Voluntary dismissal prevents award of attorney fees under § 285February 27, 2007

In a recent case, the Federal Circuit found that when a plaintiff voluntarily dismisses its case under Rule 41(a)(1)(i) before an answer is served, the defendant is not a “prevailing party.” As a result, attorney fees under § 285 could not be awarded by the district court. More details of the case after the jump. RFR Industries holds two patents directed toward railroad crossing fillers, specifically a productcalled a “flangeway filler” and a methodof installing the filler. The filler is used at railroad crossings to smooth the roadway over the crossing. RFR sued Century Steps, Inc.in 1998 for patent infringement, and in 2000 they settled the infringement suit. As part of the settlement, Century agreed to purchase a certain amount of flangeway filler from RFR, and RFR granted an express license under the two patents for any filler Century purchased from RFR. In October, 2004, RFR sued Century for patent infringement once again, alleging that because some of the filler had not been paid for, Century was operating outside the scope of the license, and also that Century had sold some filler to third parties who were not licensed. Century filed an answer and faxed a copy to RFR’s attorney, alleging that RFR’s claims were barred by the doctrine of patent exhaustion and implied license. RFR then decided to voluntarily dismiss its case without prejudice under Rule 41(a)(1)(i). Century opposed, and moved for judgment on the pleadings under Rule 12(c). The district court denied the motion to dismiss and granted the motion for judgment on the pleadings.

The court deemed Century’s answer to have been filed when faxed to RFR’s lawyer, and dismissal under Rule 41(a)(1)(i) is not permitted once an answer has been filed. The court further found that RFR’s patent rights in the flangeway fillers had been exhausted. Century then moved for attorney fees under 35 U.S.C. § 285. The court also granted this motion, finding that RFR knew or should have known that its infringement claim was baseless. The Federal Circuit reversed. The key issue was when service of the answer was effective: if it was effective before RFR attempted to voluntarily dismiss its claims, the district court was correct, if it was not effective until after RFR moved to voluntarily dismiss, attorney fees were not appropriate. As this issue is not unique to patent law, the court applied Fifth Circuit law to the time of service issue. The Fifth Circuit has stated that the adverse party must actually serve the plaintiff in order to prevent a voluntary dismissal under Rule 41(a)(1)(i). Under Rule 5(b)(2), service on a party may be made by any of (1) personal service, (2) mail, (3) if no known address, service on the clerk or court, or (4) “any other means” if the other party has consented. Because the only copy sent to RFR was by fax, a method not listed in Rule 5, RFR was not served with Century’s answer, and thus had the absolute right to dismiss under Rule 41(a)(1)(i). The court then held that the voluntary dismissal prevented any award of attorney fees, as Century was no longer a “prevailing party,” a necessary prerequisite to an attorney fee award under § 285. This is because the dismissal was without prejudice, meaning the plaintiff could refile its action in the future, and therefore the dismissal did not change the legal relationship between the parties. To read the full decision in RFR Indus;, Inc. v. Century Steps, Inc., click here.