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The Federal Circuit affirmed the district court’s denial of defendant Newegg’s motion for attorney fees under Section 285.  Before the district court, plaintiff SFA voluntarily dismissed its action against Newegg even after receiving a favorable claim construction ruling.  Newegg sought recovery of its fees on two grounds: (1) that the district court improperly construed the claims, and, under a proper construction, SFA’s suit was meritless; and (2) SFA’s strategy of filing numerous lawsuits, settling some for nuisance amounts, and dismissing others when it became clear that the defendant would not settle before trial, demonstrated litigation misconduct by SFA.  As to the first ground, the court held that the issue for the determination of exceptional case is the strength of the patentee’s position, not the ultimate correctness of that position.  Here, the patentee’s positions did not stand out when compared to others, as the district court found.  As to the second ground, the court agreed that SFA’s strategy could be a sufficient basis for finding litigation misconduct, but, here, Newegg had not demonstrated that SFA had followed this strategy, since, some of its settlements with other defendants were for more than a nuisance amount and SFA contended that it dismissed this action only because it had a trial date in another, more potentially lucrative case on the same date as the trial date in this case. 

SFA Systems, LLC v. Newegg Inc., Case No. 2014-1712 (July 10, 2015); Opinion by: O’Malley, joined by Clevenger and Hughes; Appealed From: District Court for the Eastern District of Texas, Davis, J. Read the full opinion here.

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