Patent law allows a trial court to make the losing party pay the winner's attorneys' fees but only in "exceptional cases". 35 U.S.C. 285. What counts as "exceptional", you say? Good question.

The U.S. Supreme Court plans to answer it in Octane Fitness, LLC v. Icon Health & Fitness, Inc., No. 12-1184 (U.S.), which the Court has set for hearing on February 26, 2014. Octane poses the question of whether the Federal Circuit messed up eight years ago by holding in Brooks Furniture Mfg. v. Dutailier, Inc., 393 F.3d 1378 (Fed. Cir. 2005), that section 285 restricts fee-shifting in favor of a winning defendant to cases in which the plaintiff both made an (objectively) "baseless" claim and did so in (subjective) "bad faith".^* 

The "bad faith" bit seems to have come from the Federal Circuit's reading of Professional Real Estate Investors, Inc. v. Columbia Pictures, 508 U.S. 49 (1993). The Court in Professional Real Estate set out a test for judging whether the bringing of a lawsuit runs afoul of antitrust law. Because the first amendment protects the right to sue, the Court held, antitrust liability cannot attach unless the party that defeats a lawsuit proves (1) the claims "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits" and (2) an "inimical intent" in bringing the baseless claims. Then and only then will the Noerr-Pennington doctrine allow a court to reach the further question of whether an antitrust violation occurred.

Blawgletter gathers that the Federal Circuit now expects the Court in Octane to trash the Brooks Furniture standard. We know that because in Kilopass Technology, Inc. v. Sidense Corp., 13-1193, slip op. at 22 (Fed. Cir. Dec. 26, 2013), a panel went out of its way to cast asparagus on the Brooks Furniture requirement of "subjective bad faith". "While Sidense's arguments may constitute good faith assertions that our law should be something other than it is, as a panel, we are not able to entertain them", the court lamented. Id. But the panel sent the case back to the district court because, it concluded, the court had required proof that Kilopass in fact knew it had baseless claims rather than that it should have known their baselessness.

The panel went further. When Sidense attacked the requirement that it "prove exceptionality by clear and convincing evidence, as our law currently requires", the panel said that "Sidense's argument is not a frivolous one." Id. at 23. But, "while we cannot fault Sidense for making good faith arguments asking that we change our current law, as a penal we may not indulge it." Id.

Supreme Court review in Octane and the Federal Circuit's ruling in Kilopass suggest that the courts pay heed to complaints about possible abuses in patent cases. Which makes you wonder why some in Congress and the White House favor more legislative intervention. Count us skeptical.

 

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^*The Question Presented states the issue thus:

Does the Federal Circuit's promulgation of a rigid and exclusive two-part test for determining whether a case is "exceptional" under 35 U.S.C. 285 improperly appropriate a district court's discretionary authority to award attorney fes to prevailing accused infringers in contravention of statutory intent and this Court's precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants?