Federal Circuit Applies Octane Fitness/Highmark Exceptional Case Standard

by McDermott Will & Emery

Innovative Biometric Technology LLC v. Toshiba America Information Systems, Inc.

In April 2014, a unanimous Supreme Court of the United States reversed two opinions of the U.S. Court of Appeals for the Federal Circuit relating to the criteria for a district court’s ability to award fees to a prevailing party in patent litigation under 35 U.S.C. § 285 “exceptional case” doctrine and the standard of review to be applied by the Federal Circuit in reviewing a district court finding on whether a case is “exceptional.”  Octane Fitness v. ICON Health & Fitness, (IP Update, Vol. 17, No. 5) and Highmark v. Allcare Health Management System, (IP Update, Vol. 17, No. 5).  Less than a month later, in a three-paragraph non-precedential order, the Federal Circuit applied the Octane/Highmark abuse of discretion standard to a district court attorneys’ fees award.  Innovative Biometric Technology LLC v. Toshiba America Information Systems Inc., Case No. 13-1288 (Fed. Cir., May 15, 2014) (Wallach, J., Taranto, J., and Chen, J.) (non-precedential).

The order provides substantive guidance as to how such cases are likely to be handled, announcing in the form of limiting language the result: “[w]e affirm the award, because we find no abuse of discretion to undermine the bottom-line result.”

The Federal Circuit took pains to note what it was not deciding.  Citing to Fed. R. Civ. P. 37(c)(1), the district court excluded evidence from the attorneys’ fees hearing that related to the patentee’s pre-suit investigation.  The evidence had been withheld in response to discovery requests, but was offered by the patentee to help avoid a fee award.  The Federal Circuit noted that Toshiba agreed that withholding the information at the merits stage was an “undisputedly legitimate invocation of privilege covering pre-suit investigations.”  The issue not decided is whether such withheld evidence can be introduced during post-merits consideration of fee awards.

Next, applying Fed. R. Civ. P. 56(d), the Federal Circuit rejected Toshiba’s argument that “impropriety of a request can be established by the fact that the requester did not use the information.”  The Federal Circuit disagreed, restating the principle that “a discovery request can be legitimate yet uncover no information that turns out actually to be useful.”

Finally, the Federal Circuit noted that the district court approved the fee award as a condition of approving a voluntary dismissal with prejudice under Rule 41(a)(2), whether or not other legal authorizations supported the fee award.  The Federal Circuit noted that using Rule 41(a)(2) in this way “raises questions we need not answer.”


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