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      United States Court of Appeals for the Federal Circuit



                                        03-1379

                   BROOKS FURNITURE MANUFACTURING, INC.,

                                                       Plaintiff-Appellee,

                                           v.

              DUTAILIER INTERNATIONAL, INC. and DUTAILIER, INC.,

                                                       Defendants-Appellants.




        R. Bradford Brittian, Pitts & Brittian, P.C., of Knoxville, Tennessee, argued for
plaintiff-appellee. With him on the brief were Robert E. Pitts and Melinda L. Doss.

      Kevin W. Goldstein, RatnerPrestia, of Valley Forge, Pennsylvania, argued for
defendants-appellants. With him on the brief were Kevin R. Casey and Jacques L.
Etkowicz.

Appealed from:    United States District Court for the Eastern District of Tennessee

Judge Curtis L. Collier
United States Court of Appeals for the Federal Circuit


                                           03-1379



                    BROOKS FURNITURE MANUFACTURING, INC.,

                                                          Plaintiff-Appellee,

                                              v.

              DUTAILIER INTERNATIONAL, INC. AND DUTAILIER, INC.,

                                                          Defendants-Appellants.



                             __________________________

                             DECIDED: January 4, 2005
                             __________________________



Before NEWMAN, LOURIE, and DYK, Circuit Judges.

NEWMAN, Circuit Judge.




       Dutailier International, Inc. and Dutailier, Inc. (together "Dutailier"), appeal the

decision of the United States District Court for the Eastern District of Tennessee1 holding

that Brooks' action for declaratory judgment that Dutailier's patent is invalid and not

infringed constitutes an exceptional case and awarding attorney fees. The award is

vacated.


       1      Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., No. 3:00-CV-072 (E.D. Tenn.
Apr. 3, 2003); Memorandum Opinion Dec. 18, 2001; Claim Construction Sept. 4, 2001.
                                      BACKGROUND

       Dutailier is the owner of United States Patent No. D417,983 ("the '983 patent"), a

design patent for rocking chair trim, issued December 28, 1999. Brooks and Dutailier are

both in the business of manufacturing rocking chairs. In January 2000 Dutailier sent

Brooks a cease and desist letter, alleging infringement of the '983 patent and demanding

an orderly withdrawal from the market and payment of royalties for past and interim

infringement. In response, Brooks filed suit in the Eastern District of Tennessee seeking a

declaratory judgment that it did not infringe the '983 patent and that the patent was invalid,

along with claims of unfair competition and patent mismarking. Brooks alleged that the

action was exceptional pursuant to 35 U.S.C. §285, 15 U.S.C. §1117, and Tennessee law,

and requested attorney fees and litigation costs. Dutailier then sued Brooks in the District

of Delaware, asserting patent infringement, Lanham Act and common law unfair

competition, and deceptive trade practices under state consumer protection law. After an

unsuccessful attempt to transfer the Tennessee case to Delaware, Dutailier dismissed the

Delaware action and filed equivalent counterclaims in the Tennessee action.

       The Tennessee district court granted Brooks' motion for summary judgment of

noninfringement and denied as moot Brooks' motion for summary judgment of invalidity.

By stipulated order, Brooks voluntarily dismissed its invalidity, patent mismarking, and

Lanham Act claims, and Dutailier voluntarily dismissed its remaining counterclaims, leaving

no outstanding issues and entering final judgment.

       The district court granted Brooks' request for attorney fees, concluding that the

circumstances of the case were exceptional.          See 35 U.S.C. §285 ("The court in

exceptional cases may award reasonable attorney fees to the prevailing party.") The


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district court held that Brooks had clearly prevailed on the infringement issue and was also

a prevailing party to the extent that Dutailier's counterclaims had been dismissed by

stipulated order. The court held that attorney fees were warranted under either the Patent

or Lanham Acts, or pursuant to state consumer protection law. The court did not set the

amount of the award, instead ordering the parties to submit papers and "confer in an effort

to see if the amount of attorney fees can be agreed upon."

       Dutailier attempted to appeal the attorney fees decision, but this court dismissed the

appeal as not ripe since there was no specific award. On remand, the district court

determined the amount of the fees and Dutailier re-appealed. Dutailier challenges only its

liability for attorney fees, not the amount.

