United States Court of Appeals
for the Federal Circuit
__________________________
ILOR, LLC,
Plaintiff-Appellant,
v.
GOOGLE, INC.,
Defendant-Appellee.
__________________________
2010-1117, 1172
__________________________
Appeals from the United States District Court for the
Eastern District of Kentucky case no. 07-CV-00109,
Senior Judge Joseph M. Hood.
___________________________
Decided: January 11, 2011
___________________________
DAVID E. SCHMIT, Frost Brown Todd LLC, of Cincin-
nati, Ohio, argued for plaintiff-appellant.
FRANK E. SCHERKENBACH, Fish & Richardson P.C., of
Boston, Massachusetts, argued for defendant-appellee.
With him on the brief were KURT L. GLITZENSTEIN; and
SHELLEY K. MACK, of Redwood City, California.
__________________________
ILOR v. GOOGLE 2
Before RADER, Chief Judge, LINN and DYK, Circuit
Judges.
DYK, Circuit Judge.
iLOR, LLC (“iLOR”) appeals from an order of the
United States District Court for the Eastern District of
Kentucky finding this case exceptional under 35 U.S.C. §
285 and awarding attorneys’ fees and costs and expenses.
iLOR, LLC v. Google, Inc., No. 5:07-CV-109, Doc. 93, 2009
WL 3367391 (E.D. Ky. Oct. 15, 2009). This decision was
based on a finding that iLOR’s proposed construction of
claim 26 of U.S. Patent No. 7,206,839 (“’839 patent”) was
baseless, and that iLOR knew or should have known that
the Google Notebook product did not infringe its patent.
Id. at *4.
Because we hold that iLOR’s proposed construction of
claim 26 was not objectively baseless, we reverse.
BACKGROUND
iLOR is an Internet company and assignee of the ’839
patent. This patent is directed to a “[m]ethod for adding a
user selectable function to a hyperlink.” ’839 Patent at
[54]. A hyperlink is a “string of text or a computer
graphic that a user can ‘click’ with the mouse pointer” to
open a new browser page. Id. at col.1 ll.24–26. Claim 26,
the only claim at issue, provides:
A method for enhancing a hyperlink, comprising:
providing a user-selectable link enhancement for a
toolbar, the toolbar being displayable
based on a location of a cursor in relation to a hy-
perlink in a first page in a first window of an ap-
plication, wherein said first page is associated
with a first uniform resource locator (URL),
wherein said hyperlink is associated with a sec-
ond URL and a second page, wherein said user-
3 ILOR v. GOOGLE
selectable link enhancement is adapted to display
a graphical element based on said first URL;
receiving an indication of a first user selection of said
link enhancement; and
as a result of said first user selection,
capturing said first URL associated with
said first page; and displaying a graphical
element, said graphical element associ-
ated with said captured first URL, said
graphical element adapted to cause said
first page to be displayed as a result of a
second user selection of said graphical
element.
Id. at col.12 l.59–col.13 l.13 (emphasis added).
In its infringement suit against Google in the United
States District Court for the Eastern District of Kentucky,
iLOR alleged that the Google Notebook product infringed
claim 26 of the ’839 patent because the online application
had a feature that allowed a user to right-click on a
hyperlink while the cursor was positioned over that
hyperlink. This action caused a toolbar to be displayed
from which the user could select a “Note This Item” option
to bookmark the URL address of the hyperlink for later
viewing. Google counterclaimed, seeking a declaratory
judgment of non-infringement, invalidity, and unenforce-
ability based on inequitable conduct. Relying only on
claim 26, iLOR moved for a preliminary injunction, re-
questing that Google be enjoined from using or inducing
others to use Google Notebook in a way that infringed
that claim.
In connection with the preliminary injunction motion,
the only disputed limitation of claim 26 was “the toolbar
being displayable based on a location of a cursor in rela-
tion to a hyperlink.” Id. at col.12 ll.63–64 (emphasis
ILOR v. GOOGLE 4
added). Google argued that the “being displayable” limi-
tation only covered methods where the toolbar was auto-
matically displayed when a cursor was proximate to the
hyperlink. iLOR contended that the claim also covered an
embodiment where a right-mouse click was required to
display the toolbar. The district court agreed with Google
and construed the claim to mean that “the toolbar is
‘automatically displayed’ upon the placement of the cursor
in proximity to a hyperlink with no further action on the
part of a user.” iLOR, LLC v. Google, Inc., No. 5:07-CV-
109, Doc. 70, 2007 WL 4259586, at *6 (E.D. Ky. Nov. 30,
2007).
