U.S. Supreme Court Overturns Federal Circuit Standard for Attorneys’ Fees in Patent Cases
In two unanimous decisions yesterday, the U.S. Supreme Court addressed the standards for granting and reviewing attorneys’ fees under 35.U.S.C. § 285 in Octane Fitness, LLC v. Icon Health & Fitness, Inc.1 and Highmark Inc. v. Allcare Health Management System, Inc.2 Overturning Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc.,3 the Supreme Court held that district courts can award attorneys’ fees in a case that simply “stands out from others” and that such decisions are entitled to deference on appeal.
In Octane Fitness, the Supreme Court held that the Federal Circuit’s framework set forth in Brooks Furniture was too rigid and demanding, such that it rendered 35.U.S.C. § 285 superfluous.4 Instead, the Supreme Court ruled that district courts are to determine whether cases are “exceptional” in a case-by-case exercise of their discretion, considering the totality of the circumstances.5 Citing copyright law, the Court enumerated a list of “nonexclusive” factors, 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.”6 The Court also held that the clear and convincing evidence standard was not justified and that patent litigation has always been governed by a preponderance of the evidence standard.7
In Highmark, the Supreme Court further held that the de novo standard set forth in Brooks Furniture was too high, instead ruling that the appropriate standard of review was abuse of discretion.8
The Federal Circuit standard for attorneys’ fees under Brooks Furniture required that a case either: (1) involve litigation-related misconduct or (2) be both “objectively baseless” and “brought in subjective bad faith.”9 The Supreme Court found that the first category was overly rigid in using independently sanctionable conduct as a benchmark because it excludes the case in which “unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so ‘exceptional’ as to justify an award of fees.”10 As to the second category, the Supreme Court found that either prong would be sufficient to make a case “exceptional.”11
The Supreme Court based its decision on the language of § 285 and determined that the only constraint imposed was that the award of attorneys’ fees be reserved for “exceptional” cases.12 In deciding the meaning of “exceptional,” the Supreme Court looked at the ordinary meaning, concluding that “exceptional” meant “uncommon,” “rare,” or “not ordinary.”13 Accordingly, 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.”14 With respect to the evidentiary standard, the Supreme Court reasoned, “Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.”15
The Supreme Court’s decisions ostensibly lower the standard for district courts to award attorneys’ fees in patent cases. As a result, at least in the near term, the decisions will likely increase the willingness of patent defendants to seek an award of attorneys’ fees in cases where a plaintiff has asserted a weak patent. It could be several years before we know whether district courts will grant such fee awards more frequently using the new Supreme Court “exceptional” case standard than they did using the old Federal Circuit standard.
1 Octane Fitness, LLC v. Icon Health & Fitness, Inc., No. 12-1184, 572 U.S. ___ (2014).
2 Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., No. 12-1163, 572 U.S. ___ (2014).
3 383 F.3d 1378 (Fed. Cir. 2005).
4 Octane Fitness, slip. op. at 8, 10-11.
5 Id. at 8.
6 Id. at 8 n.6.
7 Id. at 11.
8 Highmark, slip. op. at 1.
9 Octane Fitness, slip. op. at 8.
10 Id. at 8-9.
11 Id. at 9.
12 Id. at 7.
14 Id. at 7-8.
15 Id. at 11.