                                               A

Procedural Matters

       Dutailier argues that the district court erred as a matter of law by placing on it the

burden of proving its good faith, instead of placing on Brooks the burden of proving bad

faith. Dutailier cites the court's repeated descriptions of the hearing to determine whether

the case was exceptional as a "good faith hearing." See Memorandum Opinion (Dec. 18,

2001) ("out of an abundance of caution, the court conducted a hearing on the issue of

defendants' good faith"). Dutailier also argues that the court failed to interpret the evidence

in its favor as non-movant, as is required in granting a motion for summary judgment. See

Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587

(1986).

       We do not share Dutailier's characterization of the district court's procedure. The

district court received Brooks' evidence of asserted bad faith, and by "good faith hearing"


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gave Dutailier an opportunity to respond to this evidence. The facts relevant to the

exceptional case analysis were largely uncontroverted, and raised no Rule 56 issue: there

was no factual dispute about the contents of the cease and desist letter, Dutailier's size and

conduct in the marketplace, its litigation conduct, and the opinions of counsel and design

experts upon which Dutailier relied. Although we conclude that the district court erred in its

legal conclusion, as we shall discuss, the court did not commit procedural error or misplace

the burden of proof.

                                               B

Prevailing Party

       Dutailier points out that many of Brooks' claims were dismissed by stipulation, and

that the Dutailier patent remained valid; thus Dutailier argues that the district court erred in

ruling that Brooks was the prevailing party.

       Determination of the prevailing party is based on the relation of the litigation result to

the overall objective of the litigation, and not on a count of the number of claims and

defenses. See Texas State Teachers Ass'n v. Garland Independent School Dist., 489 U.S.

782, 789 (1989) ("'plaintiffs may be considered "prevailing parties" for attorney's fees

purposes if they succeed on any significant issue in litigation which achieves some of the

benefit the parties sought in bringing the suit.'") (quoting Hensley v. Eckerhart, 461 U.S.

424, 433 (1983)).

       Dutailier accused Brooks of infringing its patent and demanded that Brooks cease

producing the accused chairs. Brooks brought this declaratory action to preserve its

position, and succeeded in doing so. Brooks raised several defenses to the charge of

patent infringement, any of which would have achieved Brooks' goal. Thus when Brooks


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established its non-infringement of the Dutailier patent, it prevailed in the litigation. That

other defenses, such as invalidity of the patent, were unsuccessful or withdrawn, does not

change the outcome in Brooks' favor. We agree with the district court that Brooks was the

prevailing party.

                                               C

Exceptional Case

       A case may be deemed exceptional when there has been some material

inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or

inequitable conduct in procuring the patent, misconduct during litigation, vexatious or

unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions. See, e.g.,

Cambridge Prods. Ltd. v. Penn Nutrients Inc., 962 F.2d 1048, 1050-51 (Fed. Cir. 1992);

Beckman Instruments, Inc., v. LKB Produkter AB, 892 F.2d 1547, 1551 (Fed. Cir. 1989).

Absent misconduct in conduct of the litigation or in securing the patent, sanctions may be

imposed against the patentee only if both (1) the litigation is brought in subjective bad faith,

and (2) the litigation is objectively baseless.      Professional Real Estate Investors v.

Columbia Pictures Industries, 508 U.S. 49, 60-61 (1993); see also Forest Labs., Inc. v.

Abbott Labs., 339 F.3d 1324, 1329-31 (Fed. Cir. 2003). Since we conclude that the first

requirement (subjective bad faith) is not satisfied here, we need not decide whether the

second (objectively baseless) standard was met.2 That second inquiry does not depend on


        2     See Globetrotter Software, Inc. v. Elan Computer Group, Inc., 362 F.3d 1367,
1377 (Fed. Cir. 2004) ("A plaintiff claiming that a patent holder has engaged in wrongful
conduct by asserting claims of patent infringement must establish that the claims of
infringement were objectively baseless."); Mikohn Gaming Corp. v. Acres Gaming, Inc., 165
F.3d 891, 897 (Fed. Cir. 1998) ("bad faith is not supported when the information is
objectively accurate").


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the state of mind of the plaintiff at the time that the action was commenced, but rather

requires an objective assessment of the merits.

