By Brandon Scruggs. A member of our Litigation Practice Group
The Patent Act’s fee-shifting provision allows trial judges to award attorneys’ fees to the prevailing party in patent litigation in “exceptional cases.” Last month, the U.S. Supreme Court issued decisions in two cases on this subject, loosening the meaning of “exceptional” and requiring greater deference to a trial judge’s decision on whether to award attorneys’ fees.
In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court addressed whether the Federal Circuit had set the “exceptional case” standard too high. In Brooks Furniture (2005), the Federal Circuit had held that to qualify as “exceptional,” a patent case needed to either (1) involve “material inappropriate conduct” or (2) be both “objectively baseless” and brought in “subjective bad faith.”
The Supreme Court overruled the Federal Circuit’s standard and held that awarding attorneys’ fees is a matter of district court discretion and should be evaluated on a case-by-case basis. Justice Sotomayor, writing for the court, criticized the Brooks Furniture standard as “mechanical” and “unduly rigid.” Since the statute does not define “exceptional,” the standard should be “inherently flexible.”
The Supreme Court held that an “exceptional” case that could support an award of attorneys’ fees is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
The decision to award attorneys’ fees should be entrusted to the equitable discretion of the trial judge based on the “totality of the circumstances.” After all, who would know if a case is exceptional better than the judge who has observed the litigants’ conduct and positions for two or more years?
The Supreme Court also rejected the Federal Circuit’s requirement that an “exceptional case” must be proved by “clear and convincing evidence.” The Supreme Court noted that the statute imposes no specific burden of proof and seemed to suggest that the lower “preponderance of the evidence” standard (that is, more likely than not) may be proper. (More)
In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court addressed whether the Federal Circuit had set the “exceptional case” standard too high. In Brooks Furniture (2005), the Federal Circuit had held that to qualify as “exceptional,” a patent case needed to either (1) involve “material inappropriate conduct” or (2) be both “objectively baseless” and brought in “subjective bad faith.”
The Supreme Court overruled the Federal Circuit’s standard and held that awarding attorneys’ fees is a matter of district court discretion and should be evaluated on a case-by-case basis. Justice Sotomayor, writing for the court, criticized the Brooks Furniture standard as “mechanical” and “unduly rigid.” Since the statute does not define “exceptional,” the standard should be “inherently flexible.”
The Supreme Court held that an “exceptional” case that could support an award of attorneys’ fees is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position (both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
The decision to award attorneys’ fees should be entrusted to the equitable discretion of the trial judge based on the “totality of the circumstances.” After all, who would know if a case is exceptional better than the judge who has observed the litigants’ conduct and positions for two or more years?
The Supreme Court also rejected the Federal Circuit’s requirement that an “exceptional case” must be proved by “clear and convincing evidence.” The Supreme Court noted that the statute imposes no specific burden of proof and seemed to suggest that the lower “preponderance of the evidence” standard (that is, more likely than not) may be proper. (More)
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