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In Energy Heating, LLC v. Heat On-The-Fly, LLC, 15 F.4th 1378 (Fed. Cir. 2021), the United States Court of Appeals for the Federal Circuit affirmed the District Court of North Dakota's finding that the case was exceptional and that the court may award reasonable attorney fees under 35 U.S.C. §285. The court found that the patent owner was granted its patent due to inequitable conduct for intentionally failing to disclose prior sales and unreasonably pursuing litigation with a fraudulently obtained patent.
Background
In the case, Heat On-The-Fly, LLC (HOTF) owned U.S. Patent No. 8,171,993 (the '993 Patent) for a method of fracking. Energy Heating LLC (Energy) sought a declaratory judgment of noninfringement, invalidity, and unenforceability due to inequitable conduct. The district court agreed with Energy's inequitable conduct argument and found the patent unenforceable. Specifically, the district court found inequitable conduct because Energy established through clear and convincing evidence that HOTF deliberately withheld "substantial on-sale and public uses of the claimed invention" more than a year before the patent's priority date to the USPTO. Additionally, the district court found an intent to deceive USPTO. Accordingly, the court reasoned that a reasonable person who withholds information regarding on-sale and public uses to obtain a patent is also aware that the patent, if granted, is invalid.
HOTF appealed the district court's judgment of inequitable conduct. The appellate court affirmed the inequitable conduct and remanded a denial of attorneys' fees under 35 U.S.C. §285 to the district court for reconsideration, in light of the inequitable conduct holding. The district court referred the motions for attorneys' fees to a magistrate judge who conducted a hearing and found the case "exceptional."
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