courts broad
`discretion to award attorney fees in “extraordinary cir-
`cumstances.” See, e.g., id. (“The statute was construed to
`allow the award of fees in extraordinary cases . . . .”);
`Park-In-Theatres v. Perkins, 190 F.2d 137, 142 (9th Cir.
`1951) (“[I]n granting this power, Congress made plain its
`intention that such fees be allowed only in extraordinary
`circumstances.”). An extraordinary case was one “bot-
`tomed upon a finding of unfairness or bad faith in the
`conduct of the losing party, or some other equitable con-
`sideration of similar force, whi
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