On April 29, 2014, in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 1 the Supreme Court significantly changed the standard for awarding attorneys’ fees in patent litigation. The Supreme Court rejected the Federal Circuit’s decision in Brooks Furniture finding it unduly rigid and inconsistent with the statutory text of § 285.
In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 2 the Federal Circuit had held that:
“a case may be deemed exceptional” under § 285 only in two limited circumstances:
(1) when there has been some material inappropriate conduct, or
(2) when the litigation is both brought in subjective bad faith and is objectively baseless."
Subsequently, in iLOR LLC v. Google, Inc., 3 the Federal Circuit clarified that a litigation is objectively baseless only if it is “so unreasonable that no reasonable litigant could believe it would succeed” and that litigation is brought in subjective bad faith only if the plaintiff “actually know[s]” that it is objectively baseless. In reversing Brooks Furniture, the Supreme Court reasoned that the text of §285 “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‘.”
The Supreme Court held that an
“‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigation position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
The Supreme Court also rejected Brooks Furniture’s narrow interpretation of § 285 on the basis that it “is so demanding that it would appear to render section 285 largely superfluous.” Finally, the Supreme Court rejected the Federal Circuit’s requirement that patent litigants establish their entitlement to fees under § 285 by “clear and convincing evidence.” 4 The Supreme Court reasoned that it had not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence and that nothing in § 285 justified such a high standard of proof.
In the companion case, Highmark Inc. v. Allcare Health Management System, Inc.,5 the Supreme Court held that an appellate court should review all aspects of a district court’s § 285 determination for abuse of discretion.
Although it is too soon to know how district courts will apply the holdings in these decisions, numerous commentators have suggested that, given that the requisite showing for attorneys’ fees under § 285 has been significantly lowered, parties are increasingly likely to consider bringing such motions.6
1 Octane Fitness, LLC v. ICON Health & Fitness, Inc., No. 12-1184.
2 393 F.3d 1378 (Fed. Cir. 2005).
3 631 F.3d 1372, 1377-78 (Fed. Cir. 2011).
4 In Brooks Furniture, the Federal Circuit explained that “[t]here is a presumption that the assertion of
infringement of a duly granted patent is made in good faith…the underlying improper conduct and the
characterization of the case as exceptional must be established by clear and convincing evidence.“
5 Highmark Inc. v. Allcare Health Management System, Inc., No. 12-1163.
6 See, e.g., How Highmark and Octane Will Affect Patent Litigants, IP Law 360, (April 30, 2014); High Court
Strikes Double Blow Against Patent Trolls, IP Law 360 (April 29, 2014).