In 9-0 Vote, Supreme Court Makes it Easier to Get Fees in Patent Cases

Ars Technica reports:

This morning, the US Supreme Court published opinions in two of the five patent cases it will decide this term. Both will make it easier for parties who win patent cases to collect fees when the other side has engaged in outlandish behavior or filed an exceptionally weak case.

This result will be good news to many tech companies that believe they are regularly attacked with meritless patent cases. A lower standard for fee-shifting would allow them to get some leverage against the non-practicing patent owners sometimes known as ”patent trolls.” Many who filed briefs have supported an easier standard for fee-shifting. Apple took the unusual step of filing its own brief in one of these cases, explaining how it had to settle 51 of 57 recently completed patent cases despite believing that its position was legally superior. “[T]he opening line of many negotiations is some form of, ‘What we’re asking for is less than it will cost you to litigate this case to judgment,’” wrote Apple’s lawyers.

Justice Sonia Sotomayor wrote both opinions for a unanimous court.

In the first case, Octane Fitness, a company specializing in high-end elliptical machines, was sued by Icon Health & Fitness, a much larger competitor. Octane spent about $2 million on the litigation, but its requests to get those fees reimbursed were rejected by both the district court and the US Court of Appeals for the Federal Circuit, which considers all patent appeals.

The Supreme Court overruled the lower courts. In their unanimous opinion for Octane Fitness v. Icon Health & Fitness, the justices found the Federal Circuit had taken a wrong turn in 2005 when it rejected the “holistic, equitable” approach toward attorneys’ fees and took up a “more rigid and mechanical formulation.” In order to get fees in a case, a party had to show that a litigation is both “objectively baseless” and “brought in subjective bad faith.”

That’s almost an impossible standard to meet, Octane’s lawyer Rudy Telscher told Ars in an interview before the February oral arguments. “You’ve got to show that the plaintiff brought a ‘zero merit’ case, and they knew that’s what they were doing.”

Instead, the Supremes said today that fees should be awarded in an “exceptional” case. That’s what the statute calls for, and the word “exceptional” should be given its ordinary meaning. ”An ‘exceptional’ case is simply 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,” wrote Sotomayor.