Supreme Court Unanimously Overrules The Federal Circuit’s Fee-Shifting Framework In Patent Cases

Today, the Supreme Court issued two unanimous decisions that considerably relax the standard for awarding attorney's fees against plaintiffs who bring meritless patent suits. These decisions are timely given the ongoing debate in Congress regarding the inclusion of a "fee-shifting" provision in the pending patent reform legislation.1

Under 35 U.S.C. § 285, a district court has discretion to award attorney's fees to a prevailing party in a patent case if the court determines that the case is "exceptional." Under the standard crafted in Brooks Furniture Manufacturing., Inc. v. Dutailier International, Inc., attorney's fees previously were awarded against the patentee only if the suit was (1) objectively baseless, and (2) brought in subjective bad faith, absent misconduct during litigation or inequitable conduct before the Patent and Trademark Office.2

The Supreme Court's decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc. overrules Brooks Furniture, holding that its standard for an award of fees was "unduly rigid." The Court held that, as used in §285 of the patent code, "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." The Supreme Court vacated and remanded the case for consideration under this standard.

In Highmark, Inc. v. Allcare Health Management Systems, Inc., the companion case to Octane, the Supreme Court held that the statutory text compelled that "an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court's § 285 determination."

DETAILED DISCUSSION

Octane Fitness, LLC v. ICON Health & Fitness, Inc.

In Octane Fitness, the defendant prevailed on summary judgment and moved the district court for an award of attorney's fees under § 285, pointing to specific infringement assertions and proposed claim constructions by ICON that Octane argued were "unreasonable and unsupportable."3 The district court denied the motion, finding that Octane had failed to meet both the objective and subjective requirements to prove the case as "exceptional."4 The court also briefly addressed the poor showing of subjective bad faith. The court dismissed a proffered email exchange between ICON sales executives as "stray comments by employees with no demonstrated connection to the lawsuit" and...