The district court supported its construction by look-
ing to the ordinary meaning of the claim language, con-
cluding that the language of claim 26 “means simply that
the toolbar is displayable or capable of being displayed,
put before the view of the user, or made evident based on
the location of the cursor.” Id. at *4. The court also noted
that the specification distinguished the current invention
from Web browsers in which a user could open a new
window by “right clicking on [a] link and then clicking on
the ‘open in new window’ menu [item].” Id. at *5; see ’839
Patent col.6 ll.22–27). The court was also persuaded by
the prosecution history, which suggested that iLOR
contemplated a display of the toolbar without further user
action. iLOR, 2007 WL 4259586, at *6–8. The court thus
concluded that the “displayable” limitation of claim 26 did
not teach a right-click action in order to display a toolbar.
Because it was undisputed that Google Notebook did not
automatically display its toolbar, but instead required the
user to right-click on the hyperlink, the district court
granted summary judgment on non-infringement and
dismissed the suit with prejudice. Id. at *9.
iLOR appealed, and we approved the district court’s
construction of claim 26, holding that the district court
5 ILOR v. GOOGLE
therefore did not err in denying a preliminary injunction.
iLOR, LLC v. Google, Inc., 550 F.3d 1067, 1069 (Fed. Cir.
2008). In that first appeal, we agreed that the language
of the claim and the specification suggested that the
toolbar display was automatic and “based on the location
of the cursor” in relation to the hyperlink. Id. at 1073.
We also found that the abstract and specification permit-
ted an interpretation in which “user inaction” (i.e., hover-
ing the cursor over the hyperlink) may cause the toolbar
to display, but nothing in the specification indicated that
a further action, such as right-clicking, was required. Id.
at 1074. For example, we noted that the abstract provides
“[w]hen the cursor has remained near the hyperlink for a
predetermined time period, a toolbar is displayed contain-
ing one or more link enhancements that the user may
select.” Id. (quoting ’839 Patent, at [57]).
Finally, we agreed with the district court that there
was support in the prosecution history that iLOR contem-
plated an automatic toolbar display. During the prosecu-
tion of the ’839 patent’s parent application, iLOR
distinguished a prior art Newfield patent, which, it
claimed, required further user action for a display, not
merely locating the cursor near the hyperlink. The dis-
claimer stated, in relevant part:
First, Newfield does not teach detecting a cursor in
proximity to a hyperlink. Instead, Newfield
teaches that a user must click on or select a hyper-
link to access the breadth-first search system of
Newfield. In contrast, the present invention detects
a cursor in proximity to the hyperlink. Therefore
Newfield does not teach detecting a cursor in
proximity to a hyperlink.
Joint App. 1465 (emphases altered) (internal citation
omitted).
ILOR v. GOOGLE 6
After the disposition of that first appeal, Google
moved to recover its attorneys’ fees and costs and ex-
penses under 35 U.S.C. § 285. On October 15, 2009, the
district court granted Google’s motion, finding the case
exceptional under 35 U.S.C. § 285 and awarding attor-
neys’ fees and costs and expenses. In so ruling, the dis-
trict court found that the case was “not close” on the
merits (i.e., objectively baseless) and that iLOR had acted
in subjective bad faith. iLOR appealed from the October
15, 2009, order. Thereafter, on December 23, 2009, the
district court issued a final order increasing the attorneys’
fee award to $627,039.25 and the total award to
$660,351.93. iLOR again appealed, and we consolidated
the two pending appeals. We have jurisdiction pursuant
to 28 U.S.C. § 1295(a)(1).
DISCUSSION
Under 35 U.S.C. § 285, a “court in exceptional cases
may award reasonable attorney[s’] fees to the prevailing
party.” We review an award of attorneys’ fees for abuse of
discretion. Superior Fireplace Co. v. Majestic Prods. Co.,
270 F.3d 1358, 1376 (Fed. Cir. 2001). However, a finding
that a case is exceptional under § 285 is reviewable only
for clear error. See Takeda Chem. Indus., Ltd. v. Mylan
Labs., Inc., 549 F.3d 1381, 1385 (Fed. Cir. 2008). “A
district court abuses its discretion when its decision is
based on clearly erroneous findings of fact, is based on
erroneous interpretations of the law, or is clearly unrea-
sonable, arbitrary or fanciful.” Cybor Corp. v. FAS Techs.,
Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc).
