Articles

Patent Fee-Shifting after mCom, Realtime and Dragon

What Changed in the Enforcement Calculus

Date: June 9, 2026
Patent enforcement has always required two decisions, not one.

The first is the obvious question: can the patent owner prove infringement and survive the expected validity challenges?

The second is the question that often drives the boardroom discussion: if the case goes badly, how much additional exposure does the plaintiff face?

That second question has become harder to answer. Section 285 of the Patent Act allows a court to award reasonable attorney fees to the prevailing party in “exceptional cases.” Section 1927 can expose counsel personally when an attorney unreasonably and vexatiously multiplies proceedings. Those are serious tools. They are also easy to overstate when a defendant has just won and wants the court to treat the plaintiff’s loss as proof that the case never should have been filed.

Three recent Federal Circuit decisions push back on that shortcut. They do not make patent enforcement risk-free. They do something more useful: they separate ordinary litigation loss from fee-shifting conduct.


Key Takeaways

  • A loss on eligibility, invalidity, or noninfringement is not enough by itself to make a patent case exceptional.
  • Warning letters and “red flags” matter only if they connect to the reason the case was actually lost.
  • Fees incurred in a voluntary parallel IPR proceeding do not automatically become recoverable district court fees under § 285.
  • Personal sanctions against counsel require case-specific proof of objectively reckless or bad-faith conduct, not generalized criticism of counsel’s litigation history.
  • The practical question for patent owners is not “Can we guarantee a win?” It is “Can we show that the theory was reasonable when filed, and that we reassessed it as the record developed?”


The old shortcut: plaintiff lost, so the case must have been exceptional

Octane Fitness gave district courts flexibility to decide when a patent case “stands out” from others based on the substantive strength of a party’s litigating position or the unreasonable manner in which the case was litigated. That flexible standard was useful. It also created room for a familiar post-judgment argument: because the plaintiff lost, the plaintiff’s position must have been exceptionally weak.

The Federal Circuit has been narrowing that move.

The point is not that weak patent cases are protected. They are not. A plaintiff who presses an objectively baseless theory, ignores controlling law, hides the ball, shifts theories without support, or uses litigation mainly as leverage for nuisance value should expect a fee motion.

But “we won” is not the same argument as “they litigated an exceptional case.” The recent cases matter because they force prevailing defendants to prove the second point rather than smuggling it in through the first.


mCom: losing is not the same as being exceptional

In mCom IP, LLC v. City National Bank of Florida, the Federal Circuit affirmed dismissal of the patent owner’s infringement case, but reversed the fee and sanction awards that followed. The district court had awarded $33,986.43 under § 285 against mCom and imposed $50,619.59 in § 1927 sanctions against counsel.

That split result is where the real lesson lies.

The Federal Circuit did not rescue the infringement case. It affirmed dismissal on invalidity grounds. But it rejected the idea that the merits loss, standing alone, justified fee-shifting. The court quoted SFA Systems for a point that should now appear in almost every serious fee opposition: “It is the substantive strength of the party’s litigating position that is relevant . . ., not the correctness . . . of that position.”

That distinction matters. A position can be wrong without being sanctionable. A patent claim can be invalid without being so unusually or extraordinarily weak that the case “stands out” under § 285. The Federal Circuit said “mere invalidity is not legally sufficient to find a case exceptional.”

The court also rejected an attempt to rely on mCom’s previous litigation activity. City National argued that mCom’s other lawsuits showed a nuisance-value settlement strategy. The Federal Circuit found no record support for that premise. Other cases did not make this case exceptional.

The § 1927 ruling is just as important for lawyers. Under Eleventh Circuit law, the sanction required egregious and objectively reckless conduct tantamount to bad faith. The Federal Circuit held the record did not support that standard. Counsel’s exposure had to be tied to what counsel actually did in the case before the court.
The practical lesson: plaintiffs and counsel still need a serious pre-suit analysis. But if the analysis was reasonable when made, and if the plaintiff did not litigate in bad faith, a later merits loss should not automatically become a fee award or personal sanction.


