On April 29, 2014, the Supreme Court handed down two patent cases which make it easier for prevailing parties to recover attorney fees.
In Octane Fitness, LLC v. Icon Health & Fitness, Inc., _____ U.S. ____, No. 12-1184 (April 29, 2014), the Supreme Court held that 35 U.S.C. §285 allows for recovery of attorney fees in “exceptional cases”. An exceptional case is “one that stands out from the others with respect to the substantive strength of a party’s litigating posture (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Slip Opinion at 7-8. The Federal Circuits formulation set forth in, for example, Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005) was overly rigid, according to the Supreme Court. The Federal Circuit’s formulation required some material inappropriate conduct related to the litigation. Absent such conduct, the Federal Circuit required findings that both the litigation was brought in bad faith and the litigation was objectively baseless. 393 F.3d at 1381. In addition to repudiating the Federal Circuit’s Brooks Furniture formulation, the Supreme Court further repudiated the Federal Circuit’s requirement that a patent litigant must establish an entitlement to attorney fees by clear and convincing evidence, opting instead for a preponderance of evidence standard. Slip Opinion at 11.
Highmark, Inc. v. Allcare Health Management System, Inc., ___ U.S. ___, No. 12-1163 (April 29, 2014) concerned the proper standard of review to be applied when an award of attorney fees is appealed. The Federal Circuit applied a de novo review. The Supreme Court vacated and remanded, holding that an abuse of discretion standard should be applied.
These two holdings will present problems for non-practicing entities, especially those which apply a shotgun approach, i.e., sue everyone and settle quickly. These cases stand a greater chance of being found exceptional with an award of attorney fees to the defendant. Also, reversing an award of attorney fees on appeal will be more difficult. This should have a chilling effect on some of the more egregious non-practicing entities.