Data Shows Spike In Patent Attorney Fee Motions And Awards After Octane

Prior to last year’s U.S. Supreme Court decisions in Octane Fitness LLC v. Icon Health & Fitness, Inc, 134 S. Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Mgmt. Sys., 134 S. Ct. 1744 (2014), district courts in the United States awarded attorney fees in patent cases only in extreme circumstances. In Octane, however, the Court lowered the bar for fee awards. Furthermore, in Highmark, the Court made it clear that district court judges have broad discretion in awarding fees for litigation misconduct.

The Octane Court focused on the plain meaning on 35 U.S.C. § 285, which simply states that, “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” The Court noted that, “This text is patently clear. It imposes one and only one constraint on district courts' discretion to award attorney's fees in patent litigation: The power is reserved for ‘exceptional’ cases.” 134 S. Ct. at 1755-56. In turn, the Court held that an “exceptional” case within the statute 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.” Id. at 1756.

The combination of Octane and Highmark has had a significant effect on attorney fee awards in patent cases. According to a recent report by the Federal Circuit Bar Association submitted to Congress earlier this year, motions for fees filed by accused infringers were granted 36 percent of the time following Octane, compared to only 13 percent of the time in the one year prior to the decision. In addition, Octane apparently has resulted in a sharp increase in the number of fee motions. In the one year prior to Octane, accused infringers filed an average of approximately four fee motions per month. That rate increased to over seven motions per month in the months following the decision.

The new Octane standard’s effect on attorney fee awards is illustrated by a recent Federal Circuit decision, Olpus Technologies, Ltd. v. Vizio, Inc., Case No. 2014-1297 (Fed. Cir. Apr. 10, 2015). In Olpus, the district court granted summary judgment of noninfringement in favor of the defendant-alleged infringer. The defendant then moved for an award of attorney fees under § 285, 28 U.S.C. § 1927, and the district court’s inherent equitable powers, citing a long pattern of vexatious conduct by the patentee prior to and during the litigation. The district court reviewed the parties’ conduct and found that, among other things, the patentee had engaged in an “abusive discovery strategy,” had used “inappropriate, unprofessional, and vexatious” litigation tactics, and had manipulated its expert testimony and infringement contentions so that the defendant faced “a frustrating game of Whac-A-Mole throughout the litigation.” Nonetheless, under the pre-Octane standard, the district court declined to award fees, mainly because case had “been fraught with delays and avoidance tactics to some degree on both sides” and the court could not say that the patentee’s tactics resulted in increased legal costs.

On appeal, the Federal Circuit vacated the denial of fees. After cataloging the patentee’s misconduct and expressing skepticism that those antics did not escalate the defendant’s legal fees, the appeals court remanded with instructions to apply the Octane standard:

Although the award of fees is clearly within the discretion of the district court, when, as here, a court finds litigation misconduct and that a case is exceptional, the court must articulate the reasons for its fee decision. In light of the court’s fact findings regarding the extent of harassing, unprofessional, and vexatious litigation, the change in legal standard by the Supreme Court, and the lack of sufficient basis to deny fees under § 285, we vacate and remand for the district court to consider whether and the extent to which fees are warranted.

Slip op. at 8.

The Olpus case is a clear example of circumstances where a fee award now is likely, even though the district court’s denial of fees would not have been disturbed prior to Octane. Although attorney fee awards are not available in all cases, district courts and the Federal Circuit have greater power under Octane to award them in cases involving bad conduct by either party, including vexatious litigation tactics and unfounded claims.

News from the USPTO: international cooperation and current efforts to curtail abusive litigation

The United States Patent and Trademark Office has recently announced the creation of a new Office of International Patent Cooperation (OIPC), to support the on-going process of patent harmonization and the international patent examination system. The initiative also aims to increase certainty of intellectual property rights, while contextually coordinating efforts to reduce the costs borne by stakeholders. According to the press release:

While the USPTO has been effective in carrying out its international mission through such programs as the Patent Prosecution Highway, the Global Patent Search Network, the Cooperative Patent Classification system, and the new Global Dossier Initiative, creation of the new office will enable USPTO to focus dedicated resources to better implement its international patent cooperation efforts. The main focus of the office, working in concert with the Office of Policy and International Affairs and the Office of the Chief Information Officer, is to provide optimized business process solutions to the international patent examination system for examiners and external stakeholders.

The OIPC, which 'reflects USPTO’s strong commitment to work with global stakeholders and intellectual property offices to develop means to increase quality and create new efficiencies within the complex processes of international patent rights acquisition', will be led by Mark Powell, a former patent examiner and director of the telecommunications examination operation, who spent several years as an expert in international cooperative activities within the Office of Policy and International Affairs.

Besides announcing the creation of the OIPC, USPTO Deputy Director Michelle Lee discussed the current legislative proposals to address abusive patent litigation, intervening at the 29th Annual Intellectual Property Law Conference of the American Bar Association. According to Law360's report, Lee called for a cautious approach, highlighting the importance of strengthening the enforcement of the inventors' rights, without stifling innovation:

Every one of us in the business of intellectual property shares a common conviction that our patent system is too important to treat lightly or hastily[.] We have to find that balance, or sweet spot, where our patent laws and processes provide the strong protection innovators need, without the kind of red tape, delays, or frivolous litigation that stifles innovation.

The USPTO, which is actively working with Congress on the pending proposals, announced, in January 2014, a proposal to require disclosure of the attributable owner, including the ultimate parent entity, during the pendency of a patent application and at specified times during the life of a patent. The measure seeks 'to facilitate the examination of patent applications and to provide greater transparency concerning the ownership of patent applications and patents' - public comments may be submitted until 24 April 2014. Deputy Director Lee stated that the agency is also encouraging the adoption of measures specifically carved (i) to protect the downstream users of commonly available technologies from abusive litigation, and (ii) to streamline the complex and expensive process of patent litigation.