U.S. Supreme Court

Can patent trolling be thwarted by award of attorney fees? SCOTUS accepts two cases on fee issue

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The U.S. Supreme Court agreed on Tuesday to hear two cases on the award of attorney fees in patent cases, including one cast as an avenue to deter frivolous litigation by patent trolls.

The cases give the Supreme Court a chance to decide what constitutes an “exceptional case” meriting an award of attorney fees to the prevailing party in patent litigation, the Recorder reports.

The cert petition (PDF) in Highmark v. Allcare Health Management Systems asks the court to decide whether the U.S. Court of Appeals for the Federal Circuit must give deference to a judge’s determination that a patent claim is objectively baseless. Under the test used to identify exceptional cases, cases must be objectively baseless and brought in bad faith.

“This petition arises from a patent-infringement case of the sort—in the district court’s own words—‘that gives the term “patent troll” its negative connotation,’ ” the cert petition says. The petition characterizes the health-management patent claim by Allcare as “vague” and says the company exists only to license the patent through the threat of litigation.

Highmark argues the Federal Circuit wrongly used de novo review. “The issue presented also has tremendous practical importance,” the cert petition says. “Litigation by patent assertion entities, sometimes called ‘patent trolls,’ now accounts for a majority of all patent cases. The threat of an exceptional-case finding is a crucial deterrent to meritless suits designed to extort licensing fees.”

The second case, Octane Fitness v. Icon Health and Fitness, is “something of a sleeper,” the Recorder says. The case stems from a routine, unpublished decision over the standard for determining exceptional cases meriting attorney fees. Octane’s cert petition (PDF) alleges that Icon “hatched a plan to extort royalties out of Octane with a weak patent case” concerning the rails on an elliptical training machine. Though Octane won the infringement suit on summary judgment, the company was unable to recover $1.3 million it spent defending itself.

Octane argues the difficult two-part test to obtain attorney fees is not justified by statute or precedent, and it encourages spurious patent cases. The standard “has strayed from the statutory ‘exceptional case’ mandate, resulting in a standard that is near-impossible to meet, and serves no deterrent value,” the cert petition says.

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