AlexSam v. Cigna — Unsupported Patent Theory Leads to $1.76 Million Fee Award

Background

AlexSam accused Cigna entities of infringing U.S. Patent No. 6,000,608 through systems that let customers use multifunction cards for medical-account purchases. The asserted claims required an “unmodified existing standard point-of-sale device.” AlexSam had agreed that the phrase meant a purchase terminal in use as of July 10, 1997 that had not been reprogrammed, customized, or otherwise altered in its hardware or software for use in the claimed card system.

The same patent and closely related infringement theory had already produced extensive litigation. In a 2013 appeal involving IDT, the Federal Circuit held that AlexSam could not prove the limitation merely by showing that modifications were unnecessary. It needed evidence that the accused terminals had not actually been modified. In the Cigna case, the district court later found AlexSam’s evidence indistinguishable from the proof the Federal Circuit had rejected and entered judgment against it.

Cigna then sought attorney fees under 35 U.S.C. § 285, which permits fees in an “exceptional” patent case. It requested $1,757,577.25 for its full defense costs.

The Court’s Holding

Magistrate Judge Roy S. Payne found the case exceptional and awarded the entire requested amount. The court stressed that the disputed construction was neither new nor unexpected. AlexSam had affirmatively proposed the same construction, describing it as one that courts had consistently used for years.

Despite that history, AlexSam pursued a theory that effectively treated a terminal as unmodified whenever it could work with the accused system without needing special hardware or software. The court found no reasonable basis for that interpretation in the patent, the earlier litigation, or the record. More importantly, the Federal Circuit had already explained that evidence of what modifications were necessary was not proof of whether modifications were actually made.

The court called AlexSam’s request that it disregard the Federal Circuit’s treatment of the same limitation “simply extraordinary.” Looking at the totality of the circumstances, it concluded that the substantive weakness of the position and the way AlexSam pressed it made the case stand out from ordinary patent disputes. After reviewing Cigna’s billing records, the court found the hours and rates reasonable for patent litigation in the district and ordered payment within 30 days.

Key Takeaways

• A party risks exceptional-case fees when it advances an infringement theory inconsistent with both its agreed claim construction and binding appellate guidance.
• Evidence that a technical modification was unnecessary is not the same as evidence that no modification occurred.
• When unreasonable positions infect a case from filing, a court may award the prevailing defendant all reasonable fees rather than only fees tied to a later phase.

Why It Matters

The award underscores that Section 285 is not limited to misconduct such as discovery abuse. A case can become exceptional because the core merits position was objectively untenable in light of settled claim meaning and earlier appellate treatment of the same patent.

For patent owners, the decision highlights the need to test infringement evidence against every limitation before filing, particularly where the patent has a long litigation history. For accused infringers, it shows that a carefully documented conflict between the plaintiff’s theory, an agreed construction, and binding precedent can support recovery of the full cost of defense.