The US Court of Appeals for the Federal Circuit affirmed a district court’s denial of attorneys’ fees under § 285, finding that a defendant is not a “prevailing party” for purposes of collecting attorneys’ fees where the plaintiff voluntarily dismissed its case without prejudice and there was no final court decision designating either litigant as the prevailing party. O.F. Mossberg & Sons, Inc. v. Timney Triggers, LLC, Case No. 19-1134 (Fed. Cir. Apr. 13, 2020) (Hughes, J.).

Mossberg sued Timney for patent infringement following the breakdown of licensing negotiations. Timney sought reexamination of the patent and was granted a stay of the district court proceedings pending the reexamination outcome. After the patent was invalidated during reexamination, Mossberg filed a notice of voluntary dismissal under Rule 41(a)(1)(A)(i), which permits voluntary dismissal by a plaintiff without court order. The district court subsequently entered an order stating that the case was dismissed without prejudice. After the dismissal, Timney filed a motion to declare the case exceptional and collect attorneys’ fees under § 285, but the district court ruled that a dismissal without prejudice was not a decision on the merits and did not render Timney a prevailing party as required by § 285. Timney appealed.

The Federal Circuit affirmed, explaining that while a defendant may “prevail” for purposes of attorneys’ fees even if the court’s final judgment does not reach the merits, a party cannot prevail without a court decision effecting “material alteration of the legal relationship of the parties” marked by “judicial imprimatur.” The Court rejected Timney’s argument that the stay of the district court proceedings during reexamination provided the necessary judicial imprimatur, noting that the stay did not change the parties’ legal relationship. The Court also explained that the district court’s dismissal order did not qualify as a final court decision with the requisite judicial imprimatur because Mossberg’s voluntary dismissal became effective immediately, and the dismissal order had no legal effect. Absent any final court decision, the Federal Circuit concluded that Timney was not a prevailing party for purposes of attorneys’ fees under § 285.

Practice Note: The Federal Circuit issued this decision soon after Keith Manufacturing Co. v. Butterfield (IP Update, Vol. 23, No. 4), where it found that voluntary dismissal with prejudice qualified as a final judgment as required by Fed. R. Civ. P. Rule 54(d) for purposes of permitting a defendant to seek attorneys’ fees. Mossberg and Keith are in possible tension because the dismissal in Keith was also self-executing and required no court order. Because Mossberg did not cite or distinguish Keith, it is unclear how other courts may reconcile Mossberg and Keith. Two distinguishing factors emerge, however:

• The plaintiff’s dismissal in Mossberg was without prejudice, while the parties’ stipulated dismissal in Keith was with prejudice.
• Although both decisions considered whether a voluntary dismissal qualified as a final decision or judgment for purposes of awarding attorneys’ fees, Mossberg focused on the “prevailing party” language of § 285, while Keith focused on the “judgment” of Fed. R. Civ. P. Rule 54(d) under Ninth Circuit law.

To preserve a right to seek attorneys’ fees or avoid litigation seeking attorneys’ fees, parties considering voluntary dismissals with or without prejudice should be aware of the uncertainties implicated by Mossberg and Keith. Parties should also consider including language addressing attorneys’ fees and costs when drafting a voluntary stipulation of dismissal and/or a settlement agreement.