Bar News - June 17, 2015
Intellectual Property Law: The 4-1-1 of 2-8-5: Attorney’s Fees Awards in Patent Cases
By: Zachary R. Gates and Laura L. Carroll
It has been just over a year since the US Supreme Court issued two decisions on the same day that fundamentally changed not only the way federal district courts consider requests under 35 USC §285 for attorney’s fees in patent cases, but also the way those decisions are reviewed on appeal.
In this article, we discuss how those decisions have been treated by the US Court of Appeals for the Federal Circuit (where appeals in patent cases are heard), and provide our impressions of what practitioners should consider when seeking or defending against Section 285 awards.
What Does Section 285 Say?
As part of Congress’ sweeping overhaul of the Patent Act in 1952, a fee-shifting provision was amended and re-codified as Section 285, to read: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”
Highmark and Octane Fitness
While the provision remained unchanged, in recent years, the Federal Circuit had made it increasingly difficult to obtain a Section 285 fee award. On April 29, 2014, the Supreme Court issued opinions in Highmark Inc. v. Allcare Health Mgmt. Sys. Inc. and Octane Fitness LLC v. Icon Health & Fitness Inc., rejecting the Federal Circuit’s exacting hurdles:
- To be exceptional, a case need “simply [be] 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.” That assessment is a “case-by-case exercise” addressed to the district court’s “equitable discretion,” to be made “considering the totality of the circumstances.” (Octane Fitness)
- “[A] case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.” (Octane Fitness)
- “Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less a high one.” The Court rejected the “clear and convincing standard” and suggested that the “preponderance of the evidence standard” would apply. (Octane Fitness)
- The district court’s determination of whether a case is “exceptional” is “a matter of discretion” and a question that is “multifarious and novel, not subject to useful generalization.” As a result, on appeal, the Federal Circuit may only review the determination for an abuse of discretion (not, as before, subjected to de novo review). That standard, said the high court, applies “in reviewing all aspects of a district court’s § 285 determination.” (Highmark)
What has the Federal Circuit – and the US Supreme Court itself – told us since April 29, 2014? As an initial matter, it is important to remember that no two cases will be alike. The Supreme Court in Octane Fitness provided only a “non-exclusive list of factors” to consider in assessing exceptionality, “including frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” What a court may consider in any particular set of circumstances is within that court’s learned discretion.
Second, attorneys for patent owners are getting multiple messages. On the one hand, the Federal Circuit suggests that satisfying the obligations of Fed. R. Civ. P. 11 may suffice. In an unreported decision in September 2014 (Checkpoint Sys., Inc. v. All-Tag Security S.A.), for example, the Federal Circuit advised a district court that in its Section 285 determination on remand, it “should consider the guidance from our prior opinion... that tests or experiments on the actual accused products are not always necessary to prove infringement. In some instances, circumstantial evidence alone may suffice.” In Biax Corp. v. Nvidia Corp., decided in February 2015, the Federal Circuit cautioned that “objective reasonableness remains a relevant factor.”
On the other hand, compliance with Rule 11 does not give the parties carte blanche during the litigation. As the Supreme Court noted in dicta in Octane Fitness, “a district court may award fees in the rare case in which a party’s unreasonable conduct – while not necessarily independently sanctionable – is nonetheless so ‘exceptional’ as to justify an award of fees.”
Recently, in April 2015, the Federal Circuit found unreasonable conduct sufficient to justify a Section 285 award, where “discovery abuses, unprofessionalism, and changing litigation positions... increased expense and frustration for all concerned,” finding the district court’s denial of fees to be an abuse of discretion. (Oplus Tech. Ltd. v. VIZIO Inc.)
Third, the range of available fees will vary from none, to some, to potentially all. At one end of the spectrum, even if a case is found to be exceptional, a fee award may still be denied.
On remand in Octane Fitness, the Federal Circuit explained that the Supreme Court’s decision “did not... revoke the discretion of a district court to deny fee awards even in exceptional cases,” although it clarified in Oplus Tech. that denials of fees must be explained: “when... a court finds litigation misconduct and that a case is exceptional, the court must articulate the reasons for its fee decision.”
On the other end of the spectrum, the calculated fee award need not be limited to amounts incurred in responding to specific acts of litigation misconduct. The Federal Circuit (in Homeland Housewares LLC v. Sorensen Research & Dev. Trust) “decline[d]... to require such granularity from the district court, particularly because it is the ‘totality of the circumstances,’ and not just discrete acts of litigation conduct, that justify the court’s award of fees.”
Fourth, although Section 285 determinations will be subject to an abuse-of-discretion standard, they are not bulletproof on appeal. As the Supreme Court noted in Highmark, that standard “does not preclude an appellate court’s correction of a district court’s legal or factual error.”
Fifth, a district court’s failure to address the availability of attorney’s fees may be viewed with skepticism by reviewing courts. In dicta in its May 25, 2015, decision in Commil USA LLC v. Cisco Sys. Inc., the U.S. Supreme Court, while citing Section 285 and Rule 11 as examples of tools available to lower courts, stated: “[I]t is still necessary and proper to stress that district courts have the authority and responsibility to ensure frivolous cases are dissuaded” (emphasis added).
Sixth, even if Section 285 remedies are not ultimately successful, other avenues of relief still exist. For example, a prevailing party may seek fees from an opponent pursuant to the Court’s inherent discretion, 28 USC § 1927 (for “multipl[ying] the proceedings... unreasonably and vexatiously”), or even under New Hampshire statutory provisions like RSA Chapter 358-A (which, per a recent US District Court decision favorable to two of our clients in a pending case, may extend to “abusive litigation practices”) and RSA Chapter 359-M (prohibiting bad faith assertions of patent infringement).
|Zachary R. Gates
|Laura L. Carroll
Zachary R. Gates is an associate, and Laura L. Carroll is a partner, at Burns & Levinson in Boston. Gates and Carroll are admitted to practice in New Hampshire state and federal courts and focus their practice on intellectual property litigation.