Supreme Court Relaxes Standard for Recovering Attorney Fees in Patent Cases

by Chambliss, Bahner & Stophel, P.C.

On April 29, 2014, the United States Supreme Court significantly lowered the standard for demonstrating entitlement to attorneys' fees in patent cases. In Octane Fitness, LLC v. Icon Health & Fitness, Inc.1, the high court held that the decision whether to award attorneys' fees rests on a determination, under the totality of the circumstances and based on a preponderance of the evidence, that the case is one that stands out from others with respect to either (i) the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or (ii) the unreasonable manner in which the case was litigated. The Court rejected the more rigid standard that had been adopted by the United States Court of Appeals for the Federal Circuit, which required proof by clear and convincing evidence of either (1) some "material inappropriate conduct related to the matter in litigation" or (2) litigation brought in "subjective bad faith" that was "objectively baseless."

The statutory basis for awarding attorneys' fees in patent cases is found at 35 U.S.C. Section 285, which in its entirety reads: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." Now, federal district courts are to determine whether to award fees on a case-by-case basis, considering all the circumstances and applying "equitable discretion" to the decision.

The change in proof requirements to a more relaxed preponderance of the evidence standard (i.e., the evidence more than likely proves the proposition for which it is offered) from the previous clear and convincing standard (i.e., proof that produces in the finder of fact a firm belief or conviction that the proposition asserted is correct) is itself a significant change. The lower preponderance of the evidence standard, coupled with the "totality of the circumstances" inquiry, gives district court judges considerable latitude in shifting fees to the patent litigation winner.

In a case decided the same day as Octane, the Supreme Court in Highmark Inc. v. Allcare Health Management System, Inc.2 held that lower court decisions granting attorneys' fees in patent cases can be overturned only where a reviewing court finds that the district court judge abused his or her discretion in making the decision whether or not to award fees. In fact, the Supreme Court specifically held that all aspects of the fee determination are to be reviewed under the abuse of discretion standard, including, apparently, a decision not to award fees. Previously, the Federal Circuit had reviewed such decisions de novo (i.e., the district court judge's decision was not entitled to any deference).

In short, the Supreme Court has now made it easier for federal district court judges in patent cases to award fees to the winning party, and has made such decisions more difficult to overturn on appeal. It remains to be seen whether this change in the law will lead to more frequent awards of patent litigation fees to the winning party, particularly in cases where the losing party is a non-practicing entity or "patent troll." Congress has a number of bills under consideration that deal with patent troll cases, including fee-shifting provisions. Whether the combined effect of Octane and Highmark produces enough perceived change in the patent law to satisfy Congress' concerns will be revealed in the coming months.

1 Octane Fitness, LLC v. Icon Health & Fitness, Inc. , No. 12-1184, 2014 WL 1672251 at *2, 5 (April 29, 2014).
2 Highmark Inc. v. Allcare Health Management System, Inc. , No. 12-1163, 2014 WL 1672043 at *2 (April 29, 2014).


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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