On April 29, 2014, the Supreme Court issued its unanimous decision in Octane v. Icon (opinion available here). The Supreme Court ruled that the Federal Circuit had been misapplying Section 285 of the Patent Act which states, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” Specifically, the Federal Circuit had, in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378 (2005) held that “[a] case may be deemed exceptional” under § 285 only in two limited circumstances: “when there has been some material inappropriate conduct,” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.” The Supreme Court reversed, finding that this was not the appropriate standard to award attorney’s fees in that it was an overly rigid framework and so demanding that it appeared to render Section 285 largely superfluous. Instead, the Supreme Court held:
- “The framework established by the Federal Circuit in Brooks Furniture is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”
- Section 285 “imposes one and only one constraint on district courts’ discretion to award attorney’s fees in patent litigation: The power is reserved for ‘exceptional’ cases.”
- “A[n] ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”
- “District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances. As in the comparable context of the Copyright Act, [t]here is no precise rule or formula for making these determinations, but instead equitable discretion should be exercised in light of the considerations we have identified.” (citation and quotations omitted)
- The Supreme Court suggested that the following are a list of nonexclusive factors that district courts may appropriately consider: “frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” (citation omitted)
- “Under the standard announced today, a district court may award fees in the rare case in which a party’s unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so ‘exceptional’ as to justify an award of fees.”
The Supreme Court also rejected the Federal Circuit’s requirement that litigants establish their entitlement to fees under Section 285 by “clear and convincing evidence.” Instead, the preponderance of the evidence standard applies.
The Supreme Court’s decision thus makes it easier for Defendants who prevail in patent infringement cases to recover attorney’s fees from the losing plaintiffs. Although not addressed by the Supreme Court, the decision also suggests that it will be easier for prevailing plaintiffs to recover their attorney’s fees from losing defendants.