Supreme Court loosens standards for fee-shifting in patent actions

Octane Fitness, LLC v. Icon Health & Fitness, Inc., 572 U.S. ___ (Apr. 29, 2014) (SOTOMAYOR for the Court, Scalia joining except for footnotes 1—3, all other Justices joining)  (CAFC: Rader, Newman, LOURIE) (D. Minn.: Montgomery) (5 of 5 stars)

The Supreme Court vacates the Fed. Cir.'s affirmance of a district court judgment declining to shift fees under § 285.

The Fed. Cir.'s analysis of § 285's requirements for an "exceptional" case was too inflexible.  "[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." Slip Op. at 7—8. District courts may make that determination in their discretion, "considering the totality of the circumstances." Id. at 8.

Professional Real Estate Investors ("PRE") is not contrary. That case imposed a rigid test for assessing the presence of a "sham litigation" that might expose a litigant to antitrust liability. PRE's logic and holding do not apply to § 285's assessment of exceptionality.

The Fed. Cir. also applied an incorrect evidentiary standard when it analyzed for clear and convincing evidence. Section 285 imposes "no specific evidentiary burden, much less a high one." Id. at 11. The Supreme Court noted that the traditional standard of proof for patent cases is a preponderance of the evidence.

Justice Scalia did not join footnotes 1—3, which discussed the legislative history of § 285.

Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. ___ (Apr. 29, 2014) (SOTOMAYOR for the Court, all Justices joining) (CAFC: Newman, Mayer (DIP), DYK) (N.D. Tex.: Means) (5 of 5 stars)

The Supreme Court vacates the Fed.Cir.'s partial affirmance of a district court judgment shifting fees under § 285.

Octane Fitness demonstrated the Fed. Cir.'s error in applying the § 285 analysis, and thus required vacatur. The Fed. Cir. also erred in reviewing the "objective baselessness" aspect of the district court's judgment de novo. Because a determination of exceptionality is discretionary, it is reviewed in all aspects for abuse of discretion.