Upcoming SCOTUS Cases Can Help in the War Against Patent Trolls

Patent trolls are a rising problem in this country. These non-practicing entities purchase patents, attempt to enforce rights by threatening litigation, even over the most questionable of claims, and they often profit, as settlements are paid out to avoid the cost of litigation. Even when they do file litigation, there is little downside for the trolls, because many of them are attorneys. The high cost of litigating is mitigated by handling the legal work themselves.

Earlier this year, the White House proposed a list of reforms meant to fight patent trolling. A few days later, Chief Judge Randall Rader, of the Federal Circuit, penned an op-ed supporting one of the reforms, fee-shifting, though he noted that fee-shifting is already authorized by Section 285 of the Patent Act, as well as Rule 11 of the Federal Rules of Civil Procedure.

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Despite the authority to shift fees, Judge Rader noted that these provisions were only used in 20 out of nearly 3,000 patent cases filed in 2011, and that in 2012, the majority of all patent suits were by non-practicing entities. While he urged more frequent use of fee-shifting, could the reason for courts' reluctance lie in his own court's jurisprudence?

The Supreme Court, last week, granted certiorari in two Federal Circuit cases involving fee-shifting. (We'll have an in-depth look at both cases on our Federal Circuit blog later today.) Depending on how the court rules, the outcome could make it significantly easier for lower courts to award fees, and more difficult for the Federal Circuit to disturb those rulings.

In Highmark Inc. v. Allcare Health Management Systems Inc., the Federal Circuit employed a deference-free review standard when reversing a lower court's award of attorney's fees. The district court had awarded fees after six years of litigation on, what it felt, was a meritless claim.

One might argue that they are in a better position to determine the merits of a claim, as they are the trial court, and as such, their decision deserves deference. Indeed, every other circuit and the Supreme Court employs a deferential standard in these scenarios. After SCOTUS hears the case, the Federal Circuit might be forced to do the same.

The other case, Octane Fitness LLC v. Icon Health & Fitness Inc. will review the Federal Circuit's own "rigid and exclusive two-part test" for making fee-shifting determinations. Because the test is so strict, the question the Supreme Court will be addressing is whether such a rigid test eliminates judicial discretion, and whether it contradicts Congressional intent and Supreme Court precedent.

If both of these rulings come out in favor of flexibility in fee-shifting, Judge Rader's proposal might become a reality. As is, his own court's rulings are likely playing a part in courts' reluctance to punish frivolous patent litigation.

Related Resources:

• State of Vermont Sues Patent Troll (FindLaw's In House Blog)
• Fed. Cir. Clarifies Newegg Opinion, Crushes Patent Troll (FindLaw's Federal Circuit Blog)
• Confessions of a Patent Troll (FindLaw's Greedy Associates Blog)