The sanctions imposed under § 285 carry serious eco-
nomic and reputational consequences for both litigants
and counsel, and
[d]espite our reluctance to second-guess the judg-
ment of trial judges who typically have intimate
7 ILOR v. GOOGLE
knowledge of the case, we have the responsibility,
in light of the substantial economic and reputa-
tional impact of such sanctions, to examine the re-
cord with care to determine whether the trial
court has committed clear error in holding the
case exceptional or has abused its discretion with
respect to the fee award. Where we have found
error, we have reversed exceptional case findings
and vacated attorney fee awards based on those
findings.
Medtronic Navigation, Inc. v. BrainLAB Medizinische
Computersysteme GmbH, 603 F.3d 943, 953 (Fed. Cir.
2010).
I
A
Section 285 must be interpreted against the back-
ground of the Supreme Court’s decision in Professional
Real Estate Investors, Inc. v. Columbia Pictures Indus-
tries, Inc., 508 U.S. 49 (1993). There, the Court recog-
nized that the right to bring and defend litigation
implicated First Amendment rights and that bringing
allegedly frivolous litigation could only be sanctioned if
the lawsuit was “objectively baseless in the sense that no
reasonable litigant could realistically expect success on
the merits.” Id. at 60. “Only if challenged litigation is
objectively meritless may a court examine the litigant’s
subjective motivation.” Id.
In determining whether a case is “exceptional” under
§ 285, the relevant standard is set forth in Brooks Furni-
ture Manufacturing, Inc. v. Dutailier International, Inc.,
393 F.3d 1378 (Fed. Cir. 2005). There, we held that an
award of attorneys’ fees is permissible “when there has
been some material inappropriate conduct related to the
ILOR v. GOOGLE 8
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 infrac-
tions.” Id. at 1381. Relying on Professional Real Estate,
we held that, absent misconduct during patent prosecu-
tion or litigation, sanctions may be imposed against a
patent plaintiff “only if both (1) the litigation is brought in
subjective bad faith, and (2) the litigation is objectively
baseless.” Id.; see also Wedgetail Ltd. v. Huddleston
Deluxe, Inc., 576 F.3d 1302, 1304–06 (Fed. Cir. 2009)
(refusing to find patentee’s unsuccessful case exceptional
under Brooks Furniture). An infringement action “does
not become unreasonable in terms of [§ 285] if the in-
fringement 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.” Brooks Furniture, 393 F.3d at 1384.
Under this exacting standard, the plaintiff’s case must
have no objective foundation, and the plaintiff must
actually know this. Both the objective and subjective
prongs of Brooks Furniture “must be established by clear
and convincing evidence.” Wedgetail, 576 F.3d at 1304.
We recognize a “presumption that the assertion of in-
fringement of a duly granted patent is made in good
faith.” Brooks Furniture, 393 F.3d at 1382 (citing Springs
Window Fashions LP v. Novo Indus., L.P., 323 F.3d 989,
999 (Fed. Cir. 2003)).
B
The objective baselessness standard for enhanced
damages and attorneys’ fees against a non-prevailing
plaintiff under Brooks Furniture is identical to the objec-
tive recklessness standard for enhanced damages and
9 ILOR v. GOOGLE
attorneys’ fees against an accused infringer for § 284
willful infringement actions under In re Seagate Technol-
ogy, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc).
Relying on the Supreme Court’s decision in Safeco Insur-
ance Co. of America v. Burr, 551 U.S. 47 (2007), we held
that:
[P]roof of willful infringement permitting en-
hanced damages requires at least a showing of ob-
jective recklessness. . . . Accordingly, to establish
willful infringement, a patentee must show by
clear and convincing evidence that the infringer
acted despite an objectively high likelihood that its
actions constituted infringement of a valid patent.
. . . The state of mind of the accused infringer is
not relevant to this objective inquiry. If this
threshold objective standard is satisfied, the pat-
entee must also demonstrate that this objectively-
defined risk (determined by the record developed
in the infringement proceeding) was either known
or so obvious that it should have been known to
the accused infringer.
Seagate, 497 F.3d at 1371 (emphases added). A finding of
willful infringement is only justified if the objective prong
is satisfied. See, e.g., Spine Solutions, Inc. v. Medtronic
Sofamor Danek USA, Inc., 620 F.3d 1305, 1319–20 (Fed.
