Old Attorneys’ Fees Provision Deemed “Unduly Rigid”

Today, in the Octane Fitness case, the Supreme Court lowered the bar for establishing an award of attorneys’ fees in “exceptional” patent infringement cases. In the past, such fees had been very difficult to obtain because of the onerous standard imposed by the Federal Circuit. Even when accused companies prevailed against unfounded allegations of patent infringement, they failed to recoup the millions of dollars expended on their defense. Section 285 of the Patent Act states: [t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” In order to be deemed an “exceptional” case, the Federal Circuit had previously required that it be shown that the litigation was brought in “bad faith” and was “objectively baseless.” A litigation was deemed to be “objectively baseless” when “no reasonable litigant could believe it would succeed.” Further, all of this had to be established by “clear and convincing” evidence. The Supreme Court did several notable things in its decision. First, it shunned the prior “clear and convincing” evidentiary burden in favor of a “preponderance of the evidence” (i.e., more likely than not or 51%) standard, which mirrors the burden for patent infringement. Second, it attempted to loosen what it deemed to be a “too rigid” standard by defining an “exceptional case” as “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.” The Court left this determination to the U.S. District Courts’ discretion, considering the “totality of the circumstances.” It will be interesting to see how much clarity this new standard brings to future requests for attorneys’ fees. Showing how a case “stands out from others” should be quite an interesting exercise. Removing the “bad faith” requirement and lowering the evidentiary bar should increase companies’ chances of being awarded their fees. Now, companies should be even more concerned about pursuing specious claims of infringement.