The CAFC on contract law in Integrated Technology v. Rudolph

From Integrated Technology v. Rudolph :




Rudolph argues that, if we affirm the exceptionality
finding, Rudolph should not be held to the stipulation it
drafted prior to the first appeal regarding the amount of
attorneys’ fees. We agree. We review contract interpretation
de novo and the district court’s ultimate decision for
abuse of discretion. Doe I v. Wal-Mart Stores, Inc., 572
F.3d 677, 681 (9th Cir. 2009) (“Contract interpretation is
a question of law that we review de novo.”); Bywaters v.
United States, 670 F.3d 1221, 1228 (Fed. Cir. 2012) (“[I]n
determining the amount of reasonable attorneys’ fees to
award under federal fee-shifting statutes, the district
court is afforded considerable discretion.”).
We interpret the stipulation’s text to be binding only
when Rudolph is liable for fees for the entire case. The
stipulation states that “Rudolph will not contest the
reasonableness of ITC’s request for fees in the amount of
$3,252,228.50.” J.A. 18396.1. This language assumes
that the district court has already held Rudolph liable for
fees encompassing the entire case—the stipulation relates
only to “ITC’s request for fees.” Id. Even when a party is
liable for fees covering the entire case, the losing party
may still contest the reasonableness of the prevailing
party’s fee request. The stipulation refers only to this
issue: “the reasonableness of the dollar amount.” Id.
Moreover, Rudolph explicitly reserves the right “to contest
or appeal ITC’s entitlement to attorneys’ fees on appeal or
otherwise as may be appropriate . . . .” Id. In other
words, Rudolph remains able to contest the extent of its
liability for fees.

(...)

The context in which the stipulation was entered supports
our textual interpretation. The district court had
just resolved the judgment as a matter of law motions
heavily in favor of ITC—the court upheld the jury’s infringement
and willfulness verdict, it trebled damages, it
held the case exceptional, and it entered a broad injunction.
In that climate, Rudolph agreed not to contest the
amount of ITC’s requested fees.
Now, however, the case’s posture has substantially
changed. Indeed, ITC won only a fraction of its original
claims. In this case, ITC asserted two patents against
both Rudolph’s pre- and post-redesign products. It also
accused Rudolph of willful infringement, and it sought
treble damages and an injunction. After the initial district
court proceedings had concluded, ITC won a complete
victory on one of the two asserted patents. However, on
appeal, we reversed the infringement finding as to the
redesigned products, which vacated the willfulness finding,
vacated the injunction, vacated the trebled damages,
and vacated the exceptionality determination. After the
appeal, ITC won only a portion of its original case—
simple infringement of one patent on only the preredesign
products.
Furthermore, the district court provided no explanation
in holding Rudolph to the stipulation. The court
merely stated that “[t]he parties previously stipulated to
the amount of fees,” without resolving Rudolph’s argument
that the stipulation was no longer binding. J.A. 72.
As the court provides no reasoning, it is difficult to defer
to the district court’s view of the case.
Federal Circuit law requires that the amount of the
fee award “bear some relation to the extent of the misconduct.”
Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340,
1344 (Fed. Cir. 2001)