Realtime: “red flags” have to connect to the winning theory

Realtime Adaptive Streaming LLC v. Sling TV, L.L.C. is the warning-letter case defendants will need to read carefully.

The district court awarded fees based on six supposed “red flags” that, in the court’s view, should have told Realtime that its case was fatally flawed. Those flags included adverse developments involving related patents, a USPTO office action, a defense notice letter asserting invalidity and threatening fees, and an expert declaration submitted during summary judgment proceedings. The Federal Circuit vacated and remanded.

The important point is not that red flags are irrelevant. They can be very relevant. A plaintiff that receives a specific, well-supported explanation of why its asserted claims fail cannot ignore it forever.

Realtime says the court has to do the work of connecting the flags to the theory that actually defeated the case. A notice letter is not a fee-shifting machine. An adverse decision involving a related patent is not automatically dispositive. A USPTO rejection on one ground does not necessarily prove that a plaintiff should have abandoned a different theory in district court.

That matters because fee motions often collect every bad fact in the record and present the pile as if accumulation equals exceptionality. Realtime resists that approach. The analysis must be specific: what did the plaintiff know, when did it know it, how did that information bear on the actual claim or defense that won, and what did the plaintiff do next?

For defendants, that raises the bar for fee motions. The best fee record will not merely show that the defendant warned the plaintiff. It will show that the warning was accurate, specific, tied to the dispositive issue, and ignored despite later developments that made the problem unavoidable.

For plaintiffs, the lesson is equally practical. Treat notice letters as record events. Analyze them. Preserve the analysis. If the letter is wrong, explain why. If it is partly right, narrow or reassess. If later discovery changes the risk profile, update the file. The goal is not to create privileged window dressing. The goal is to make sound litigation decisions and have a record showing that the plaintiff did so.


Dragon: IPR fees are not automatically part of the § 285 award

Dragon Intellectual Property LLC v. DISH Network L.L.C. addresses a different but increasingly common question: if the defendant beats the patent in IPR, can it recover the IPR fees through a district court § 285 motion?

The Federal Circuit’s answer was "no," at least for the voluntary parallel IPR fees at issue there.

DISH and Sirius XM sought fees incurred in parallel Patent Trial and Appeal Board proceedings. The district court found the cases exceptional and awarded fees for district court litigation, but refused to award fees incurred solely in the IPRs. The Federal Circuit affirmed.

The majority emphasized that the defendants “voluntarily pursued parallel proceedings in front of the Board instead of arguing invalidity before the district court.” That choice had advantages. IPR uses a lower burden of proof than district court invalidity litigation, proceeds on a statutory timeline, and gives defendants a specialized validity forum. But because the defendants elected that path, the court saw no basis for awarding IPR fees under § 285.

That holding is important because IPR has become part of the standard defense playbook. A patent owner evaluating enforcement must assume that an IPR may follow. But Dragon limits the argument that every dollar spent in a parallel PTAB fight automatically becomes part of the fee-shifting threat in district court.

It does not eliminate PTAB cost pressure. It does not prevent fee recovery for district court work. It does not say IPR-related facts are never relevant to exceptionality. But it does undercut a blunt settlement argument: “If we win the IPR, you will owe our PTAB fees.” After Dragon, that argument needs much more care.


How this changes the filing calculus for patent owners

The cases do not make it easier to file weak claims. They make it more important to document why a claim is not weak.

For a patent owner, the decision framework should look something like this:
  1. What is the infringement theory, in claim-chart form, before the complaint is filed?
    A plaintiff should be able to identify accused functionality, map it to asserted claim limitations, and explain what is known, what is inferred, and what discovery is expected to prove. If the theory depends on internal source code, server-side processing, or nonpublic technical operation, the pre-suit file should say so and explain why the inference is reasonable.
     
  2. What are the expected invalidity and eligibility attacks?
    Subject matter eligibility, obviousness, written description, indefiniteness, and claim construction problems should be evaluated before filing. The analysis does not need to predict the future perfectly. It does need to show that the plaintiff understood the obvious lines of attack and had a reason to proceed.
     
