Octane Fitness, LLC v. ICON Health and Fitness, Inc. and Highmark, Inc. v. Allcare Health Mgmt. Sys. Inc.
The determination of whether a case is “exceptional” under the attorney fee-shifting provision of The Patent Act is left to a broad discretion of the District Court.
In two slip opinions rendered April 29, 2014, SCOTUS addressed issues regarding awarding attorneys fees under 35 U.S.C. § 285 to prevailing parties in “exceptional” patent infringement cases. Under 35 U.S.C. § 285, a District Court is authorized to award attorney’s fees to prevailing parties in “exceptional cases.” The CAFC had used a Brooks Furniture standard defining an “exceptional case as one which involves “material inappropriate conduct” or is both “objectively baseless” and “brought in subjective bad faith.” Under the Brooks Furniture standard, an exceptional case must be established by clear and convincing evidence.
In the opinion delivered by Justice Sotomayor, the Court, in a 9-0 decision, construed the term “exceptional” in its plain and ordinary meaning and held that exceptional means “uncommon,” “rare,” and “not ordinary.” The Court held that the CAFC has applied too rigid of a standard in determining whether a case is an exception case and rejected the Brooks Furniture standard.
According to Justice Sotomayor, the § 285 statute is “patently clear” and imparts flexibility on the District Court to decide whether a case is exceptional. Octane, slip op. at 7. “[A]n ‘exceptional’ case is simply one that 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.” Id. at 7-8. Therefore, the intent of the statute only requires that the litigation present either subjective bad faith or exceptionally meritless claims. Additionally, the Court held that a preponderance of the evidence standard is the appropriate standard to use to establish entitlement of fees, rather than a clear and convincing evidence standard. Id. at 11.
Reversed and Remanded
In this opinion, also delivered by Justice Sotomayor, the Court used the Octane case as precedent to unanimously hold that “an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court’s § 285 determination.” Highmark, slip op. at 5.
Vacated and Remanded
Note: The holdings in these cases, relaxing the standard required for district courts to determine whether a case is “exceptional” may aid in thwarting certain “patent trolls” from asserting patent claims that are meritless or brought in bad faith. Stay tuned to see how these rulings affect the litigation process, the legislative process regarding patent reform, and if the holdings will actually send the trolls back under the bridge or if the trolls will just find another way out.
The link to the transcript for the March 31, 2014 oral arguments before the SCOTUS in Alice Corp. v CLC Int’l can be found here.
Background: Alice Corporation, petitioner, owns the four patents-in-suits which are directed toward a computerized trading platform for the execution of a previously agreed-upon exchange, known as “settlement.” The inventions include electronically maintained accounts for each party in the settlement and after receiving transactions from each party, the computer system effects the exchange. The United States District Court for the District of Columbia declared each of Alice’s patents invalid for not defining patent-eligible subject matter. The U.S Court of Appeals for the Federal Circuit affirmed the decisions, in an en banc rehearing.
Issue: Whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.
Per usual, we will preface our thoughts with the following disclaimer: “It is generally a futile effort to predict how the Supreme Court will rule on any given issue.” That being said, below are some quotes that we found of particular interest:
U.S. Patent No. 4,151,613: Protective device for the buttocks and hips of a person for use in skateboarding.
JW Note: For all our readers who are also skateboarding enthusiasts!
What is claimed is:
1. A flexible, unitarily molded, protective device for wearing on and protecting the buttocks and hips of a person engaging in the sport of skateboarding comprising:
a. casing means having resilient means disposed therein and having a generally rectangular configuration adapted to be worn around a person’s midsection and comprising cutout sections in the upper portion providing upwardly extending arm members;
b. said arm members comprising slot means containing a belt member therethrough;
c. said rectangular casing means including a lower main body portion comprising tongue means and annular slot means at each side;
d. a pair of double stranded cord means secured to the lower central portion of said main body portion and to said annular slot means on each side of said lower body portion whereby said device is worn and secured around a person’s waist by securing said belt member to the person’s waist and securing each of said cord means around each of the person’s legs.
We are pleased to welcome Kristen Fries as a contributing author at Anticipate This!
Kristen is a patent attorney licensed in the State of Ohio and registered to practice before the United States Patent and Trademark Office. Ms. Fries practices in the area of intellectual property and technology law, including prosecution of patent applications, in various technical fields.
She holds a Bachelor of Science in Mechanical Engineering from Miami University and is a registered Engineer-in-Training (EIT). Kristen earned a Juris Doctor, cum laude, from the University of Toledo College of Law. As a law student, she served as Note and Comment Editor for Law Review.
Prior to attending law school, Ms. Fries worked in the building materials industry as a project engineer for a manufacturing facility
We look forward to reading Kristen’s thought-provoking commentary on all things IP. Enjoy!