$5 Million Attorneys’ Fee Award Affirmed Because Government’s Litigation Position Not Substantially Justified

HITKANSUT LLC V. UNITED STATES

Before Prost, Clevenger, and Moore. Appeal from the Court of Federal Claims.

Summary: Fee-shifting under 28 U.S.C. § 1498(a), turns on whether “the position of the United States was substantially justified.” The relevant inquiry is the government’s position during litigation, not pre-litigation conduct.

Hitkansut sued the United States (acting through a national laboratory) for patent infringement in the Court of Federal Claims (CFC). Hitkansut sought royalties of nearly $6 million, but was awarded only $200,000. The CFC also awarded Hitkansut nearly $5 million dollars in attorneys’ fees because the CFC did not find that “the position of the United States was substantially justified.” The CFC focused on the government’s pre-litigation failures to act, as well as its positions taken during litigation. On appeal, the Federal Circuit examined the legislative history of the fee-shifting provision and clarified that pre-litigation conduct should not be considered when analyzing whether to shift fees. Despite the CFC’s error, the Federal Circuit affirmed the attorneys’ fees award. The government maintained non-infringement positions that were factually inconsistent with the national laboratory’s actions. The government maintained invalidity arguments that were not substantially justified and, in some respects, were contradicted by the government’s expert witness. Also, the CFC did not err in refusing to reduce the fee award because, while Hitkansut achieved “limited success” in recovering only $200,000, Hitkansut established its sole liability claim and recovered the maximum amount of damages allowed by law.

Editor: Paul Stewart