Cir. 2010) (reversing denial of JMOL of no willfulness
after finding that Medtronic was not objectively reckless
in relying on obviousness defense despite jury’s finding of
non-obviousness); DePuy Spine, Inc. v. Medtronic Sofa-
mor Danek, Inc., 567 F.3d 1314, 1336–37 (Fed. Cir. 2009)
(affirming JMOL of no willfulness where defendant “pre-
sented a substantial question” of noninfringement under
the doctrine of equivalents, even though the jury found
equivalence). Under both Brooks Furniture and Seagate,
objective baselessness “does not depend on the plaintiff’s
ILOR v. GOOGLE 10
state of mind at the time the action was commenced, but
rather requires an objective assessment of the merits.”
Brooks Furniture, 393 F.3d at 1382. State of mind is
irrelevant to the objective baselessness inquiry. See id.;
Seagate, 497 F.3d at 1371 (“[S]tate of mind of the accused
infringer is not relevant to [the] objective inquiry.”). The
existence of objective baselessness is to be determined
based on the record ultimately made in the infringement
proceedings. See Brooks Furniture, 393 F.3d at 1382;
Seagate, 497 F.3d at 1371.
C
While the district court’s opinion here is not entirely
clear, the district court appears to have found both objec-
tive baselessness and subjective bad faith based on a
finding that “iLOR was aware long before filing suit” that
Google Notebook did not automatically display its toolbar
and that the scope of the ’839 patent did not cover non-
automatic methods of displaying toolbars. iLOR, 2009
WL 3367391, at *2. As we now discuss, we conclude that
a finding of objective baselessness has not been met here,
and we need not consider the issue of subjective bad faith.
II
Though iLOR was ultimately unsuccessful in its pat-
ent infringement suit, Google has not met its high burden
to show by clear and convincing evidence that this suit
was brought frivolously or that iLOR’s position on claim
construction was objectively baseless. The question is
whether iLOR’s broader claim construction was so unrea-
sonable that no reasonable litigant could believe it would
succeed. See Dominant Semiconductors Sdn. Bhd. v.
OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008) (“To
be objectively baseless, the infringement allegations must
be such that no reasonable litigant could reasonably
11 ILOR v. GOOGLE
expect success on the merits.” (internal quotation omit-
ted)).
The parties agree that this case turns almost entirely
on whether the patentee’s construction of claim 26—the
only claim at issue—had any objective merit. That claim
provided in part: “the toolbar being displayable based on a
location of a cursor in relation to a hyperlink in a first
page in a first window of an application.” ’839 Patent
col.12 ll.63–65. As noted above, iLOR proffered a con-
struction where claim 26 would cover a toolbar that might
also be displayed upon a right-mouse click. iLOR, 2007
WL 4259586, at *4. However, the district court disagreed
and adopted Google’s proposed construction, and we
affirmed.
On its face, the claim language does not preclude the
patentee’s construction, although, as we held in the first
appeal, the language supports the district court’s con-
struction. For instance, iLOR points out that claim 26
does not use the word “automatic.” iLOR also points out
that the plain language of the preamble to claim 26 uses
open-ended “comprising” language, which does not pre-
clude additional steps such as a right-mouse click to
display the toolbar. See, e.g., Genentech, Inc. v. Chiron
Corp., 112 F.3d 495, 501 (Fed. Cir. 1997) (construing
“comprising” as a “term of art used in claim language
which means that the named elements are essential, but
other elements may be added and still form a construct
within the scope of the claim”). A reasonable litigant
could proffer these arguments in good faith.
Nor does the specification clearly refute the patentee’s
construction. There is no description in the ’839 patent
that the toolbar must automatically pop up. And while
the specification does not disclose a right-click embodi-
ment, it does not foreclose that argument either. For
ILOR v. GOOGLE 12
example, the Abstract describes a patented method that
“permits the user to interact with a hyperlink in a variety
of ways without necessarily having to open and/or follow
the hyperlink.” ’839 Patent, at [57] (emphasis added).
This language could suggest that a right-click action is
not foreclosed.
We also find that the district court’s reliance on the
prosecution history of the parent patent is misplaced.
The district court found that during the prosecution
history of the parent application to the ’839 patent, iLOR
differentiated the Newfield prior art from the claimed
invention based on the fact that Newfield required a click
to select a hyperlink. iLOR’s disclaimer stated, in rele-
vant part:
First, Newfield does not teach detecting a cursor
in proximity to a hyperlink. Instead, Newfield
teaches that a user must click on or select a hy-
perlink to access the breadth-first search system
of Newfield. . . . In contrast, the present invention
detects a cursor in proximity to the hyperlink.
