The Federal Circuit has affirmed an award of attorney’s fees in a patent case, finding that the patent owner litigated in a manner that met the standard for “exceptional” cases.

Viavi owns four patents, which each describe low angle shift (“LAS”) optical filters that are used in many three-dimensional sensing applications.

Platinum Optics Technology Inc. (“PTOT”) is based in Taiwan and manufactures optical filters that use hydrogenated silicon.

In 2019, Viavi began the process of getting its LAS filters qualified for a major company’s new line of mobile devices. Its filters qualified and were included in the major company’s products, including phones, sold into the American market.

Viavi learned that PTOT was also going through the major company’s qualification process.

Viavi alleged that its understanding was that PTOT had met the major company’s qualifications. Eventually, Viavi went from meeting all or nearly all of the major company’s LAS filter needs to meeting approximately 70% or 80% of those needs.

As the court explained,

Taking this declining market share together with the information it received from the companies, Viavi was apparently convinced that PTOT had entered the market and was responsible for the decline in market share.

In 2020, Viavi wrote to PTOT stating that

We believe that PTOT’s sales activities directed to the United States market would violate at least certain claims of Viavi’s U.S. Patents. If Viavi’s understanding of PTOT’s sales activities is incorrect, please let us know immediately.

PTOT didn’t respond. Three weeks after sending the letter, Viavi sued PTOT for patent infringement in the US.

As the Federal Circuit noted,

Notably, in this time, Viavi did not possess any devices manufactured by the major company that contained a PTOT filter. What Viavi did have was the three PTOT filters it had previously obtained in connection with its litigation against PTOT in China and Taiwan. It analyzed each of these filters, finding that only the 11246 Filter met the major company’s technical requirements.

In 2019, Viavi had sued PTOT in both Taiwan and China, alleging that PTOT infringed Viavi’s foreign patents that are related to the patents later at issue in the US litigation.

The basis of this prior suit was three PTOT LAS optical filters that were in Viavi’s possession, including the 11246 Filter.

This Asian litigation resolved with two licensing agreements that released PTOT of past infringement but did not provide similar protections for filters made and sold after May 1, 2020.

Later, when Viavi filed suit in federal court in California, it accused PTOT of infringing its patents by selling the 11246 Filter, “or a filter that is not materially different than that,” into the US market.

At a summary judgement hearing in the federal court case, PTOT’s witness declared that PTOT did not design the 11246 Filter for inclusion in the major company’s devices and that PTOT had not manufactured or sold the 11246 Filter since May 2020.

Even though it didn’t contest PTOT’s representation that the 11246 Filter hadn’t been sold since May 1, 2020, Viavi opposed the summary judgment motion, claiming that “it was entitled to reasonable discovery from PTOT so that it could obtain information about any of PTOT’s filters that were incorporated into the major company’s devices.”

After having its motion to amend denied, Viavi moved to voluntarily dismiss with prejudice.

After the District Court granted this motion, PTOT moved for attorney’s fees.

The District Court granted in part PTOT’s motion for attorney’s fees pursuant to 35 U.S.C. § 285, finding that the case was exceptional.

The District Court found that Viavi filed suit without evidence that the 11246 Filter was being used in devices that were sold in the United States or that any PTOT filter was being sold in the United States.

The district court also found that “it remains unclear why Viavi could not obtain and inspect a mobile device as it had in other litigations” before filing suit.

Thus, the district court found that Viavi’s lack of diligence in its pre-suit investigation weighed toward a finding that this case was “exceptional.”

The Federal Circuit agreed, noting that

Viavi is a company that is no stranger to litigating to protect its patents and it is also no stranger to actually buying accused products before filing suit. Its failure to do so—a failure that was easily remedied by buying and taking apart mass-produced consumer products as it had done many times—is entirely unreasonable given the circumstances.

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