Octane Fitness LLC v.
ICON Health & Fitness, Inc., No. 12-1184 (U.S. April 29, 2014).
Highmark, Inc. v
Allcare Health Management System, Inc., No. 12-1163 (U.S. April 29, 2014).
In two unanimous decisions, the U.S. Supreme Court repudiated
a 2005 decision by the U.S. Court of Appeals for the Federal Circuit that
restricted awards of attorneys fees to a prevailing party under 35 U.S.C. § 285. Calling the Federal Circuit’s
requirements “unduly rigid,” the Court ruled that district court judges have
broad discretion to award fees in cases that, based on the totality of the
circumstances, “stand[] out from other [cases] with respect to the substantive
strength of a party’s litigating position (considering both the governing law
and the cases of the case) or the unreasonable manner in which the case was
litigation.” In addition, the Court ruled that district court determinations
under §285 are subject to review only for abuse of discretion.
The Octane and Highmark opinions give district courts more flexibility in
deviating from the “American rule” governing attorneys fees in patent cases. In
light of current Congressional interest in instituting a “loser pays” system in
patent cases through amendments to the Patent Act, the decisions may give the
courts some breathing room to attempt to combat the PAE epidemic through a more
hands-on approach to case administration, rather than being subjected to statutory
fixes imposed by Congress.
Background:
The Patent Act,
like many U.S. statutes, provides an express exception to the general rule in
American litigation that each party pays its own attorneys fees, regardless of
the outcome. Section 285 of the Act states simply that, “The court in
exceptional cases may award reasonable attorney fees to the prevailing party.”
Prior to 2005, courts including the Federal Circuit interpreted this provision as
authorizing attorneys fee award in cases which, in the district court’s
discretion, were exceptional under the circumstances.
In 2005, however,
the Federal Circuit imposed a more exacting standard for attorney fee awards. Brooks Furniture Mfg, Inc. v. Dutailer Int’l,
Inc., 393 F.3d 1378 (2005). In Brooks,
the CAFC ruled that attorney fee awards were only available in two situations. First,
a case was exceptional “when there has been some material inappropriate conduct
related to the matter in litigation, such as willful infringement, fraud or
inequitable conduct in procuring the patent, misconduct during litigation,
vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11,
or like infractions.” 393 F.3d at 1381. If those situations were lacking, then
fees could be imposed where two conditions were present: :"both (1) the
litigation is brought in subjective bad faith, and (2) the litigation is
objectively baseless.” Id. In addition, Brooks held that a finding of
exceptionality must be supported by clear and convincing evidence.
Octane Fitness:
In the first case
decided, Octane Fitness, the Supreme
Court held that the Brooks standard
was too restrictive. Associate Justice Sotomayor noted that “exceptional” was a fairly general term,
meaning “unusual,” “uncommon,” “rare,” and “not ordinary.” As a result, the
Court concluded that there is no single, precise formulation for determining
whether a case is “exceptional.” Instead, “exceptional” simply means that:
We hold, then, that 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. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances. As in the comparable context of the Copyright Act, there is no precise rule or formula for making these determinations, but instead equitable discretion should be exercised in light of the considerations we have identified.
Slip op. at 7-8 (Citation, quote and footnote omitted). The
Court ruled that the Brooks standard was too rigid for several reasons. First
it largely required independently sanctionable conduct, which rendered § 285 superfluous. Second, the second
part of the test required both objectively baseless claims and subjective bad
faith, although either one alone should be enough to justify and attorney fee
award. Finally, the Court ruled that in light of the broad discretion afforded
district courts in evaluating requests for fees, the evidence need not attain
the level of clear and convincing proof. The Court noted that, “Section 285
demands a simple discretionary inquiry; it imposes no specific evidentiary
burden, much less such a high one.” Slip op. at 11.
Highmark:
In the second case decided the Court addressed the appropriate
standard of review for district court awards under § 285. In Highmark, the
Federal Circuit applied de novo review, declining to extend deference to the
district court’s decision. In another opinion written by Sotomayor, the Supreme Court made short work of that position:
For reasons we explain in Octane, the determination whether a case is “exceptional” under §285 is a matter of discretion. And as in our prior cases involving similar determinations, the exceptional-case determination is to be reviewed only for abuse of discretion.
Slip op. at 4. Copies of both decisions are available HERE.
No comments:
Post a Comment