       There is a presumption that the assertion of infringement of a duly granted patent is

made in good faith. Springs Willow Fashions, LP v. Novo Indus., LP, 323 F.3d 989, 999

(Fed. Cir. 2003). Thus, the underlying improper conduct and the characterization of the

case as exceptional must be established by clear and convincing evidence. Beckman, 892

F.2d at 1551. Even for an exceptional case, the decision to award attorney fees and the

amount thereof are within the district court's sound discretion. See S.C. Johnson & Son,

Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201 (Fed. Cir. 1986) (even an exceptional case

does not require in all circumstances the award of attorney fees).

       The district court found that Dutailier had acted in bad faith in sending the cease and

desist letter and filing the Delaware suit against Brooks. The court based its opinion

largely, but not solely, on what it considered the frivolousness of the infringement claim.

The court also considered the behavior of Dutailier in the marketplace and its policy of

suing and acquiring its competitors, most of whom were significantly smaller than Dutailier

and, according to the court, little able to afford to defend themselves. Taken together,

Brooks argues, these factors render the case exceptional. We address each in turn.

                                               D

Infringement

       Dutailier states that it had a good faith belief in the strength of its infringement claim,

and that it had conducted a thorough investigation of the accused chairs before sending

Brooks the cease and desist letter and filing the infringement counterclaims. Dutailier

states that its investigation included analyses by its marketing staff and designers, followed


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by infringement opinions by Canadian and United States patent attorneys, and then

evaluations by two independent experts in the field of rocking chair design. All of the

experts and attorneys that Dutailier consulted concluded that there was substantial

similarity between the accused chairs and the design set forth in the '983 patent.

       The district court did not find this activity adequate to establish a good faith belief

that Brooks was infringing the '983 patent. The court began its infringement analysis by

construing the scope of the '983 patent. It did this by describing in words the design shown

in the drawings of the patent, and then reading the resulting verbal limitations on the

accused chair. In reciting the differences between the '983 design and the accused chair,

the court placed particular significance on the backward bulge in the rear edge of the

upright trim. The court said:

       This court also previously determined that "[t]here can be no doubt that the
       contours of the rear surface of the rear element constitute limitations which
       cannot be ignored in determining the scope of the '983 patent. . . . The
       accused product's rearward element simply does not have a 'trailing edge
       descending in a gentle "s" curve, which is substantially parallel to the "s"
       curve of the forward edge, resulting in a slightly widened planar face, as the
       trailing edge descends to the base portion.' . . . The limitation requiring the
       gentle 's' curve on the trailing edge is not met by the accused chair. The
       limitation which requires the gentle 's' curve to be parallel to the 's' curve of
       the forward edge is not met. And, the limitation which requires that there be
       only a slight widening of the planar face is not met."

Brooks Furniture, Memorandum Opinion at 17, quoting claim construction of Sept. 4, 2001.

       The court explained that design patents are entitled to almost no scope beyond the

precise content of the patent drawings. Elmer v. ICC Fabricating, Inc., 67 F.3d 1571, 1577

(Fed. Cir. 1995). Applying this principle, the court concluded that no reasonable jury as the

ordinary observer, and certainly no reasonable expert in chair design, would consider the

accused chairs to be infringing. The court rejected Dutailier's argument that it reasonably


03-1379                                       7
relied on opinions of counsel that there probably was infringement, as well as the opinions

of its internal officers and outside design experts that the accused chair was substantially

the same as that shown in the patent. The court referred to the infringement opinion by

one of the patent attorneys Dutailier consulted, and stated that "at first glance, one might

actually find this opinion to be reasonable, comprehensive and competent," and that the

attorney "also adequately considered the prior art in this instance," that the attorney

"detailed the components and embodiments" of the patent and application he was

considering, and that he "provided a detailed review of the proper procedure one must

follow in determining infringement, and then lengthy application of this procedure in

comparing the Brooks and Town Square chairs to Dutailier's designs." Memorandum Op.

at 11-14. The court concluded that the attorney "adequately analyzed the scope of the

patent claims" and applied the test set forth in Gorham Mfg. Co. v. White, 81 U.S. (14 Wall.)

511 (1871) to the infringement question. Id. at 14-15. Nonetheless, the court held that

"despite all of [the attorney's] thoroughness in his infringement review and in his

comparison of the Brooks chair and the Dutailier chair, [he] has failed to address several of

the most important aspects of this infringement action which, therefore, requires the court

to find that his opinion of infringement is, in fact, unreasonable." Id. at 15. The court cited

the differences in the two chair designs, in particular the "s" curve on the trailing edge of the

upright member, as aspects of the infringement analysis that the attorney's opinion failed to

consider. The court found that the opinion, and the opinions of the other experts Dutailier

had consulted, were unreasonable in their conclusions, and thus that Dutailier's reliance on

these opinions was also unreasonable. Such unreasonable reliance, the court held,

established bad faith on Dutailier's part in instituting the conflict with Brooks.


