In an April 13, 2020, decision, the Federal Circuit held that neither a voluntary dismissal under Federal Rule of Civil Procedure 41(a)(1)(A)(i), nor a stay of a patent lawsuit pending the results of a patent reexamination, constitute a final judicial decision for the purposes of recovery of legal fees under 35 U.S.C. § 285.  This ruling provides patent holders that have their patents invalidated by accused infringers at the USPTO an avenue to potentially avoid paying legal fees.

In O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC, et al, No 2019-1134, O.F. Mossberg (“Mossberg”) sued Timney Triggers (“Timney”) for infringement of U.S. Patent No. 7,293,385, directed to the trigger mechanism of guns. Timney, instead of answering the complaint, challenged the validity of Mossberg’s patent before the USPTO through a series of reexamination petitions and moved for a stay.  The underlying district court case was stayed during this entire time. Timney ultimately succeeded, and the USPTO rejected all of Mossberg’s claims. Mossberg then voluntarily dismissed its lawsuit pursuant to Rule 41(a)(1)(A)(i), and Timney applied for attorney’s fees as the “prevailing party” under 35 U.S.C. § 285.  The district court denied the motion because a Rule 41(a)(1)(A)(i), dismissal without prejudice is not a decision on the merits and thus cannot be a judicial declaration altering the legal relationship between the parties, which is required to be declared a “prevailing party.”

On appeal, Timney argued that by staying the district court proceedings for five years pending the USPTO proceedings, the district court had rendered the necessary final decision to qualify it as a “prevailing party.” Specifically, Timney argued that a decision on the merits from the district court is not necessary where the district court’s stay “approved, authorized, or supported the Patent Office as an alternative forum to decide invalidity” and therefore was the judicial action that led to the invalidation of the patent.  Slip Op., at 5.

In rejecting this argument, the Federal Circuit reasoned that the declaration of a prevailing party, which can be predicated on non-merit based decisions, still requires a final court decision. There was no such final decision here, as Rule 41(a)(1)(A)(i) is explicit that such dismissals are made “without a court order.”  Further, the Court held that the district court’s order dismissing the case had no legal effect, due to the governing rule. Regarding the stay, the Court determined that the stay did not change the legal relationship of the parties “because it remained in place while the parties determined the patent’s invalidity” at the Patent Office.  Slip Op., at 6.  Instead, the voluntary dismissal under Rule 41(a)(1)(A)(i) changed the relationship of the parties, which was done without a court order per the rule. With no court order, Timney could not be declared a prevailing party to recover attorneys’ fees.

With this holding, the Federal Circuit has provided a narrow avenue for patent owners to avoid paying attorney fees under Section 285 if they voluntarily dismiss their case before a district court has had an opportunity to render a final decision, regardless of any decisions made in parallel proceedings before the USPTO.  While this circumstance may come about rarely, both patent owners and accused infringers should be aware of the potential pitfalls when seeking or defending requests for attorneys’ fees.