May 6, 2014
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Attorneys' Fees in Patent
The Supreme Court of the United States just made it more likely that
attorneys’ fees will be awarded in “exceptional” patent cases.
In two companion cases, the Supreme Court unanimously rejected the
previous standard used for awarding such fees, and also the standard
of review applicable to attorneys’ fees issues on appeal.
When Is A Patent Case “Exceptional”?
For years, the standard for determining this issue was controlled by
Brooks Furniture Mfg., Inc. v. Dutailier Int’l., Inc., 393 F.3d 1378 (Fed.
Cir. 2005). For a case to be exceptional under Brooks, it had to involve
litigation or other misconduct, or the case had to be so lacking in merit
that it was “objectively baseless” and the “plaintiff brought it in
subjective bad faith.”
In Octane Fitness, LLC v. Icon Health & Fitness (S. Ct. Apr. 29, 2014),
the Supreme Court rejected the Brooks test as “unduly rigid,” stating
that it found no basis in the plain language of 35 U.S.C. § 285 (the
patent statute governing attorneys’ fees) for the test. Section 285
simply says that fees may be awarded for cases that are “exceptional,”
without defining the term further. The Supreme Court found that under
a proper interpretation of the patent law, “an ‘exceptional’ case is
simply one that stands out from others with respect to the substantive
strength of a party’s litigating position (considering both the governing
law and the facts of the case) or the unreasonable manner in which
the case was litigated.” Notably, this would affect parties with
exceptionally weak theories of infringement, as well as those asserting
defenses that are unreasonable.
Reduced Burden Of Proof
The Supreme Court also found that “nothing in § 285 justifies” the high
“clear and convincing evidence” required to establish entitlement to
fees. Accordingly, the Court held that the burden is the lower
“preponderance of the evidence” standard that is prevalent in most
patent law issues.
Deferential Standard of Review on Appeal
The same day the Supreme Court issued its opinion in Octane, it
issued a separate opinion clarifying the proper standard of review on
appeal for attorneys’ fees awards in patent cases.
In Highmark, Inc. v. Allcare Health Management System, Inc. (S. Ct.
Apr. 29, 2014), a patent owner did not prevail on its infringement
claims in the district court, and the prevailing party sought an award of
attorneys’ fees under § 285. The district court determined that the
patent owner had engaged in “vexatious” and “deceitful” litigation
conduct under the now-defunct “objectively baseless” standard,
concluded that the case was exceptional, and awarded the prevailing
party attorneys’ fees. On appeal, the Federal Circuit reviewed the
district court’s § 285 determinations de novo (i.e., without deference),
and affirmed the district court’s findings with respect to one claim, but
reversed with respect to another.
The Supreme Court disagreed with the Federal Circuit’s application of
a de novo standard of review, and held that all aspects of a district
court’s § 285 determination should be reviewed for abuse of discretion
on appeal. The Court ruled that an abuse of discretion standard of
review is appropriate since, as the Court clarified in Octane, an
exceptional case finding under § 285 is a matter of discretion. This
means that a district court’s decision to award attorneys’ fees to the
prevailing party under § 285 should be reviewed with deference on
appeal, and should not be overturned unless there is clear legal or
Together, the Octane and Highmark decisions represent a shift in the
framework that district courts will use when deciding whether to award
attorneys’ fees in patent cases. The Supreme Court has now given
district courts more discretion to award attorneys’ fees to the prevailing
party in a patent case under § 285, and a district court’s decision
regarding whether to award attorneys’ fees is now unlikely to be
overturned on appeal absent a clear legal or factual error.
The effect of these decisions on the number of attorneys’ fees awards
in patent cases remains to be seen. But it stands to reason that district
courts may begin to award attorneys’ fees with greater frequency,
given the more flexible framework for analysis, greater discretion, and
deferential standard of review on appeal. At this juncture, the main
takeaway is that, when it comes to awarding attorneys’ fees in patent
cases, the ball is now in the court of the district courts, so to speak.
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