Carnegie Institution v. Fenix Diamonds — Federal Circuit Upholds $3.24 Million Fee Award

Background

Carnegie Institution of Washington and its licensee M7D Corporation accused Fenix Diamonds of infringing two patents covering methods for growing and improving lab-created diamonds. Fenix’s supplier produced evidence describing its manufacturing process, including images, schematics, recipes, and videos. After discovery, the district court entered summary judgment of noninfringement.

The infringement appeal was voluntarily dismissed, but the fee dispute continued. The district court found the case exceptional under 35 U.S.C. § 285 and concluded that the plaintiffs should have known by July 14, 2020, that their infringement theories were objectively baseless. It awarded Fenix $3,240,669.66 in attorney fees and non-taxable expenses incurred after that date, plus post-judgment interest, and held Carnegie and M7D jointly and severally liable. It denied Fenix prejudgment interest.

The Court’s Holding

The Federal Circuit affirmed the award in full. The panel held that the district court acted within its discretion in finding the case exceptional. The plaintiffs continued litigating after receiving evidence that defeated infringement under the governing claim constructions, made misleading representations about access to the supplier’s facility, dropped one patent only at the last moment, and improperly withheld a lender presentation suggesting that one asserted patent was invalid.

Those findings also supported use of the court’s inherent authority to shift non-taxable expenses. The panel upheld shifting all fees and expenses incurred after July 14, 2020, because the district court reasonably found that the suit would have ended then but for the plaintiffs’ continued pursuit of an objectively baseless case. That finding satisfied the required connection between misconduct and the amount awarded.

Carnegie could not avoid joint liability by portraying itself as a passive patent owner. Carnegie and M7D shared counsel and arguments, and their license agreement gave Carnegie consultation, consent, cooperation, and recovery rights. The panel also affirmed denial of prejudgment interest because Fenix waited until a later accounting submission to request it and then failed to answer Carnegie’s opposition; Fenix could have requested interest generally in its original fee motion.

Key Takeaways

• A patent case may become exceptional when a party keeps litigating after evidence and the operative claim construction make its theory objectively baseless.
• Courts may shift all fees and expenses incurred after a clear cutoff date when the litigation would have ended but for bad-faith conduct.
• A patent owner and licensee may be jointly liable when their litigation relationship is closely intertwined.
• A party seeking prejudgment interest on a fee award should request it in the initial fee motion, even before the exact amount is known.

Why It Matters

The nonprecedential opinion is a practical warning about continuing patent litigation after decisive technical evidence arrives. Section 285 does not punish an unsuccessful infringement theory merely because it loses, but persistence, concealment, and misleading conduct can transform a merits defeat into a multimillion-dollar fee award.

The ruling also matters to universities, research institutions, and other patent owners that license enforcement rights. Contractual participation and shared litigation strategy can expose the owner to the same fee liability as the operating licensee, even when the licensee directed much of the case.