Nova Chemicals Corporation v. Dow Chemical Company

United States Court of Appeals
for the Federal Circuit
______________________

NOVA CHEMICALS CORPORATION (CANADA),
NOVA CHEMICALS INC. (DELAWARE),
Plaintiffs-Appellants

v.

DOW CHEMICAL COMPANY,
Defendant-Appellee

______________________

2016-1576
______________________

Appeal from the United States District Court for the
District of Delaware in No. 1:13-cv-01601-LPS, Chief
Judge Leonard P. Stark.
______________________

Decided: May 11, 2017
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DONALD ROBERT DUNNER, Finnegan, Henderson,
Farabow, Garrett & Dunner, LLP, Washington, DC,
argued for plaintiffs-appellants. Also represented by
MARK J. FELDSTEIN, DARRELL CHRISTOPHER KARL.

RAYMOND N. NIMROD, Quinn Emanuel Urquhart &
Sullivan, LLP, New York, NY, argued for defendant-
appellee. Also represented by WILLIAM ADAMS, CLELAND
B. WELTON, II; HARRY J. ROPER, AARON A. BARLOW, PAUL
DAVID MARGOLIS, Jenner & Block LLP, Chicago, IL.
2 NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY

______________________

Before PROST, Chief Judge, DYK and HUGHES, Circuit
Judges.
PROST, Chief Judge.
NOVA Chemicals Corp. (Canada) and NOVA Chemi-
cals Inc. (Delaware) (collectively, “NOVA”) appeal the
district court’s award of approximately $2.5 million in
attorney fees to Dow Chemical Co. (“Dow”) under 35
U.S.C. § 285. NOVA filed the underlying action in equity,
seeking relief from a prior judgment that it had infringed
certain Dow patents. The only issue in this appeal is
whether the district court abused its discretion in finding
this case exceptional for purposes of § 285. Because it did
not abuse its discretion, we affirm.
I. BACKGROUND
We provide only a brief summary of the background,
which is recounted in more detail in our opinions address-
ing the merits of the underlying patent litigation. See
Dow Chem. Co. v. Nova Chems. Corp. (Canada) (“Dow I”),
458 F. App’x 910 (Fed. Cir. 2012); see also Dow Chem. Co.
v. Nova Chems. Corp. (Canada) (“Dow II”), 803 F.3d 620,
635 (Fed. Cir. 2015), cert. denied, 136 S. Ct. 2452 (2016).
A
In 2005, Dow filed an infringement action in the U.S.
District Court for the District of Delaware, alleging that
NOVA infringed U.S. Patent No. 5,847,053 and U.S.
Patent No. 6,111,023 (“the asserted patents”). NOVA
asserted numerous defenses, including arguments that
the accused product did not infringe and that Dow lacked
standing to sue because it had transferred ownership of
the asserted patents. The court held a jury trial, followed
by a bench trial on standing. The district court ultimately
held that Dow had standing to sue and entered judgment
against NOVA for over $61 million in damages (“the 2010
NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY 3

judgment”). J.A. 442; see also Dow Chem. Co. v. Nova
Chems. Corp. (Canada), 726 F. Supp. 2d 459 (D. Del.
2010); Dow Chem. Co. v. Nova Chems. Corp. (Canada),
No. 05-737-JJF, 2010 WL 3070189 (D. Del. July 30, 2010);
Dow Chem. Co. v. Nova Chems. Corp. (Canada), No. 05-
737-JJF, 2010 WL 3056617 (D. Del. July 30, 2010). We
affirmed that judgment on appeal. Dow I, 458 F. App’x at
921.
In a separate appeal from the district court’s subse-
quent award of supplemental damages, we held the
asserted patent claims to be invalid as indefinite under
the Supreme Court’s intervening indefiniteness standard
in Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct.
2120 (2014). Dow II, 803 F.3d at 635. Our decision in
Dow II did not disturb the 2010 judgment relating to pre-
verdict infringement. The district court had entered final
judgment pursuant to Federal Rule of Civil Procedure
54(b), which NOVA had already paid at the time of the
second appeal.
During the supplemental-damages phase of the in-
fringement action, NOVA became aware of evidence
allegedly showing that Dow and its counsel had commit-
ted fraud on the court in the course of obtaining the 2010
judgment. By then, however, NOVA was time-barred
from filing a motion under Federal Rule of Civil Proce-
dure 60(b)(3) to set aside that judgment for fraud, misrep-
resentation, or misconduct. See Fed. R. Civ. P. 60(c)(1)
(setting a one-year time bar). Accordingly, in September
2013, NOVA filed a separate action in equity against Dow
(“the equity action”) for relief from the 2010 judgment.
In its amended complaint, NOVA alleged two frauds
on the court. First, NOVA asserted with respect to stand-
ing that Dow and its counsel had misrepresented Dow’s
ownership of the asserted patents. NOVA based this
allegation on the testimony of a former Dow tax depart-
ment employee, Edward Valenzuela, in an unrelated
4 NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY

