May 20142

Supreme Court Modifies Standard for Awarding Attorney’s Fees in Patent Cases

Two recently decided Supreme Court cases have made it easier for a party to be granted attorney’s fees after winning a case. According to 35 U.S.C. §285, a court may award attorney’s fees to a winning party in “exceptional” cases. Since 2005, the determination of the whether a case is exceptional has followed the guidelines outlined by the Federal Circuit in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378 (2005). These guidelines set a high standard for what is to be considered “exceptional.” Under Brooks, a case was exceptional only if there was “some material inappropriate conduct” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.” Furthering the difficulty of proving an exceptional case, these requirements had to be established by clear and convincing evidence.

Two recent decisions by the Supreme Court have modified the requirements for showing an exceptional case. In Octane Fitness, LLC v. Icon Health & Fitness, Inc., the Supreme Court overturned the ruling in Brooks declaring it “unduly rigid” and stating that it “impermissibly encumbers the statutory grant of discretion to district courts.” Instead, the Supreme Court focused on the ordinary definition of the term “exceptional” meaning uncommon, rare, or not ordinary. Therefore, an exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.” The result is a more flexible standard relying on the district court’s discretion in consideration of the facts of the case and the totality of the circumstances.

In the companion case Highmark Inc. v. Allcare Health Management System, Inc., the Supreme Court ruled on the standard of review that appellate courts should use when reviewing an exceptional case determination made by the district court. In Highmark, the appellate court had reviewed an exceptional case determination de novo, granting no deference to the District Court’s decision. However, because the new test set forth in Octane Fitness relies on the discretion of the district court to determine whether a case is exceptional, the Supreme Court held that an appellate court should review this decision using an abuse-of-discretion standard.