In Octane v. ICON, the US Supreme Court overturned prior Federal Circuit decisions on the standard for awarding attorney fees in patent litigation. In a companion case, Highmark v. Allcare, the US Supreme Court said that appellate review of a lower court award of attorney's fees for an "exceptional" case will only be reviewed for an "abuse of discretion" by the lower court.
Section 285 of the Patent Act allows a district court to award attorney fees in an "exceptional case." However, the Patent Act does not define "exceptional."
In the past, the Federal Circuit has said that a case can be "exceptional" in only two situations: 1) when there has been "material inappropriate conduct" or 2) when the litigation has been "brought in subjective bad faith" and the lawsuit is "objectively baseless."
The US Supreme Court, in Octane, rejected the Federal Circuit standard. Instead, the Supreme Court said the standard is whether the case "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." Whether the standard is met is based on the "totality of the circumstances."
PRACTICE POINTER: What is the impact of these Supreme Court decisions? Perhaps little. Court decisions awarding attorney fees are often puzzling when the court describes how a party's position is objectively baseless, as one could see the reasonableness to that party's position.
Nevertheless, these decisions will seemly impact to a greater extent smaller litigants who have a financially difficult time affording their own attorney's fees, let alone the additional fees of the opposing party. Those litigants will be hesitant to enforce their patent rights or defend against infringement claims because it is now riskier to guess what might "stand out" based on the "totality of circumstances.
© Michael A. Shimokaji, 2014 The contents of this article represent the opinions of the author and not those of the author's law firm or clients.