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SCOTA to Review Attorneys’ Fees

US Supreme Court
To review attorneys’ fees
In patent cases

The US Supreme Court has granted certiorari petitions in two patent cases in which the award of attorneys’ fees to the prevailing party is at issue.

Under 35 U.S.C. § 285, a court may award reasonable attorneys’ fees to the prevailing party in “exceptional cases.”  A case is considered “exceptional” if the litigation (1) was brought in subjective bad faith and (2) is objectively baseless.

As a matter of practice, courts only very rarely award attorneys’ fees to prevailing parties in patent cases.

Some have argued that this creates an unreasonably favorable environment for patent owners who sue to enforce patents of questionable validity, or who sue in cases of questionable infringement. Such plaintiffs may thus not be punished by the courts for pursuing baseless claims and running up the defendants’ expenses in order to force extortionate settlements.

In Octane Fitness, a federal district court granted a motion for summary judgment of non-infringement in favor of Octane. However, the court denied Octane’s motion for attorneys’ fees, on the grounds that the suit was neither objectively baseless nor brought in subjective bad faith. The Federal Court affirmed the decision on appeal, unwilling to lower the bar for exceptionality.

Octane appealed to the Supreme Court, arguing that the standard for getting attorneys’ fees “is near-impossible for an accused infringer to meet no matter the unreasonableness of the litigation, and that consequently serves as no deterrent to the assertion of spurious claims.”

Octane also stressed the “gross injustice” of an accused but innocent infringer having to spend more than $1 million to defend itself, with only a remote hope of reimbursement from the plaintiff.

In Highmark, the accused infringer also prevailed on summary judgment after years of litigation and millions of dollars in legal costs. The district court founds that the case was exceptional enough to merit an award of attorneys’ fees against the plaintiff on several grounds, including the lack of a pre-filing investigation by an attorney, who relied on an investigation by someone who was neither an attorney nor an engineer.

However, the Federal Circuit reversed in part, finding that at least some parts of the plaintiff’s case weren’t frivolous.

The plaintiff patent owner in the Highmark case was a Non-Practicing Entity (NPE) – a company which owns patents but does not itself make goods using the patented invention. The plaintiff in Octane was a major manufacturer of exercise equipment, but it had never sold a commercial product using the patent at issue.

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