Icon Health & Fitness, Inc. v. Octane Fitness, LLC

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
ICON HEALTH & FITNESS, INC.,
Plaintiff-Appellant,
v.
OCTANE FITNESS, LLC,
Defendant-Cross-Appellant.
______________________
2011-1521, -1636
______________________
Appeals from the United States District Court for the
District of Minnesota in No. 09-CV-0319-ADM-SER,
Judge Ann D. Montgomery.
______________________
Decided: August 26, 2014
______________________
LARRY R. LAYCOCK, Maschoff Brennan Laycock Gil-
more Israelsen & Wright, of Salt Lake City, Utah, for
plaintiff-appellant. With him on the brief was DAVID R.
WRIGHT.
RUDOLPH A. TELSCHER, JR., Harness Dickey & Pierce,
PLC, of St. Louis, Missouri, for defendant-cross-appellant.
With him on the brief was KARA R. FUSSNER.
______________________
2 ICON HEALTH & FITNESS v. OCTANE FITNESS
Before NEWMAN, MAYER, ∗ and LOURIE, Circuit Judges.
PER CURIAM.
This case has returned to us on remand from the Su-
preme Court of the United States. In its earlier appear-
ance in this court, ICON Health & Fitness, Inc. (“ICON”)
appealed from the decision of the United States District
Court for the District of Minnesota, which granted sum-
mary judgment that two families of elliptical machines
sold by Octane Fitness, LLC (“Octane”) did not infringe
certain claims of ICON’s U.S. Patent 6,019,710 (the “’710
patent”) (Appeal No. 2011-1521). ICON Health & Fitness,
Inc. v. Octane Fitness, LLC, No. 09-0319, 2011 WL
2457914 (D. Minn. June 17, 2011). Octane cross-appealed
from the district court’s denial of a motion to find the case
exceptional and to award attorney fees pursuant to 35
U.S.C. § 285 (Appeal No. 2011-1636). ICON Health &
Fitness, Inc. v. Octane Fitness, LLC, No. 09-0319, 2011
WL 3900975 (D. Minn. Sept. 6, 2011).
We affirmed on the merits, concluding that the dis-
trict court did not err in its underlying claim construction
or in granting summary judgment of noninfringement.
ICON Health & Fitness, Inc. v. Octane Fitness, LLC, 496
F. App’x 57, 58 (Fed. Cir. 2012). On cross-appeal, we also
affirmed the district court’s denial of Octane’s motion to
find the case exceptional and to award attorney fees,
declining at that time to revisit our standard for excep-
tionality first articulated in Brooks Furniture Manufac-
turing, Inc. v. Dutailier International, Inc., 393 F.3d 1378(Fed. Cir. 2005). ICON, 496 F. App’x at 65.
Octane filed a petition for writ of certiorari in the Su-
preme Court on the § 285 issue, which the Court granted.
∗
Pursuant to Fed. Cir. Rule 47.11, Circuit Judge
Mayer has been designated to replace Circuit Judge
Rader, now retired, on this panel.
ICON HEALTH & FITNESS v. OCTANE FITNESS 3
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 571
U.S. __, 134 S. Ct. 49 (2013). Simultaneously with its
decision in Highmark Inc. v. Allcare Health Management
System, Inc., 572 U.S. __, 134 S. Ct. 1744, 1749 (2014),
which vacated our judgment in that case and changed the
standard of review of a § 285 determination on appeal, the
Court reversed this court’s decision in Octane’s cross-
appeal, changed the standard for determination of an
“exceptional case,” and remanded for further proceedings
consistent with its opinion. Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U.S. __, 134 S. Ct. 1749, 1758
(2014). Supreme Court review of the judgments on the
merits with respect to claim construction and nonin-
fringement was not requested, and those judgments
remain undisturbed. See ICON, 496 F. App’x at 58–65.
However, in order for the district court to apply the
Supreme Court’s guidance from Octane and Highmark to
the facts of this case, we vacate the district court’s denial
of Octane’s motion to find the case exceptional and to
award attorney fees, and remand for further consideration
of the § 285 motion.
I
ICON owns the ’710 patent directed to an elliptical
machine that allows for adjustable stride length. ICON
sued Octane, alleging that Octane’s Q45 and Q47 ellipti-
cal machines infringed claims 1–5, 7, and 9–10 of the ’710
patent. The district court granted Octane’s motion for
summary judgment, concluding that Octane’s machines
did not infringe the ’710 patent either directly in view of
the court’s construction of certain claim limitations or
under the doctrine of equivalents. ICON, 2011 WL
2457914, at *8–14.
Octane subsequently moved the district court to find
the case exceptional under the “totality of the circum-
stances” and to award attorney fees under § 285. Def.’s
Mem. Supp. Mot. Att’y Fees & Costs, No. 09-0319, 2011
4 ICON HEALTH & FITNESS v. OCTANE FITNESS
WL 11734262 (D. Minn. July 18, 2011), J.A. 2633–34
(citing Yamanouchi Pharm. Co. v. Danbury Pharmacal,
Inc., 231 F.3d 1339, 1346–47 (Fed. Cir. 2000)). Octane
argued that ICON’s infringement action was objectively
baseless because the district court had rejected ICON’s
purportedly frivolous contentions relating to the construc-
tion of certain means-plus-function claim limitations and
infringement of Octane’s accused elliptical machines.
