In two closely watched cases, the Supreme Court yesterday issued its opinions in Octane Fitness, LLC v. ICON Health & Fitness, Inc. (Supreme Court docket number 12-1184) and Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. (Supreme Court docket number 12-1163). The issue in both cases centered on the attorney fee-shifting provision of 35 U.S.C. § 285, which simply reads: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." In Octane, a mostly unanimous court (Justice Scalia did not join footnotes 1-3) held 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." Octane, slip op. at 7-8. Of course, it should come as no surprise that the Court required such a determination to be made "considering the totality of the circumstances." Id. at 8. Finally, the Court left the determination of whether a case is "exceptional" to the discretion of the district court judge. Therefore, the outcome of Highmark necessarily followed (this time unanimously): "We therefore hold that an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court's §285 determination." Highmark, slip op. at 5. This is true, even though "questions of law may in some cases be relevant to the §285 inquiry." Both cases were vacated and remanded.
These cases have been watched closely because of their potential impact on so-called "patent trolls." The outcome will make it much easier for a trial courts to shift the fees to the non-prevailing party if it believes that the litigation was brought or conducted in an abusive manner. It will also make it more difficult for an appeals court to overturn such a determination. These decisions also come as the Senate is working out a compromise on a new fee-shifting provision to the patent statute. It might be prudent, therefore, to put legislative reform efforts on hold (especially with regard to § 285), until the impact of these decisions can be ascertained.
Patent Docs will provide additional analysis of these opinions in a subsequent post.