  3. What would make the plaintiff reassess?
    A good enforcement plan defines decision points. Claim construction, early § 101 motion practice, IPR institution, office actions, key document production, expert reports, and summary judgment filings can all change the risk profile. Reassessment is not weakness. It is the behavior that helps separate disciplined enforcement from stubborn litigation.
     
  4. What is the response protocol for notice letters?
    After Realtime, patent owners should not toss defense letters into the “standard threats” folder. Some letters are boilerplate. Some are serious. The difference matters. A plaintiff should evaluate whether the letter identifies a real defect tied to the asserted claims and the accused products. If it does, the plaintiff should decide whether to narrow, amend, pause, settle, or continue with a documented rationale.
     
  5. How will PTAB risk be priced?
    Dragon helps on fee-shifting exposure, but it does not make IPR cheap. A defendant may still use IPR to create leverage, delay, and validity risk. The enforcement budget should treat PTAB defense as a likely parallel track in many cases, even if those fees are not automatically recoverable under § 285.


What changes for defendants

Defendants still have strong fee tools. These cases do not neuter § 285. They do, however, reward precision.

A stronger fee motion after these cases will usually do four things.

First, it will tie the fee request to the actual dispositive theory. If the defendant won on § 101, the fee motion should explain why the plaintiff’s eligibility position was exceptionally weak, not merely why the plaintiff had other patent problems.

Second, it will build a chronology. What did the plaintiff know at filing? What did the plaintiff learn after the defendant’s letter, the court’s ruling, the PTAB’s action, or discovery? Why did continuing the case become unreasonable at a specific point?

Third, it will separate litigation fees from PTAB fees. Dragon makes that distinction hard to avoid.

Fourth, it will avoid overreaching against counsel. Personal sanctions should be reserved for case-specific misconduct that meets the governing standard, not used as an added pressure point because the plaintiff’s lawyer has brought other patent cases.


The better question for both sides

These decisions should improve the enforcement conversation.

For plaintiffs, the question is not whether losing is possible. Losing is always possible. The question is whether the case has a reasonable factual and legal basis, whether the plaintiff is prepared to test that basis against new information, and whether the business upside justifies the litigation and PTAB risk.

For defendants, the question is not whether the plaintiff lost. The question is whether the plaintiff’s position was so weak, or its conduct so unreasonable, that the case stands out from ordinary hard-fought patent litigation.

That is the right line. Patent rights should be enforceable. Bad cases should have consequences. But fee-shifting should not become an automatic tax on every patent owner that brings a case and loses.


Practical checklist before filing or continuing enforcement

Before filing, ask:
  • Do we have a claim chart that would still look reasonable if a court reads it two years from now?
  • Have we pressure-tested eligibility, invalidity, claim construction, and damages?
  • Have we identified what discovery must prove and why we have a Rule 11 basis to seek it?
  • Have we priced the likelihood of IPR and the business cost of delay?
  • Have we set decision points for reassessment?

After receiving a defense letter, ask:
  • Does the letter identify a specific defect or just threaten fees?
  • Is the cited authority tied to the asserted claims and accused products?
  • Does the letter change the merits analysis?
  • Should the case be narrowed, paused, settled, or continued?
  • Can we explain the decision in a way that would make sense to a court later?

After an adverse development, ask:
  • Is the development tied to the theory that matters in this case?
  • Does it affect every asserted claim or only some claims?
  • Does it affect infringement, validity, damages, or only leverage?
  • What would a reasonable plaintiff do at this point?


Conclusion

mCom, Realtime, and Dragon do not give patent plaintiffs a free pass. They give plaintiffs something narrower and more important: room to enforce in good faith without treating every loss as a fee-shifting event.

That shift matters. It changes settlement leverage. It changes how notice letters should be written and answered. It changes how PTAB costs should be discussed. And it changes the internal filing memo for any patent owner deciding whether enforcement is worth it.

The best enforcement decisions will still be conservative where they need to be. But they should not be timid for the wrong reason. The Federal Circuit is reminding district courts that “exceptional” still means something.


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