Louisiana tax case (“the Louisiana action”). Mr. Valen-
zuela testified in that case: “I think [around the end of
2001] all of Dow’s patents were contributed to an intangi-
ble holding company.” J.A. 22554.
Second, NOVA alleged that Dow’s counsel knew or
should have known of a “scheme to mislead the jury” with
respect to infringement. J.A. 21055, 21081, 21087, 21089
(capitalization omitted). In particular, NOVA contended
that Dow’s expert, Dr. Joao Soares, had provided conflict-
ing testimony about testing on the accused product during
a separate litigation in Canada (the “Canadian action”).
Dow moved to dismiss the equity action. The court
granted the motion and dismissed the complaint, holding
that “[t]here [wa]s fundamentally no adequate allegation
of the grave miscarriage of justice that is required under
the extraordinary circumstances” for setting aside a prior
judgment based on fraud. J.A. 21496. Specifically, the
court noted that Mr. Valenzuela’s testimony in the Loui-
siana action was “immaterial and irrelevant” to Dow’s
standing because the terms of the relevant patent trans-
fer agreement were clear on their face, and Mr. Valenzue-
la’s testimony “ha[d] nothing to do with the authenticity
of [the version of] Schedule A” that had been held to be
the controlling portion of the agreement. J.A. 21497.
With respect to noninfringement, the district court held
that NOVA had merely identified “arguably inconsistent
statements by . . . Dr. Soares” that neither “plausibly
alleged perjury” nor reached any fact that had been in
material dispute at trial in the infringement action. J.A.
21498.
We affirmed the dismissal of the equity action. Nova
Chems. Corp. (Canada) v. Dow Chem. Co. (“Dow III”), 607
F. App’x 993 (Fed. Cir. 2015) (Mem.).
NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY 5

B
Dow subsequently moved in the district court for
sanctions, attorney fees, and costs under 35 U.S.C. § 285,
28 U.S.C. § 1927, and the district court’s inherent sanc-
tioning authority. In opposing the motion, NOVA submit-
ted declarations regarding its pre-suit diligence, which
allegedly showed it had filed the equity action in good
faith.
The district court denied Dow’s motion under 28
U.S.C. § 1927 and the court’s inherent sanctioning au-
thority. It held that, as demonstrated by the extent of
pre-suit diligence, NOVA did not file the equity action in
bad faith. Nova Chems. Corp. v. Dow Chem. Co. (“Dow
IV”), No. 13-1601, 2015 WL 5766257, at *4–5 (D. Del.
Sept. 30, 2016). The court, however, granted Dow’s
motion under § 285, which allows courts to award “rea-
sonable attorney fees to the prevailing party” in “excep-
tional cases.” 35 U.S.C. § 285. The district court did so
based on the weakness of NOVA’s litigating position and
the manner in which NOVA pursued this case. Dow IV,
2015 WL 5766257, at *5–7. In particular, the court
reiterated that NOVA’s claims for relief “just didn’t stand
up” and were “not even plausible.” Id. at *6 (internal
quotation marks omitted); see also id. at *2–3 (reiterating
the insufficiency of NOVA’s allegations). It also stated
that NOVA “could have dealt with the situation” in “less
inflammatory ways.” Id. at *5. The court concluded that,
despite the “high burden” applicable, NOVA “nonetheless
moved forward with its theories, theories which the
[c]ourt ultimately found were not even plausible.” Id. at
*6.
The district court then awarded Dow nearly $2.5 mil-
lion in § 285 attorney fees. J.A. 1. NOVA timely ap-
pealed. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
6 NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY

II. DISCUSSION
On appeal, NOVA only challenges the district court’s
exceptional-case determination under § 285. It does not
dispute the amount of attorney fees awarded. Nor does it
dispute that § 285 is applicable. See Dow IV, 2015 WL
5766257, at *5 n.2 (noting that NOVA did not dispute the
applicability of § 285 before the district court).
An exceptional case under § 285 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 unrea-
sonable manner in which the case was litigated.” Octane
Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct.
1749, 1756 (2014). “District courts may determine wheth-
er a case is ‘exceptional’ in the case-by-case exercise of
their discretion, considering the totality of the circum-
stances.” Id. We review “all aspects of a district court’s
§ 285 determination” for abuse of discretion. Highmark
Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744,
1749 (2014). “A district court would necessarily abuse its
discretion if it based its ruling on an erroneous view of the
law or on a clearly erroneous assessment of the evidence.”
Id. at 1748 n.2 (quoting Cooter & Gell v. Hartmarx Corp.,
596 U.S. 384, 405 (1990)).
A
NOVA argues that the district court committed legal
error, and thus abused its discretion, by looking to
NOVA’s pursuit of the equity action as “[t]he overriding
factor,” rather than considering the totality of the circum-
stances, and also erred in finding that the filing of an
equity action—regardless of its merit—could be subject to
a fee award. Appellants’ Opening Br. 34. According to
NOVA, the court improperly viewed NOVA’s pursuit of
the equity action to be an “extreme[] tactic” and incorrect-
ly suggested that there were “other, less inflammatory
ways [NOVA] could have dealt with the situation.” Dow
NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY 7

