March 17, 2017

An Objectively Reasonable Case Can Still be Exceptional

By Bryan K. Wheelock, Principal

In Bayer Cropscience AG v. Dow Agriscience LLC, [2015-1854] (March 17, 2017), the Federal Circuit affirmed affirmed the award of attorneys’ fees under 35 USC 285 to Dow, holding that the district court did not abuse its discretion in finding the case exceptional.

In its decision awarding attorney fees, the district judge found that Bayer’s arguments were “fallacious” because they were “implausible” and “made no business sense” in light of the facts surrounding the agreements and their negotiation.  The Federal Circuit noted the conflicting testimony of one of Bayer’s executives as well as the inconsistent emails to Bayer’s position that Dow was not licensed to commercially exploit Bayer’s genetically modified soybeans.

The Federal Circuit noted that abuse of discretion is a highly deferential standard.  It said that the district court applied the correct legal test under § 285, examining the totality of the circumstances to determine whether the case stood out from others.  The Federal Circuit found that the district court’s opinion thoroughly demonstrated the totality-of-the circumstances approach, detailing the reasons why Bayer’s positions on the merits and litigation tactics coalesced in making this case, in its judgment, exceptional.

The Federal Circuit rejected the argument that Bayer had an objectively reasonable case on the merits, noting that Octane Fitness established that whether a party’s merits position was objectively reasonable is not dispositive under § 285.  The Federal Circuit noted that the district court considered factors beyond the merits — including Bayer’s litigation conduct — and emphasized that Bayer’s conduct in litigating this case in the face of evidence that contradicted its contorted reading of the Agreement was objectively unreasonable.  In the words of the district court, “Bayer marched onward with a view of its case that was not supported by its witnesses.”

The Federal Circuit  approved pre-suit diligence as a factor in the totality-of the-circumstance approach and found that the district court did not abuse its discretion in concluding that Bayer failed to perform a diligent pre-suit investigation of its claims against Dow.  Rejecting Bayer’s other arguments, the Federal Circuit affirmed the district court.