Supreme Court Docket Report - October 1, 2013

Keywords: patent act, attorney's fees, Federal Insurance Contributions Act, Medicaid Providers

Today, the Supreme Court granted certiorari in five cases of interest to the business community:

Patent Act - Attorney's Fees for Exceptional Cases

The Patent Act allows courts to "award reasonable attorney fees to the prevailing party" in "exceptional cases." 35 U.S.C. § 285. Today, the Supreme Court granted certiorari in two separate cases - Octane Fitness, LLC v. Icon Health & Fitness, Inc., No. 12-1184, and Highmark Inc. v. Allcare Health Management System, No. 12-1163 - to clarify when such awards are appropriate and when they should be upheld. Octane concerns the proper test for determining whether an infringement claim is "exceptional," while Highmark involves the standard of review applied by the Federal Circuit to a district court's ruling on exceptionality.

Because the Court's resolution of these cases is likely to clarify the circumstances under which fees may be awarded to defendants in meritless lawsuits for patent infringement, the two decisions together may prove significant for all businesses potentially involved in patent litigation - particularly for those that aggressively pursue infringement litigation or are the targets of questionable infringement actions.

Octane. The petitioner in Octane successfully defended against a suit alleging that its elliptical machines infringed the respondent's patent. The district court denied Octane's request for attorney's fees. The court applied Federal Circuit precedent holding that, absent any misconduct in the prosecution or litigation of the infringement claim, a case qualifies as "exceptional" only if it was both "brought in subjective bad faith" and "objectively baseless." Icon Health & Fitness, Inc. v. Octane Fitness, LLC, 2011 WL 3900975, at *1 (D. Minn. Sept. 6, 2011). The district court held that Octane had not satisfied either prong of that test.

On appeal, Octane argued both that it had shown the case to be exceptional and that the Federal Circuit should discard the subjective prong of the exceptionality test. The Federal Circuit rejected both arguments and affirmed the district court, expressly declining to "revisit [its] settled standard for exceptionality." Icon Health & Fitness, Inc. v. Octane Fitness, LLC, 496 F. App'x 57, 65 (Fed. Cir. 2012). Octane's petition for certiorari argued that the Federal Circuit's test is unduly stringent and fails to deter meritless infringement suits.

Highmark. The petitioner in Highmark sought attorney's fees after defending against a claim that it had infringed a health-care patent. The district court concluded that the case was exceptional, both because two of the infringement claims were baseless and because of litigation misconduct.

A divided panel of the Federal Circuit affirmed in part and reversed in part. The panel majority applied a recent Federal Circuit precedent holding that de novo review, rather than review under the deferential clear-error standard, applied to a district court's conclusion that an infringement action was objectively baseless. See Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1309 (Fed. Cir. 2012). Using the de novo standard, the majority concluded that only one of the infringement claims...