IP Law Daily Claims Court lacks statutory authority to award Patent Act attorney fees to third-party defendant
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Monday, October 26, 2020

Claims Court lacks statutory authority to award Patent Act attorney fees to third-party defendant

By Brian Craig, J.D.

The U.S. Court of Federal Claims held that it lacks subject matter jurisdiction to award attorney fees under 35 U.S.C. § 285 to a third party but reserved the question as to the court’s inherent authority.

In a patent infringement case involving technologies for reading passports and permanent resident cards, which was brought against the U.S. government by a German company, the U.S. Court of Federal Claims has held that it lacks subject matter jurisdiction to award attorney fees under the Patent Act to a third party named as an additional defendant. In the action brought by the German technology company, Giesecke & Devrient GmbH, the court vacated a previous award of attorney fees to third-party defendant HID Global Corporation as a prevailing party. The court concluded it lacks authority under the Patent Act to award attorney fees to a third party or noticed nonparty without an express statutory grant by Congress (Giesecke+Devrient GmbH v. The United States, October 22, 2020, Holte, R.).

Giesecke, a German technology company offering pioneering passport technologies, is the owner of U.S. Patent No. 7,837,119 ("the ’119 Patent"), entitled "Contactless Data Carrier." Giesecke filed suit in the U.S. Court of Federal Claims, alleging the government infringed the ’119 Patent through the use of electronically enabled machine readable travel documents (eMRTDs) such as United States Passport Cards, Permanent Resident Cards (Green Cards), and Global Entry cards. The German company then filed an amended complaint naming HID Global Corporation as a defendant alleging that HID provides the government with Permanent Resident Cards and Global Entry cards. Before answering the complaint, HID filed a motion to dismiss. Giesecke then dismissed its claims against HID. After bifurcating the issues of entitlement to, and quantum of, attorney fees, the court issued an opinion and order granting HID entitlement to attorney fees pursuant to 35 U.S.C. § 285 as a prevailing party. Following transfer to Judge Ryan Holte, the court ordered additional briefing on the court’s jurisdiction to award attorney fees.

Subject matter jurisdiction. The U.S. Court of Federal Claims held that it lacks jurisdiction to award attorney fees to a third party or noticed nonparty pursuant to 35 U.S.C. § 285. The court recognized that if it determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action. Subject-matter jurisdiction, because it involves a court’s power to hear a case, can never be forfeited or waived. In this case, whether an award of fees under Section 285 is within the jurisdiction of the Court of Federal Claims was never conclusively decided. Under the Patent Act, the court in "exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The U.S. Supreme Court has further defined an "exceptional case," describing it as one that stands out from others with respect to the substantive strength of the party’s litigating position or the unreasonable manner in which the case was litigated.

Under 28 U.S.C. § 1498(a), the Court of Federal Claims can award attorney fees to a prevailing plaintiff who is an independent inventor, a nonprofit organization, or an entity that has no more than 500 employees. Although Section 285 is used frequently by district courts, the Court of Federal Claims has never awarded attorney fees under Section 285 in a Section 1498 case. The jurisdiction of the Court of Federal Claims is even more limited than that of other federal district courts. Section 1498 falls under Title 28 of the United States Code setting forth the jurisdiction of the Court of Federal Claims. Section 1498 specifically applies to patent owners in an "action against the United States in the United States Court of Federal Claims." 28 U.S.C. § 1498(a). Section 285, on the other hand, does not explicitly state which courts have the power to apply it. To date, however, the Court of Federal Claims has never awarded attorney fees pursuant to 35 U.S.C. § 285.

The court concluded it lacks authority to award attorney fees without an express statutory grant by Congress. The court recognized that it is unable to expand the jurisdiction of the Court of Federal Claims beyond the express intent of Congress and years of case law unanimously interpreting the court’s narrow jurisdiction as excluding fee awards under 35 U.S.C. § 285.

Collateral issue. Furthermore, the court concluded that jurisdiction over the underlying controversy is insufficient to grant the court subject matter jurisdiction over the collateral issue of a fee award. As the Court of Claims’ jurisdiction to grant relief depends wholly upon the extent to which the United States has waived its sovereign immunity, the Court of Federal Claims cannot decide an issue—collateral or otherwise—not expressly allowed by statute, particularly in the context of a third party seeking redress from a plaintiff. Although the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit have found requests for attorney fees to be ancillary to the merits of a case in other unrelated contexts, a decision from the Court of Claims to award fees pursuant to Section 285 in a Section 1498 action would impermissibly expand the jurisdictional powers conferred on it by Congress. Therefore, the court vacated the court’s previous order granting HID’s motion to award attorney fees pursuant to Section 285.

Inherent authority. The court declined to consider the court’s inherent authority to award attorney fees to a third party at this time. The court directed the parties to file a joint status report proposing further proceedings on entitlement to attorney fees under other legal theories and the need for any supplemental briefing.

This case is No. 1:17-cv-01812-RTH.

Attorneys: Jay Forrest Utley (Baker & McKenzie LLP) for Giesecke & Devrient GmbH. Philip Charles Sternhell for the United State.

Companies: Giesecke & Devrient GmbH; HID Global Corporation

MainStory: TopStory Patent GCNNews

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