IV, 2015 WL 5766257, at *5–6. NOVA acknowledges that
it faced a “high burden” in the equity action but argues
that the district court legally erred by relying on the
extraordinary nature of relief sought to create a “Catch-
22” situation wherein the mere filing of an independent
action to set aside a prior judgment would render a case
exceptional under § 285. Appellants’ Opening Br. 36–38
(internal quotation marks omitted). We agree with NOVA
to the extent that the filing of an action to set aside a
prior judgment, without more, does not render a case
exceptional per se.
Due to the applicable Rule 60(b)(3) time-bar and other
circumstances, NOVA is correct that the pursuit of a
separate action in equity was “the only federal court
option” available for it to set aside the 2010 judgment. 1
Appellants’ Opening Br. 35. Dow submits that rather
than file the equity action, NOVA could have requested
additional discovery in the infringement action or filed a
motion under Federal Rule of Civil Procedure 60(b)(4) on
grounds that the 2010 judgment was void for lack of
standing. But those suggestions are unhelpful. Dow
conceded at oral argument that even armed with addi-
tional evidence from further discovery, NOVA would have
still been required to file a separate action to set aside the
2010 judgment. Oral Argument 17:55–18:36, available at
http://oralarguments.cafc.uscourts.gov/mp3/2016-
1576.mp3. And Dow’s suggestion of filing a Rule 60(b)(4)
motion relates only to raising a lack of standing; it does

1 Such an action is permitted under Federal Rules
of Civil Procedure 60(d)(1) and 60(d)(1)(3). See Fed. R.
Civ. P. 60(d)(1), (3) (stating that Rule 60 “does not limit a
court’s power to: (1) entertain an independent action to
relieve a party from a judgment[] . . . or (3) set aside a
judgment for fraud on the court”).
8 NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY

not necessarily allow NOVA to also challenge how the
infringement determination was previously procured. 2
A party whose only option for relief from a prior
judgment is to file a separate action in equity should not
be disincentivized from doing so if that party has a plau-
sible basis for relief. Therefore, despite the extraordinary
nature of relief that NOVA sought, the district court erred
to the extent it based its exceptional-case determination
on NOVA’s filing of the equity action itself.
B
But that does not end our review of the district court’s
exceptional-case determination. The district court did not
base its analysis solely, or even primarily, on the fact that
NOVA filed an equity action. Rather, it expressly relied
on alternative grounds, holding the case to be “exception-
al, both in the substantive strength of NOVA’s litigating
position and in the manner in which the case was litigat-
ed.” Dow IV, 2015 WL 2766257, at *5 (emphases added).
At a minimum, the court did not abuse its discretion in
concluding that the case was exceptional due to the sub-
stantive strength of NOVA’s litigating position.
The substantive strength of a party’s litigating posi-
tion can—i.e., whether it is objectively baseless—
independently support an exceptional-case determination.
See Octane Fitness, 134 S. Ct. at 1756 (“[A]n ‘exceptional’
case is simply one that stands out from others with re-
spect to the substantive strength of a party’s litigating
position . . . or the unreasonable manner in which the case
was litigated.” (emphasis added)). Thus, “a case present-
ing . . . exceptionally meritless claims may sufficiently set