03-1379                                        8
       On review, we do not share the view that the opinions of counsel and the opinions of

the other experts were inadequate and their conclusions unreasonable. The legal criterion

for infringement of a design patent is substantial identity, whereby "in the eye of an ordinary

observer, giving such attention as a purchaser usually gives, two designs are substantially

the same, if the resemblance is such as to deceive such an observer, inducing him to

purchase one supposing it to be the other, the first one patented is infringed by the other."

Gorham v. White, 81 U.S. at 528. In evaluating such resemblance, it is not necessary that

every aspect of the designs be identical. See id. at 526-27 ("We are now prepared to

inquire what is the true test of identity of design. Plainly, it must be sameness of

appearance, and mere difference of lines in the drawing or sketch, a greater or smaller

number of lines, or slight variances in configuration, if sufficient to change the effect upon

the eye, will not destroy the substantial identity.")

       The fact that an infringement opinion may not have mentioned every detail of the

patented or the accused design does not necessarily render the opinion wrong or

unreliable.   The district court described the attorney's opinion as appearing to be

"reasonable, comprehensive and competent." Such an opinion cannot be transformed into

the opposite extreme of unreliability and incompetence, simply because the court reached a

different conclusion on the merits of infringement. Bringing an infringement action does not

become unreasonable in terms of '285 if the infringement can reasonably be disputed.

Infringement is often difficult to determine, and a patentee's ultimately incorrect view of how

a court will find does not of itself establish bad faith. The several opinions of counsel and

other expert opinions obtained by Dutailier are not charged with having been obtained for

specious "cosmetic" purposes, and their analysis of the designs is not unreasonable. We


03-1379                                        9
conclude that there was not clear and convincing evidence of bad faith by Dutailier in

charging Brooks with infringement and in pressing this charge in litigation.

                                              E

Other Conduct

       The district court supported its ruling that this was an exceptional case with several

ancillary observations. For example, the court observed that one of the opinion letters was

by an attorney in the same firm that conducted the litigation, the court concluding that this

rendered it less reliable than an opinion by a completely unrelated attorney. The court also

referred to the harsh terms of the cease and desist letter, which demanded withdrawal of

the accused products from the marketplace, identification of the customers who had

purchased them, and a response within two weeks. The court cited Dutailier's disinterest in

granting Brooks a license. The court also looked to Dutailier's conduct with respect to other

competitors, the lawsuits it filed against them, and the fact that it acquired one competitor

after suing it. The court also observed that Dutailier was substantially larger than Brooks.

       None of these facts supports the district court's conclusion that Dutailier acted in bad

faith in asserting its patent. The substance and thoroughness of the legal opinions could

support a reasonable belief that the patent was being infringed. A duly granted patent is a

grant of the right to exclude all infringers, not just those of comparable size. See United

States v. United States Steel Corp., 251 U.S. 417, 451 (1920) ("the law does not make

mere size an offense"). The record states that while Dutailier enforces its patents, it sues

its larger competitors as well as the smaller ones.

       Patent rights are useful only if they can legally exclude others from the patented

subject matter. That Dutailier is a larger company than Brooks, that it has sued others, and


03-1379                                      10
that it was unwilling to grant a license, are not indicative of bad faith. Although the entirety

of a patentee's conduct may be considered, enforcement of patent rights that are

reasonably believed to be infringed does not entail special penalty when the patentee is

unsuccessful. See generally National Presto Indus., Inc. v, West Bend Co., 76 F.3d 1185,

1197 (Fed. Cir. 1996) ("The trial judge's discretion in the award of attorney fees permits the

judge to weigh intangible as well as tangible factors: the degree of culpability of the

infringer, the closeness of the question, litigation behavior, and any other factors whereby

fee shifting may serve as an instrument of justice.").

       The finding that Dutailier acted in bad faith is reversed. Since this was material to

the finding that this was an exceptional case, that finding is reversed, and the award of

attorneys fees based thereon is vacated.

       No costs.




                           REVERSED; FEE AWARD VACATED




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