Octane asserted that ICON’s allegations were “unreason-
able and unsupportable” because the court’s noninfringe-
ment determination “should have been a foregone
conclusion to anyone who visually inspected its ma-
chines.” ICON, 2011 WL 3900975, at *2 (citations omit-
ted). Octane also argued that ICON’s case was brought in
subjective bad faith as supposedly evidenced by: (i) an e-
mail exchange between two ICON sales executives sug-
gesting that the litigation was undertaken as a matter of
commercial strategy; and (ii) the fact that ICON is a
larger company that never commercialized its ’710 patent.
Id. at *4.
The district court applied our then-authoritative test,
which required Octane to show by clear and convincing
evidence that ICON’s claim was objectively baseless and
brought in subjective bad faith. See Brooks Furniture,
393 F.3d at 1381–82. The court found both that “[t]his
case is not exceptional, and an award of attorney’s fees is
not warranted.” ICON, 2011 WL 3900975, at *4.
The court specifically determined that, although ulti-
mately unsuccessful, ICON’s rejected claim construction
arguments and infringement contentions were not objec-
tively baseless, frivolous, or unreasonable. Id. at *2–3.
The court concluded that the claim construction issues
were not easily resolved and stated that it did not agree
with Octane that the conclusions relating to noninfringe-
ment were so easily reached and that it had no reason to
doubt ICON’s pre-suit investigation because “[t]he visible
differences” between Octane’s machines and the patented
ICON HEALTH & FITNESS v. OCTANE FITNESS 5
invention “did not make it unreasonable to rely on testing
and expert opinions as to infringement.” Id. at *2–3.
Although noting that “the inquiry could end [t]here,”
the district court further determined that ICON had not
brought suit in bad faith and that attorney fees were not
warranted. Id. at *3–4. The district court therefore
denied Octane’s § 285 motion.
II
On Octane’s cross-appeal, we affirmed the district
court’s denial of Octane’s motion to find the case excep-
tional and to award attorney fees, finding no clear error in
the district court’s factual findings or conclusions and
declining at that time to reconsider the standard for
exceptionality articulated in Brooks Furniture. Id. at 65.
On petition for writ of certiorari from that aspect of
our decision of October 24, 2012, from which we denied
rehearing on December 27, 2012, Octane challenged only
the propriety of our standard for finding a patent case
exceptional under Brooks Furniture; Octane did not
challenge the factual findings and conclusions underlying
the district court’s denial of its § 285 motion.
The Supreme Court abrogated both the clear and con-
vincing evidence standard and the two-part test for objec-
tive baselessness and subjective bad faith of Brooks
Furniture. Octane, 134 S. Ct. at 1757–58. The Court held
that within the context of § 285 “an ‘exceptional’ case is
simply one that stands out from others with respect to the
substantive strength of a party’s litigating position (con-
sidering both the governing law and the facts of the case)
or the unreasonable manner in which the case was liti-
gated.” Id. at 1756. The Court further concluded that
“[d]istrict courts may determine whether a case is ‘excep-
tional’ in the case-by-case exercise of their discretion,
considering the totality of the circumstances.” Id. The
Court explained that there is no precise rule or formula
6 ICON HEALTH & FITNESS v. OCTANE FITNESS
for making those determinations and noted that district
courts should exercise “equitable discretion” in consider-
ing a nonexclusive list of factors that could include “‘frivo-
lousness, 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 (quoting
Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)).
The Supreme Court also observed that “a case presenting
either subjective bad faith or exceptionally meritless
claims may sufficiently set itself apart from mine-run
cases to warrant a fee award.” Id. at 1757.
The Supreme Court’s decision in Octane did not, how-
ever, revoke the discretion of a district court to deny fee
awards even in exceptional cases. Long before Brooks
Furniture, we held that “an exceptional case does not
require in all circumstances the award of attorney fees.”
S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d
198, 201 (Fed. Cir. 1986); see also Gardco Mfg., Inc. v.
Herst Lighting Co., 820 F.2d 1209, 1215 (Fed. Cir. 1987)
(“After the district court determines that a case is excep-
tional, there remains in every case its freedom to exercise
its discretion informed by the court’s familiarity with the
matter in the litigation and the interest of justice.” (inter-
nal quotations omitted)). Indeed, in the companion case
Highmark, the Court held that “[b]ecause § 285 commits
the determination whether a case is ‘exceptional’ to the
discretion of the district court, that decision is to be
reviewed on appeal for abuse of discretion” and that
district courts should have discretion in “all aspects of
[the] § 285 determination.” Highmark, 134 S. Ct. at1748–49.
Accordingly, affording the district court in this case
its full discretion following the Supreme Court’s decision
in Highmark and in view of the new standard for deter-
mining whether a case is exceptional as articulated by the
Court in Octane, we vacate the district court’s judgment
ICON HEALTH & FITNESS v. OCTANE FITNESS 7
denying Octane’s motion both to find the case exceptional
and to award attorney fees under § 285. We remand that
issue to the district court for application in the first
instance of the new standard whether, under the totality
of the circumstances, this case “stands out from others
with respect to the substantive strength” of ICON’s litiga-
tion position or was litigated in an unreasonable manner.
Octane, 134 S. Ct. at 1756.
CONCLUSION
In view of the foregoing, we vacate the district court’s
denial of Octane’s motion to find the case exceptional and
to award attorney fees pursuant to 35 U.S.C. § 285 and
remand for further consideration of that issue. The
decisions relating to claim construction and noninfringe-
ment of ICON’s ’710 patent, as recited in our previous
opinion, are not affected by this remand.
VACATED IN PART AND REMANDED