Federal Circuit throws out $2.8m fees in Fossil dispute

The US Court of Appeals for the Federal Circuit has thrown out an award of $2.8 million in attorneys’ fees and costs in a patent and trademark infringement suit against fashion brand Fossil.

In a precedential decision handed down yesterday, the court vacated and remanded the lower court’s award.

Romag Fasteners is the owner of US patent number 5,722,126 on magnetic snap fasteners, which it sells under its registered trademark ‘Romag’ (US registration number 2,095,367).

In November 2010, Romag sued Fossil and various retailers including Macy’s and Nordstrom for patent and trademark infringement and violation of the Connecticut Unfair Trade Practices Act (CUTPA), at the US District Court for the District of Connecticut.

Romag had licensed the patent and trademark to a Chinese manufacturer, which supplied authentic magnetic snaps for use in handbags manufactured and distributed by Fossil.

But in 2010, a batch of Fossil handbags appeared to contain counterfeit ‘Romag’ magnetic snaps, which led Romag to sue.

A jury found that Fossil had committed patent and trademark infringement and unfair trade practices, while Macy’s was liable for patent infringement. Nordstrom was cleared of the allegations.

The Federal Circuit affirmed the court’s finding of infringement, while other aspects of the judgment were not appealed.

Romag sought attorneys’ fees under the Patent Act, Lanham Act and CUTPA. The district court granted fees under the Patent Act and CUTPA, but not under the Lanham Act.

Fossil appealed against the award of fees under the Patent Act, and Romag cross-appealed against the denial of fees under the Lanham Act.

Under the Patent Act and Lanham Act, “the court in exceptional cases may award reasonable attorney fees to the prevailing party”.

Applying the Octane standard, the district court found that Romag was entitled to attorneys’ fees under the Patent Act.

This was because Fossil didn’t “withdraw [anticipation and obviousness] defences with prejudice until after trial”, and because Fossil’s “patent invalidity defence of indefiniteness bordered on frivolous”.

The US Supreme Court held in Octane Fitness v Icon Health & Fitness that under 35 USC section 285, “an ‘exceptional’ case is simply 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 … , considering the totality of the circumstances”.

Romag argued that the district court had erred in not awarding fees under the Lanham Act, and that the Octane standard applied to the award of fees under the Patent Act and the Lanham Act.

“We conclude that the district court erred and that the Octane standard applies to the Lanham Act,” said Circuit Judge Timothy Dyk, on behalf of the court.

Dyk added that no circuit court has specifically considered Octane and then declined to apply it to the Lanham Act.

“This is unsurprising, as the language of the Patent Act and the Lanham Act for attorneys’ fees is identical,” he said, remanding the issue.

Despite these comments, the Federal Circuit then turned to whether the district court had erred in awarding fees under section 285 to Romag, and concluded that the district court had made several errors.

According to the Federal Circuit, Romag’s claim that Fossil didn’t withdraw its invalidity defences until after testimony had been completed is “misleading and contradicted by the record” and that the district court clearly erred in concluding this.

“Finally, we note that the district court made no finding that Fossil’s defences of anticipation and obviousness were objectively unreasonable,” said Dyk.

The court added that in awarding fees under the Patent Act, the district court declined to consider Romag’s conduct earlier in the litigation that the district court had sanctioned.

The suit was remanded for the district court to consider the attorneys’ fees “free of the errors identified”.

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