First, it permits an award of fees "where it would be grossly unjust that the winner be left to bear the burden of his own counsel which prevailing litigants normally bear." Badalamenti v. Dunham's Inc., 896 F.2d 1359, 1364 (Fed. Cir. 1990), cert. denied 498 U.S. 851, 111 S.Ct. 142, 112 L.Ed.2d 109 (1990) (quoting J.P. Stevens Co. v. Lex Tex Ltd., 822 F.2d 1047, 1052 (Fed. Cir. 1987)) (emphasis in original). Thus, under § 285, an award of attorneys' fees compensates the prevailing party for losses incurred as the consequence of the conduct of the losing party.

Their "discretion [is] informed by [their] familiarity with the matter in litigation and the interests of justice." Badalamenti v. Dunham's, Inc., 896 F.2d 1359, 1365 (Fed. Cir. 1990) (quotes and cite omitted). "[T]he decision respecting inequitable conduct is a discretionary decision to be made by the judge on his or her own factual findings. . . . Once threshold findings of materiality and intent are established, the court must weigh them to determine whether the equities warrant a conclusion that inequitable conduct occurred."

An abuse of discretion occurs when (1) the district court's decision is based on an erroneous conclusion of law, (2) the district court's findings are clearly erroneous, or (3) the district court's decision is clearly unreasonable, arbitrary or fanciful. Badalamenti v. Dunham's, Inc., 896 F.2d 1359, 1362 (Fed. Cir. 1990) (applying 6th Circuit law) (This case lists four facts; however, two of the factors are substantially the same.), cert. denied, 498 U.S. 851, 111 S.Ct. 142, 112 L.Ed.2d 109 (1990). In deciding whether the district court acted unreasonably, arbitrarily or fancifully, this court has announced several factors that it should consider when deciding whether the district court abused its discretion by imposing sanctions.

In other words, a court may find a case exceptional if the conduct of the losing party would make it grossly unjust for the prevailing party to be left with the burden of litigation expenses. Badalamenti v. Dunham's, Inc., 896 F.2d 1359, 1364 (Fed. Cir. 1990). Defendant contends that this is an exceptional case under § 285 because plaintiff (1) engaged in litigation misconduct and (2) prolonged the litigation in bad faith after the court's January 9, 2009 claims construction ruling.

Hewitt charges that it is Plaintiffs, not Hewitt, that have misconstrued the Rule when they argue that Rule 37(d) relates only to Rule 37 discovery sanctions, which they are not seeking here. Badalamenti v. Dunham's Inc., 896 F.2d 1359, 1362 (Fed.Cir.1990) (" The plain terms of the rules of civil procedure show that a party served with a document request has four options: (1) respond to the document request by agreeing to produce documents as requested (Fed.R.Civ.P. 34(b)); (2) respond to the document request by objecting (Fed.R.Civ.P. 34(b)); (3) move for a protective order (Fed.R.Civ.P. 26(c) and 37(d)); or (4) ignore the request." ).

To put it another way, a court may find a case exceptional if the conduct of the losing party would make it grossly unjust for the prevailing party to be left with the burden of litigation expenses. Badalamenti v. Dunham's, Inc., 896 F.2d 1359, 1364 (Fed. Cir. 1990). The exceptional case inquiry is a two-step process: determining whether the case is exceptional and, if so, deciding whether to award attorney fees to the prevailing party.

According to the Federal Circuit, sanctions may not be imposed under RCFC 37(d) unless a party wholly fails to respond to a discovery request. See, e.g., Badalmenti v. Dunham's Inc., 896 F.2d 1359, 1362-63 (Fed. Cir.), cert. denied sub nom., Hyde Athletic Indus., Inc. v. Badalmenti, 498 U.S. 851 (1990). Here, there is insufficient evidence to demonstrate that one or more government employees deliberately destroyed the records in question to prevent their discovery.