In Rothschild Connected Devices Innovations, LLC v. Guardian Protection Services, Inc., [2016-2521] (June 5, 2017), the Federal Circuit reversed and remanded the determination that Appellee Rothschild Connected Devices Innovations, LLC had not engaged in conduct sufficient to make the litigation “exceptional.”

Rothschild’s sued ADS, alleging that ADS’s home security system infringes U.S. Patent No. 8,788,090. ADS responded that the ’090 patent covers patent ineligible subject matter under 35 U.S.C. § 101, and that prior art anticipates claim 1 of the ’090 patent, an offered to settle if Rothschild paid ADS its attorneys fees and costs of $43,330. When Rothschild rejected the offer, ADS next filed a motion for judgment on the pleadings, and sent Rothschild a “Safe Harbor Notice” pursuant to Federal Rule of Civil Procedure 11(c)(2). In response, Rothschild voluntarily moved to dismiss its action, and ADS opposed the motion and filed a cross-motion for attorneys fees pursuant to § 285.

The District Court granted Rothschild’s Motion to Dismiss and denied ADS’s Cross-Motion for attorneys’ fees, finding that Rothschild did not engage in conduct sufficient to make the action “exceptional” under § 285, noting that Rothschild’s decision to voluntarily withdraw its complaint within the safe harbor period is the type of reasonable conduct Rule 11 is designed to encourage.

The Federal Circuit found the denial of attorneys’ fees was an abuse of discretion. The Federal Circuit found that the district court clearly erred by failing to consider Rothschild’s willful ignorance of the prior art. The Federal Circuit further found that the district court misjudged Rothschild’s conduct in the other litigation is brought. Finally the Federal Circuit found that the district court improperly conflated Rule 11 with 35 U.S.C. § 285.

The Federal Circuit remanded the case for further consideration of the attorneys’ fees reward by the district court.