ENERGY HEATING, LLC. v. HEAT ON-THE-FLY, LLC

Federal Circuit Summary

Before Moore, Hughes, and Stoll.  Appeal from the United States District Court for the District of North Dakota.

Summary:  A district court must articulate a reasonable basis for denying attorneys’ fees under § 285 if it found inequitable conduct.

Heat-on-the-Fly’s (HOTF) patent relates to hydraulic fracturing, or “fracing” (sometimes referring to as “fracking”).  Before the critical date, HOTF conducted 61 fracing operations using the technology claimed in the patent.  HOTF did not disclose these pre-critical date activities to the patent office during prosecution.  The district court found HOTF’s inventor intended to deceive the patent office and concluded the patent was unenforceable for inequitable conduct.  However, the district court declined to award attorneys’ fees under 35 U.S.C. § 285. 

The grant or denial of attorneys’ fees is reviewed under the highly deferential abuse-of-discretion standard.  Nevertheless, the Federal Circuit vacated and remanded because the district court’s reasoning was unclear.  The district court explained its denial of attorneys’ fees on the grounds that HOTF “provided a meritorious argument against the finding of inequitable conduct.”   However, a finding of inequitable conduct requires clear and convincing evidence of a specific intent to deceive.  To meet that standard, the specific intent must be the “single most reasonable inference able to be drawn from the evidence.”  Therefore, the district court’s finding that HOTF’s arguments were “meritorious” was unclear and possibly at odds with the inequitable conduct finding.  While declining to hold that attorneys’ fees should always be awarded in inequitable conduct cases, the Federal Circuit held that a district court must articulate a reasonable basis for denying attorneys’ fees in such cases.

This case is: ENERGY HEATING, LLC. v. HEAT ON-THE-FLY, LLC

Written by: Mark E. Davis and Adam Powell

Edited by: Paul Stewart