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Octane Fitness and Highmark Decisions, District Courts Decide Fees

By Gabriella Khorasanee, JD on May 06, 2014 | Last updated on March 21, 2019

On Tuesday, the Supreme Court released two opinions, both authored by Justice Sonia Sotomayor, regarding attorney fees in patent cases, and the meaning of the Patent Act's Section 285 language that allows a "court in exceptional cases may award reasonable attorney fees to the prevailing party." The cases have been closely watched, as companies are forced to defend patent claims against patent trolls, and the issue has gained traction in the media.

Well, it seems like attorneys can breathe a collective sigh of relief as the Supreme Court has "fixed" the fee shifting issue in patent cases. Read on to see how.

Octane Fitness, LLC, v. Icon Health & Fitness, Inc.

The issue in Octane Fitness was to determine the correct standard used to determine the award of attorney fees to a prevailing party. Section 285 only requires that a case be "exceptional," yet the Federal Circuit had required one of two things to prove a case exceptional: (1) "material inappropriate conduct;" or (2) litigation "brought in subjective bad faith" and "objectively baseless." The Court rejected this standard stating that the Brooks standard "is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts."

Instead, the Court held that the determination of what is an "exceptional" case "is simply one that stands out from others with respect to the substantive strength of a party's litigating position." To determine this, district courts must look at the totality of the circumstances, on a "case-by-case exercise of their discretion."

Highmark v. Allcare Health Management Systems

Next, the Court went on to decide the appropriate standard of review an award of attorney fees is subjected to on appeal, and said, "Our holding in Octane settles this case." Previously, the Federal Circuit was applying de novo review, but the Supreme Court rejected that standard for patent fee cases. Since Octane requires a district court to use its discretion to determine the award of attorney fees, then the appropriate standard of review is abuse of discretion.

These cases have given district courts considerably more leeway in determining patent awards, so hopefully attorneys who are continually defending actions against patent trolls will have a small advantage. Patent trolls may be less likely to initiate baseless actions now that they know they can be hit with the bill.

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