Joint App. 1465 (emphases altered) (internal citation
omitted). Although we decided in the first appeal that
this disclaimer applies to claim 26, it was not frivolous to
argue that this disclaimer is directed to claims 178 and
190 of the parent application (which later became claims
1 and 9 of the ’839 patent). Among other differences,
original claims 178 and 190 are different from claim 26 in
that they contain the limitation “detecting a cursor in
proximity to [a] hyperlink,” while claim 26 does not.
Compare Joint App. 1458, 1462, with ’839 Patent col.12
l.59–col.13 l.13. Thus, iLOR could reasonably argue that
the disclaimer applied only to the “detecting” step in
original claims 178 and 190.
13 ILOR v. GOOGLE
In light of the claim terms, specification, and prosecu-
tion history, we believe that iLOR could reasonably argue
for the claim construction that it proposed. As with many
cases, this suit presents a routine question of claim con-
struction in which the issues are often complex and the
resolutions not always predictable. As this court has
recognized, patent claim construction can be difficult:
Claim interpretation is not always an exact sci-
ence, and it is not unusual for parties to offer
competing definitions of even the simplest claim
language. In this case, however, it is not for us to
determine whether [plaintiff’s] pre-filing interpre-
tation of the asserted claims was correct, but only
whether it was frivolous. We conclude that it was
not, for [plaintiff’s] claim interpretation, while
broad, followed the standard canons of claim con-
struction and was reasonably supported by the in-
trinsic record.
Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295,
1301 (Fed. Cir. 2004) (finding Q-Pharma's pre-filing claim
interpretation of a “therapeutically effective amount” of
an active ingredient in body lotion non-frivolous because
nothing in the written description mandated Jergens’
more narrow interpretation, and Q-Pharma's interpreta-
tion appeared consistent with the claim language, written
description, and prosecution history) (internal citation
omitted). Even when presented with “simple” claim
terms, courts may differ in their interpretation of those
terms. Here, the claim issues were far from “simple.”
The objective evidence in this case demonstrates that
iLOR could reasonably argue that its broad claim con-
struction position was correct and that Google infringed
its claims. Indeed, the fact that this court held oral
argument and issued a precedential written opinion in the
first appeal suggests that we did not regard the case as
ILOR v. GOOGLE 14
frivolous. See Fed. R. App. P. 34 (“Oral argument must be
allowed in every case unless a panel of three judges who
have examined the briefs and record unanimously agrees
that oral argument is unnecessary for any of the following
reasons: (A) the appeal is frivolous . . . .”) (emphasis
added).
As we held in the first appeal, iLOR’s claim construc-
tion was incorrect. But simply being wrong about claim
construction should not subject a party to sanctions where
the construction is not objectively baseless.
We also note that the contention as to iLOR’s repre-
sentations about its commercial product vis-à-vis Google’s
Notebook product are irrelevant in finding objective
baselessness. Prior to commencing suit, iLOR’s CEO,
Steve Mansfield, wrote a blog entry that identified iLOR’s
automatically displayed “fly-out” toolbar as a feature that
differentiated iLOR’s product from Google’s product.
From the statements, the district court inferred that
iLOR must have known that Google did not infringe its
patents. However, these statements are irrelevant to the
issue of objective baselessness. A finding of objective
baselessness is to be determined by the record made in
the infringement proceedings. See Brooks Furniture, 393
F.3d at 1382; Seagate, 497 F.3d at 1371.
Because the district court committed clear error in
holding this case exceptional under § 285, we vacate the
award of attorneys’ fees.
III
iLOR also challenges the district court’s award of
costs and expenses for copying, court reporting, tran-
scripts, expert fees, travel, research, obtaining documents
and pleadings, and electronic document handling under §
15 ILOR v. GOOGLE
285. iLOR concedes that copying, court reporting, and
transcripts are properly taxable under 28 U.S.C. § 1920.
On remand, these costs may be allowed. Other costs and
expenses may not be allowed.
We note the district court also awarded expert fees
under § 285. We have held that such fees cannot be
awarded under § 285, but recognize that a court can
invoke its inherent power to award such fees in excep-
tional cases based upon a finding of bad faith. See, e.g.,
Takeda Chem. Indus, Ltd. v. Mylan Labs, Inc., 549 F.3d
1381, 1391 (Fed. Cir. 2008); Amsted Indus. v. Buckeye
Steel Castings Co., 23 F.3d 374, 378 (Fed. Cir. 1994);
Mathis v. Spears, 857 F.2d 749, 757–58 (Fed. Cir. 1988).
Because there is no basis for finding bad faith here, we set
aside the award of expert fees.
REVERSED AND REMANDED