What are Offers of Judgment in Intellectual Property Cases?
Offers of Judgment in Intellectual Property Cases
Rule 68 of the Federal Rules of Civil Procedure provides the procedural mechanism called an offer of judgment, which allows a party to make a formal offer to settle the lawsuit for a given amount up to 14 days before trial. If the offeree accepts this offer, then the lawsuit is settled for the offered amount. If the offer is rejected, however, and the final judgment obtained is less favorable than the offer, then the offeree who refused to settle must pay the offeror’s costs incurred after making the offer. The application of this rule can differ slightly when applied to the different substantive intellectual property statutes, particularly regarding attorney’s fees.
Copyright Cases and Rule 68 — The Supreme Court has made clear that when Congress expressly includes attorneys’ fees as part of the costs recoverable under a statute, those fees are subject to the cost-shifting provision of Rule 68. But what happens when the underlying or substantive statute—like the Copyright Act—also includes “prevailing party” language? For example, in copyright infringement cases, 17 U.S.C. § 505 permits the court to award attorneys’ fees to the “prevailing party” as part of the “costs.” So, what if the plaintiff technically “prevails” on its copyright claim by proving the defendant’s liability and obtains a judgment, but that judgment is less than the defendant’s pretrial Rule 68 offer? The various circuits seem to agree that a plaintiff in this situation could not recover its post-offer costs or fees, because it did not obtain a judgment more favorable than the Rule 68 offer—but what about the defendant? The circuit courts also appear to agree that a defendant may recover its post-offer costs under such circumstances
Patent & Trademark Cases and Rule 68 — The underlying statutes for both patent and federal Lanham Act trademark infringement suits do not include attorneys’ fees as “costs.” Instead, attorneys’ fees are recoverable under 35 U.S.C. § 285 (patent) and 15 U.S.C. § 1117 (trademark) only by the prevailing party in “exceptional cases.” Because of these definitions of “costs,” it is unlikely to recover attorney’s fees by making a Rule 68 offer in patent or trademark cases.
Trade Secrets & Common Law Misappropriation Cases and Rule 68 — State law governs trade secret, non-Lanham Act trademark, and common law misappropriation claims. Therefore, any offer of judgment would fall under Rule 167 of the Texas Rules of Civil Procedure. Rule 167 is not frequently used because once invoked, the defendant may only recover costs if the judgment is less than 80% of the offer rejected by the plaintiff. On the other hand, if the plaintiff counters and the judgment is more than 120% of the plaintiff’s offer, the plaintiff must receive costs. Making matters worse, costs assessed against a plaintiff are a set-off to its recovery. This limit prevents plaintiffs from paying more than the judgment. Therefore, a plaintiff who recovers nothing will not pay costs.
For more information, see our blog post Rule 68 Offers of Judgment in Intellectual Property Cases.
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This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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