No. 36
June 2014

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The U.S. Supreme Court Makes it Easier for District Courts to Award Attorney's Fees in Patent Litigation
(Article by Joshua B. Goldberg, Nath, Goldberg & Meyer, Alexandria, Virginia, U.S.A.)
On April 29, 2014, the U.S. Supreme Court issued a decision involving the U.S. Patent Act's fee shifting provision, which authorizes U.S. district courts to award attorney's fees to prevailing parties in “exceptional cases”. 35 U.S.C. C 285. As it has been doing in many other cases recently, the Supreme Court unanimously rejected the current “unduly rigid” test of the Federal Circuit laid out in Brooks Furniture Mfg., Inc. v. Dutailer Int'l., Inc., 393 F.3d 1378 (Fed. Cir. 2005), instead granting more discretion to the district courts in determining whether a specific case is exceptional. The general principle put forth by the Supreme Court is that:
    [A]n “exceptional” case is simply one that stands out from the 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 [and without any] precise rule or formula for making these determinations.
In contrast, the Brooks Furniture test defined an “exceptional case” as one either involving “material inappropriate conduct” or one that is both “objectively baseless” and “brought in subjective bad faith.” Brooks Furniture also required that parties establish the “exceptional” nature of a case by “clear and convincing evidence.”

The Supreme Court indicated that, even without Section 285, courts hold the inherent power to impose fees on parties for bad behavior. Here, the Court made clear that Section 285 should be construed to go beyond that inherent power — otherwise it would be superfluous.

This decision does not expressly favor patentees or accused infringers. However, it has eliminated the Federal Circuit's “safe-harbor” for protecting plaintiffs. In the past, attorney fees were not allowed for filing a losing case unless the case was “objectively baseless.” In patent cases, that standard is difficult to meet because of all the avenues for ambiguity. That safe-harbor is now gone.

Finally, the Supreme Court rejected the Federal Circuit's rule requiring clear and convincing evidence before an award of fees. Here, the court held that there is “no specific evidentiary burden.” Rather, as mentioned, the decision is “a simple discretionary inquiry.”