Supreme Court Issues Two Cases Controlling When Attorney's Fees May Be Awarded in Patent Suits

The following article represents the second in a series dedicated to reporting on the U.S. Supreme Court’s decisions impacting intellectual property rights in 2014.

Patent infringement litigation is expensive – and the cost of that litigation can make or break a company. Nevertheless, historically it has been next to impossible for a party to obtain an award of attorney’s fees in a patent case, even in egregious situations. Today the Supreme Court changed the rules of when a trial court can shift the cost of those fees to the other party.

The Patent Act has long allowed a judge to award attorney’s fees in “exceptional” cases. 35 U.S.C. §285. In Octane Fitness, the first of two cases decided today, the Supreme Court rejected the Federal Circuit’s framework for awarding attorney’s fees, which only authorized the award of attorney’s fees in two very limited circumstances: (1) when there has been litigation misconduct, or (2) when the litigation is both brought in subjective bad faith and objectively baseless. Octane Fitness, LLC v. Icon Health & Fitness, Inc. (U.S., No. 12-1184, 4/29/14). Instead, the Supreme Court gave “exceptional” its ordinary meaning, holding “that 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.” This holding gives the trial court great latitude to make case-by-case decisions within their equitable discretion as to when to award attorney’s fees to either the plaintiff or defendant.

In a separate opinion in Highmark, the Supreme Court also ruled the Federal Circuit must apply the abuse-of-discretion standard of review as to all aspects of a district court’s §285 determination. This will result in a more difficult hurdle for one challenging a trial court’s award (or denial) of attorney’s fees under §285. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. (U.S., No. 12-1163, 4/29/14).

In sum, today’s decisions make an award of attorney’s fees more likely in patent cases, and it is now more likely that an attorney’s fee award will not be overturned on appeal.