In two cases decided yesterday, the U.S. Supreme Court made it easier for trial judges to award attorneys’ fees to prevailing parties in federal patent lawsuits and increased the likelihood that those rulings would be given some deference on appeal. These rulings will directly impact any client involved in prosecuting or defending patent litigation.
Unlike most U.S. civil lawsuits in which the parties must bear their attorneys’ fees, the Patent Act (35 U.S.C. § 285) authorizes trial judges in patent lawsuits to award attorneys’ fees to the prevailing party in “exceptional cases.” In 2005, the Federal Circuit (the U.S. appellate court handling all patent appeals) decided this meant attorneys’ fees could only be awarded in cases involving either (1) misconduct related to the litigation or (2) an objectively baseless or subjectively bad faith claim based upon clear and convincing evidence. This rule drastically limited the ability of trial judges to award attorneys’ fees in patent cases. Today, the Supreme Court declared in two unanimous rulings that this framework is too rigid and limiting.
First, in the Octane Fitness v. Icon Health case, the Court held the existing definition of an exceptional patent case was too narrow, declaring instead that an exceptional case is “simply one that stands out from others with respect to substantive strength of a party’s litigating position (considering both governing law and facts of the case) or the unreasonable manner in which the case was litigated.” The Court also eliminated the requirement that a prevailing party prove its right to attorneys’ fees by “clear and convincing evidence.” As a result, trial judges may now use their discretion, considering the totality of the circumstances of each case, to grant attorneys’ fees to the prevailing party under a new framework for “exceptional cases.”
Second, in its other decision today in Highmark Inc. v. Allcare Health, the Court added that a trial judge’s award of attorneys’ fees is to be reviewed on appeal for “abuse of discretion,” the standard used for appellate review of fee awards in other similar areas of law, rather than the “de novo” standard.
The implications of these two rulings include the following:
Requests for attorneys’ fees will become more prevalent and will be awarded more often;
All aspects of these discretionary attorney fee rulings will be reviewed only for abuse of discretion, thus leading to fewer reversals on appeal;
The Supreme Court will continue, as it has since at least 2006, taking an active role in reviewing patent law and eliminating many bright-line rules made by the Federal Circuit; and
The Supreme Court will also continue to modify patent law to conform it to other analogous federal law.