Patent infringement litigation usually is high stakes and very expensive. The cost of the litigation can easily reach seven figures or more. In the United States, each party to litigation generally bears its own costs, with exceptions. Section 285 of the patent statute contains the exception for patent litigation. The statute is short and sweet:
The court in exceptional cases may award reasonable attorney fees to the prevailing party. (Emphasis supplied).
But what cases are ‘exceptional?’ In the past, the Federal Circuit Court of Appeals, which hears patent appeals, only allowed an award of attorneys fees if the claim or defense was ‘objectively baseless’ based on ‘clear and convincing evidence.’ This standard favored patent owners seeking to enforce patents and provided a bright-line, predictable result.
Earlier this year the Supreme Court in Icon Health & Fitness rejected the Federal Circuit bright-line standard, and, in keeping with the recent Supreme Court approach to patent cases, adopted a fuzzy-is-better standard:
…an “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…
The Federal Circuit recently considered the Icon Health & Fitness case on remand from the Supreme Court and sent the case back to the lower court for decision on the attorneys fee issues. The Federal Circuit reminded the lower court that the attorneys fee decision does not stop with a determination that a case is ‘exceptional.’ The lower court has discretion to deny attorneys fees even in exceptional cases. The decision of the lower court judge will be reviewed on appeal only to determine whether the judge abused his or her discretion, which means the Federal Circuit will defer to the lower court judge in almost all cases.
The effect of the decisions is to transfer power from the Federal Circuit to the district court judges who hear the witnesses, see the evidence, and observe the litigation behavior of the parties. The effects on the parties are to reduce the predictability of patent litigation, to increase the risk to every patent litigant, and generally to discourage patent litigation.
— Robert Yarbrough, Esq.