Yesterday, the United States Supreme Court handed down a ruling that could offer defendants some real relief from frivolous patent infringement lawsuits, because it makes it easier for a defendant to be awarded its attorney fees. Octane Fitness, LLC v. Icon Health & Fitness, Inc., 572 U.S. ___ (2014). The decision could prove particularly helpful to those who often find themselves dealing with patent trolls.
Pursuant to Patent Statute 35 U.S.C. §285, a court may award reasonable attorney fees to the prevailing party “in exceptional cases.” However, under prior Federal Circuit Court precedent, a case could be deemed “exceptional” only if the district court found (by clear and convincing evidence): (i) “litigation-related misconduct of an independently sanctionable magnitude,” or (ii) “that the litigation was both ‘brought in subjective bad faith’ and ‘objectively baseless.’” Id.
The Supreme Court rejected the Federal Circuit Court’s “overly rigid” test by noting that “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating positions (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Id. (emphasis added). Accordingly, a defendant no longer must prove that the litigation was both brought in subjective bad faith and objectively baseless. Id. (“[A] case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.”)
The Court further rejected the requirement that litigants establish entitlement to attorney fees by clear and convincing evidence by explaining that “patent-infringement litigation has always been governed by a preponderance of the evidence standard.” Id. The Court clarified that the decision to award attorney fees was left to the “discretion” of the district court based on the “totality of the circumstance.” Id.
In short, the attorney-fee bar has been lowered in patent cases, so those who bring meritless cases (or engage in unreasonable litigation conduct) now run a greater risk of having to pay the other side’s attorney fees.