AlexSam v. Simon Property Group — Patent Case Was Exceptional from Filing

Background

AlexSam accused Simon Property Group and Blackhawk Network of infringing U.S. Patent No. 6,000,608 through gift-card systems. Every asserted claim required an “unmodified existing standard retail point-of-sale device,” a term AlexSam had agreed meant a terminal that had not been reprogrammed, customized, or otherwise altered for use in the patented card system.

The court granted summary judgment of noninfringement, and the Federal Circuit affirmed. Simon and Blackhawk then sought fees and sanctions, arguing that AlexSam’s infringement theory was objectively unreasonable from the outset.

The Court’s Holding

Magistrate Judge Roy S. Payne found the case exceptional under 35 U.S.C. § 285 and held that the defendants are entitled to all reasonable attorney fees and expenses incurred in defending the action. The precise amount will be fixed after the defendants provide detailed accountings and the parties confer.

The court did not need to decide whether an earlier case had conclusively invalidated the patent. AlexSam’s infringement position was independently exceptional because it conflicted with the agreed claim construction and controlling Federal Circuit guidance. Earlier appellate precedent had rejected proof that modifications were merely unnecessary; the claim required evidence that accused terminals actually had not been modified.

Despite that distinction, AlexSam again relied on evidence materially indistinguishable from evidence the Federal Circuit had already found insufficient. Its proposed interpretation effectively treated a system as “unmodified” whenever a card could work with a point-of-sale device, an understanding the court found unsupported by the patent’s intrinsic record, extensive prior litigation, or the record in this case.

Key Takeaways

• A patent case may be exceptional from filing when the infringement theory contradicts an agreed claim construction and directly applicable appellate guidance.
• Evidence that hardware need not be modified is not evidence that the accused hardware actually was unmodified when the claim requires the latter.
• A court may award all reasonable defense fees under Section 285 while reserving the dollar amount for later accounting and briefing.
• The fee ruling rested on the weakness of the infringement position, so the court did not need to resolve a separate dispute over whether prior litigation had already invalidated the patent.

Why It Matters

The ruling shows the financial risk of maintaining an infringement theory after both claim construction and prior appellate precedent identify the proof a claim limitation requires. Section 285 is not limited to isolated misconduct during litigation; an untenable merits position can make the entire case exceptional and expose the patent owner to fees dating back to the complaint.

Full Opinion