A SHIFTING LANDSCAPE FOR SHIFTING FEES: ATTORNEY-FEE AWARDS IN PATENT SUITS AFTER OCTANE AND HIGHMARK
Darin Jones(fn*)
Abstract: Section 285 of the Patent Act authorizes courts to award attorney fees to the prevailing party in patent litigation in "exceptional cases." Until recently, interpretation of § 285 had been governed by a highly restrictive formulation set forth by the United States Court of Appeals for the Federal Circuit. In April 2014, the United States Supreme Court released a pair of decisions-Octane Fitness v. ICON Health and Fitness, and Highmark Inc. v. Allcare Health Management System, Inc.-that rejected the Federal Circuit's interpretation of § 285 and reinvigorated the potential for fee shifting in patent suits. This Note argues that the Supreme Court's decisions in Octane and Highmark broaden the potential for parties in patent litigation-particularly defendants-to seek and receive awards of attorney fees. This Note presents a survey and analysis of the district court opinions deciding attorney-fee motions under § 285 announced in the eight months following Octane and Highmark. The results of that survey indicate that defendants are now significantly more likely to receive attorney-fee awards than they were previously. This Note ultimately argues that defendants in patent suits should consider these new fee dynamics as a key element of their litigation strategy from the outset of patent defense cases. Doing so may enable them to take advantage of the newly expanded opportunity for fee shifting. To that end, this Note suggests that defendants should actively strive to inform district court judges about their broad authority to award fees. Additionally, this Note recommends that litigants avoid analogizing to prior successful cases when arguing for fees. Instead, this Note proposes that parties should follow the example set by the Supreme Court and focus on the plain meaning of the statute using common sense arguments.
INTRODUCTION
"The court in exceptional cases may award reasonable attorney fees to the prevailing party."(fn1)
In civil litigation in the United States, "[e]ach litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise."(fn2) This "bedrock principle [is] known as the 'American Rule.'"(fn3) Title 35 of the United States Code, the title that governs patent law, contains one of the exceptions to that general rule. The fee-shifting provision in § 285 allows district courts discretion to award attorney fees "in exceptional cases." The text of § 285 has remained identical since 1952.(fn4) For most of the last ten years, however, judicial interpretation of § 285 had been governed by the "rigid and mechanical formulation"(fn5) set forth by the United States Court of Appeals for the Federal Circuit in Brooks Furniture Inc. v. Dutailier International, Inc.(fn6)
The Brooks Furniture framework, as it came to be known, permitted attorney fees awards in only two circumstances: if a moving party could prove that its opponent had engaged in material litigation misconduct, or when the case was brought in subjective bad faith and the claims were objectively baseless.(fn7) Moving parties were required to show these elements by clear and convincing evidence.(fn8) Over time, the rigid interpretation of § 285 under Brooks Furniture garnered an increasing amount of criticism from prominent commentators, who argued that patent litigants-particularly defendants-needed a "flexible" rule that would "discourage aggressive suits and frivolous demands."(fn9) Practically speaking, patent defendants have had relatively little opportunity to use fee awards to discourage frivolous, expensive litigation.(fn10) As of last spring, that landscape is shifting.
In April 2014, the United States Supreme Court responded to the longstanding criticism that the Federal Circuit had improperly eviscerated congressional intent to provide meaningful fee-shifting in § 285. In two landmark decisions-Octane Fitness, LLC v. ICON Health and Fitness, Inc.(fn11) and Highmark Inc. v. Allcare Health Management System, Inc.(fn12)- the Court may have significantly expanded the availability of attorney fee awards in patent infringement suits, and, consequently, fundamentally altered the dynamics of patent litigation suits.
This Note documents the shifting landscape of fee awards under § 285, and offers concrete suggestions to litigants, particularly defendants, about how best to take advantage of courts' new potential receptivity to awarding fees in appropriate cases. In Part I, this Note briefly describes the statutory history of the Patent Act's fee-shifting statute, and reviews the provision's interpretation prior to the Supreme Court's twin decisions in Octane and Highmark-including a synopsis of the now-defunct Brooks Furniture framework that governed previously. Part II describes the Octane and Highmark decisions, analyzing the Court's interpretation of the language as well as the purpose behind § 285. Part III examines the post-Octane world. It canvasses and describes the results from the first fifty-five decisions that have applied Octane and Highmark. It includes a survey of the district court opinions deciding a motion for attorney fees under § 285 released between April 29, 2014 (the day Octane and Highmark were decided), and December 31, 2014. Finally, in Part IV, this Note suggests that defendants in patent litigation should more aggressively seek fees in light of the most recent developments. In particular, this Note argues (1) that litigants should strive to inform courts that awards of attorney fees are within the discretion of individual judges considering the totality of the circumstances in a particular case, and (2) that judges should use common sense, informed by their own experience, in determining whether an individual case is "exceptional." The information presented in this Note is designed to assist litigants who wish to take advantage of the apparently broadening opportunity to receive fee awards in the new legal landscape opened by Octane and Highmark.
I. THE WORLD BEFORE OCTANE AND HIGHMARK
In order to understand the effect that the Supreme Court's decisions in Octane and Highmark will have on attorney-fee disputes going forward, it is necessary to understand the state of the law prior to these decisions. Part I.A begins with a discussion of the legislative history of the fee-shifting statute that applies in patent suits, 35 U.S.C. § 285. Part I.B outlines the Federal Circuit's decision in Brooks Furniture Inc. v. Dutailier International, Inc.,(fn13) which governed interpretation of § 285 from 2005 until April 2014, when the Octane and Highmark cases were decided.
A. Statutory History of 35 U.S.C. § 285
Prior to 1946, the American Rule-by which each party to litigation pays its own attorney fees-applied in patent litigation just as it does in civil litigation generally.(fn14) Then in 1946, Congress created a statutory exception in the body of law that governs patent litigation and granted district courts the discretion to "award reasonable attorney's fees to the prevailing party upon the entry of judgment on any patent case."(fn15) This fee-shifting provision was added to the former 35 U.S.C. § 70 (now § 285) and took effect immediately upon approval.(fn16)
Congress had no intention, however, for that amendment to transform the American patent litigation system into a loser-pays regime. On the contrary, the Senate Committee on Patents reported that it did "not contemplate[] that the recovery of attorney's fees [would] become an ordinary thing in patent suits."(fn17) Congress included the provision "so as to enable the court to prevent a gross injustice to an alleged infringer."(fn18) Allowing district courts the discretion to award fees, Congress believed, would also deter willful infringement "by anyone thinking that all he would be required to pay if he loses the suit would be a royalty."(fn19)
In the years following the amendment's adoption, courts understood that Congress wanted the provision to be applied only in limited circumstances. An early decision out of the Northern District of Ohio explained that, in that court's view, it was "apparent from the wording of the statute and its history that an award of attorneys' fees should not be made in an ordinary case. The court is invested with discretionary power where it is necessary to prevent gross injustice."(fn20) A few years later, in 1951, the Ninth Circuit expressed essentially the same interpretation of the 1946 fee-shifting provision:Congress made plain its intention that such fees be allowed only in extraordinary circumstances. . . . Thus, the payment of attorney's fees for the victor is not to be regarded as a penalty for failure to win a patent infringement suit. The exercise of discretion in favor of such an allowance should be bottomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which makes it grossly unjust that the winner of the particular law suit be left to bear the burden of his own counsel fees which prevailing litigants normally bear.(fn21) This reading was supported by numerous decisions from courts across the country.(fn22)
In 1952, Congress enacted a large-scale revision and recodification of the patent laws.(fn23) As part of the 1952 Patent...
