Where Exceptional Becomes Normal
Garrison Keillor’s fictional Lake Wobegon is famous as the place “where all the women are strong, all the men are good-looking, and all the children are above average.” Exceptional gets defined down when it applies to everyone.
Last month, the US Supreme Court has defined down the term exceptional regarding patent infringement cases. The Court has made getting attorneys’ fees easier for those victimized by patent litigation, although further Congressional action may be necessary to make it more available.In Octane Fitness, LLC v. ICON Health & Fitness, Inc. a largely unanimous Supreme Court (in an opinion authored by Justice Sonia Sotomayor) reinterpreted that the term “exceptional” in the statute 35 U.S.C. § 285, which states that “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” Under an interpretation developed by the Federal Circuit, “exceptional” meant either “when there has been some material inappropriate conduct,” or when a lawsuit is “brought in subjective bad faith” and “objectively baseless.” See Brooks Furniture Mfg, Inc. v. Dutailier Int’l Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). This is not far from the standard used to sanction parties or counsel under Fed. R. Civ. P. 11(c) .
The Supreme Court now finds that “an ‘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.” Bad faith no longer needs to be found – just something unusual or unreasonable.
Moreover, under a case decided the same day by the Supreme Court, Highmark Inc. v. Allcare Health Management System, Inc., these awards of attorneys’ fees are not to be reviewed under a restrictive “clear and convincing evidence” standard, but a much more forgiving review for abuse of discretion by the district court.
Octane Fitness will allow many more district courts to penalize both patent trolls and those who try to grind down a patent holder, by elevating the risk that they will be found liable for the winning party’s attorneys’ fees. However, the judicial system has gone as far as it can in reinterpreting how patent trolls are punished. The next step belongs to Congress. It should amend 35 U.S.C. § 285 to further lower the hurdle for attorneys’ fees. In copyright infringement litigation under 17 U.S.C. § 505 a court does not have to find “exceptional” circumstances to award reasonable attorneys’ fees to the winner. Alternatively, Congress can prescribe attorneys’ fees to the winning party, unless there is good cause not to, such as very close questions of law or fact. While patent litigation is already much more expensive because they inevitably deal with the leading edge of technology, the prospect of having to pay for both sets of lawyers will focus the minds of parties on solving the issue sooner – and cheaper.