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Finding of Exceptional Case Denied Due to Unclean Hands

In Gaymar Industries, Inc. v. Cincinnati Sub-Zero Products, Inc. et al, 1-08-cv-00299 (NYWD July 3, 2014, Order) (McCarthy, M.J.), the magistrate judge recommended denial of defendant’s request for reconsideration of its failed motion for attorneys’ fees under 35 U.S.C. §285 in light of Defendant’s unclean hands.

After the court’s denial of its motion for attorneys’ fees as an “exceptional case” pursuant to 35 U.S.C. §285, Defendant Cincinnati Sub-Zero Products, Inc. (“CSZ”) moved for reconsideration in light of new case authority, i.e. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Management System, Inc., 134 S.Ct. 1744 (2014). The court noted that Octane Fitness lowered the burden of proof for proving an “exceptional case” by rejecting the “clear and convincing” standard in favor of the “preponderance of the evidence” and relaxed the underlying test by holding that “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances . . . . There is no precise rule or formula for making these determinations.” Citing 134 S.Ct. at 1756; Highmark, 134 S.Ct. at 1748.

The court found that neither of the submitted authorities called for a different result than previously reached. In doing so, the court noted these cases did not alter the long-standing rule that “[e]ven for an exceptional case, the decision to award attorney fees . . . [is] within the district court’s sound discretion.” Citing Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378, 1382 (Fed. Cir. 2005). This discretion allows the judge to consider factors, including closeness of the case, the tactics of counsel, the conduct of the parties, and any other factors that may contribute to a fair allocation of the litigation burdens of litigation between winner and loser.

While acknowledging that the plaintiff’s conduct was questionable, the court recounted instances of litigation misconduct by CSZ and its reluctance to award attorneys’ fees under such circumstances. The court rejected Defendant’s argument that greater focus and weight should be given to the plaintiff’s behavior in determining an exceptional case. Rather, the court reasoned that its discretion was subject to traditional equitable principles, including the equitable maxim of unclean hands requiring that “he who comes into equity must come with clean hands.” Citing Precision Instrument Mfg. Co. v. Automotive Maintenance Machine Co., 324 U.S. 806, 814 (1945); Motorola Credit Corp. v. Uzan, 561 F.3d 123, 127 (2d Cir. 2009) (‘[U]nclean hands’ really just means that . . . the plaintiff’s fault, like the defendant’s, may be relevant to the question of what if any remedy the plaintiff is entitled to.”)

Accordingly, the magistrate judge found that defendant lacked the “clean hands” sufficient to render it an “exceptional case” and recommended denial of its motion for reconsideration.