2 Dow states in its briefing that a Rule 60(b)(4) mo-
tion “would have failed.” Appellee’s Br. 48. It is unclear if
Dow means that such a motion would have been proce-
durally improper or failed on the merits.
NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY 9

itself apart from mine-run cases to warrant a fee award.”
Id. at 1757. In this regard, “[i]t is the ‘substantive
strength of the party’s litigating position’ that is relevant
to an exceptional case determination, not the correctness
or eventual success of that position.” SFA Sys., LLC v.
Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015) (quot-
ing Octane Fitness, 134 S. Ct. at 1756).
NOVA’s allegations of fraud in this case mainly rested
on “purportedly conflicting testimony” from the Louisiana
action and the Canadian action. Dow IV, 2015 WL
2766257, at *7. But as explained by the district court, the
arguable inconsistencies in those other actions, even if
proven, were immaterial to the 2010 judgment. We
previously held with respect to standing that, as a legal
matter, the relevant patent transfer agreement unambig-
uously provided that Schedule A defined the scope of the
transfer. Dow I, 458 F. App’x at 914. The district court
did not abuse its discretion in holding that NOVA had
failed to sufficiently challenge, based on a generic incon-
sistent statement, the authenticity of the document held
to be the operative version of Schedule A. Dow IV, 2015
WL 2766257, at *2. NOVA’s allegations of fraud regard-
ing the infringement determination are just as baseless, if
not more. As the district court observed, Dr. Soares’s
testimony in the Canadian action was not necessarily
inconsistent with his prior infringement testimony and, in
any event, did not directly relate to the limitation that
had been the focus of the parties’ underlying infringement
dispute. Id. The district court therefore did not abuse its
discretion in holding that NOVA’s litigating position was
objectively baseless.
NOVA contends that the district court “compound[ed]
its error” by relying on the extensiveness of NOVA’s pre-
suit investigation to support the exceptional-case deter-
mination. Appellants’ Opening Br. 38. The court pointed
out that NOVA’s pre-suit diligence “confirm[ed] the ex-
traordinary nature of this case.” Dow IV, 2015 WL
10 NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY

5766257, at *6. To the extent the district court relied on
NOVA’s extensive pre-suit diligence to support an excep-
tional-case finding, doing so would appear counterintui-
tive. In context, though, we think the better reading is
that the district court properly relied on the extensiveness
of NOVA’s pre-suit diligence to confirm NOVA’s high
burden and the gravity of its allegations. The court did
not rely on the pre-suit diligence itself as an independent
basis to find the case exceptional. It later clarified that
even though NOVA’s pre-suit diligence “undercut[] Dow’s
assertion” of bad faith, “it d[id] nothing to sway the [c]ourt
to find that this case [wa]s not exceptional.” Id. We
agree, as a general matter, that the extent of a party’s
pre-suit investigation or how fervently it believed in its
allegations does not affect the objective strength of that
party’s litigating position.
At a minimum, the district court did not abuse its dis-
cretion in holding that NOVA’s litigating position was
objectively baseless.
C
NOVA also argues that the district court legally erred
by “consider[ing] this case in comparison to the full pano-
ply of patent cases.” Id. at *7. According to NOVA, the
court should have considered whether the equity action
stood out from other actions to set aside a prior judgment,
rather than considering whether the equity action stood
out from other patent cases more generally. Otherwise, it
contends, an action to set aside a prior judgment would
always be exceptional because, “[b]y necessity,” it would
“stand out” from the traditional patent infringement
case.” Appellants’ Opening Br. 40. NOVA’s argument is
unavailing.
NOVA fails to cite any legal precedent to support its
position that a district court’s baseline for comparison is
so restricted in a § 285 analysis. Oral Argument 0:32–
2:29. One could always search for more similar cases for
NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY 11

comparison. Taken to its logical conclusion, continuing to
narrow the universe of comparators to cases resolved on
similar procedural postures, legal grounds, or facts would
leave few or no comparators remaining. We decline to
hold that the district court erred in comparing this case to
other patent cases more generally.
Any concern regarding the district court’s comparison
is tempered because, again, it did not hold that this case
stood out merely because NOVA requested that a prior
judgment be set aside for fraud whereas many other
patent cases do not present such circumstances. The
equity action was a direct extension of, and intertwined
with, the prior infringement action. 3 Requiring the
district court in this circumstance to narrow its compari-
son to other independent actions requesting relief from
judgment would run counter to the Supreme Court’s
general instruction that “[d]istrict courts may determine
whether a case is ‘exceptional’ in the case-by-case exercise
of their discretion, considering the totality of the circum-
stances.” Octane Fitness, 134 S. Ct. at 1756. The district
court therefore did not commit reversible error in compar-
ing this case to patent cases more generally.
We have considered NOVA’s remaining arguments
and find them unpersuasive.
III. CONCLUSION
For the foregoing reasons, the district court did not
abuse its discretion in determining, under the totality of

3 But for the relevant time-bar, NOVA may have
filed its request to set aside the 2010 judgment through a
Rule 60(b)(3) motion, in which case its argument for
excising patent infringement cases from the universe of
§ 285 comparators would lose considerable, if not all,
force.
12 NOVA CHEMICALS CORPORATION v. DOW CHEMICAL COMPANY

the circumstances, that this case was exceptional under
§ 285.
AFFIRMED.
COSTS
Costs to Appellee.