Monday, October 7, 2013

U.S. Supreme Court Grants Cert. in Two Cases Involving Awards of Attorneys' Fees in Patent Infringement Cases

U.S. readers probably have heard about this already, but last week the U.S. Supreme Court agreed to hear two cases involving awards of attorneys' fees in patent infringement cases.  In the U.S., unlike most countries, the prevailing party in litigation normally bears its own attorneys' fees.  In patent law in particular, the statute (section 285) provides only that "The court in exceptional cases may award reasonable attorney fees to the prevailing party."  The general framework the Federal Circuit applies is as follows.  As I have written on this blog before, case law establishes that the moving party must establish exceptional circumstances by clear and convincing evidence; the district court then determines if fees are appropriate, and if so in what amount.  The amount is reviewed on appeal under the abuse of discretion standard. Only a limited number of circumstances justify fee awards in patent cases, however, including  “inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement.”  Wedgetail, Ltd. v. Huddleston Deluxe, Inc., 576 F.3d 1302, 1304 (Fed. Cir. 2009).  Moreover, as I noted in this post involving another recent case (Taurus IP, LLC v. DaimlerChrysler Corp.), the Federal Circuit case law on awards of fees to defendants goes like this:
Absent misconduct in litigation or in securing the patent, a case may be found exceptional under § 285 only if (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.  Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). Subjective bad faith by the offending party can be upheld on review if, despite the lack of an explicit finding by the district court, other findings of fact are compatible with, and only with, that view. . . . There exists a “presumption that the assertion of infringement of a duly granted patent is made in good faith.” Brooks Furniture, 393 F.3d at 1382. Factual findings regarding subjective bad faith are reviewed for clear error. . . .  

To be objectively baseless, the patentee’s assertions—whether manifested in its infringement allegations or its claim construction positions—“must be such that no reasonable litigant could reasonably expect success on the merits.” Dominant Semiconductors Sdn. Bhd. v. OSRAM GmbH, 524 F.3d 1254, 1260 (Fed. Cir. 2008), quoted in iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1378 (Fed. Cir. 2011). As a question of law, this court reviews a district court’s determination of whether a party’s claim or defense in a patent case is objectively baseless without deference. Highmark, 687 F.3d at 1308–09.
The Highmark case cited in the second paragraph quoted above is one of the two cases in which the Court has granted cert.  Here is the question presented in Highmark Inc. v. Allcare Health Mgt. Sys., Docket No. 12-1163:  "Whether a district court's exceptional-case finding under 5 U.S.C. § 285, based on its judgment that a suit is objectively baseless, is entitled to deference."  

The other case is Octane Fitness, LLC v. Icon Health & Fitness, Inc., Docket No. 12-1184  The question presented is "Does the Federal Circuit's promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriate a district court's discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court's precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants?"

Dennis Crouch has a nice write-up on these cases--and on a copyright case the Court decided to hear, Petrella v. MGM, that addresses the interplay of the statute of limitations and laches and that may have implications for patent law as well--here.  (I briefly mentioned patent law's interplay of these doctrines in a recent post, here.)  In Professor Crouch's opinion, "the Supreme Court will reverse in Highmark and the reasons are well understood by the Federal Circuit judges. In all likelihood, a GVR [grant, vacate, and remand] without opinion would provide sufficient instruction to the Federal Circuit in this case. However, I suspect that we will see these two cases argued and decided in parallel with a roughly identical timeline. One important aspect of the Highmark case is the question of whether attorney fees can be awarded as a deterrent against other parties' bad behavior."  He has a follow-up piece here.

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