The Software IP Report

Supreme Court Rejects Federal Circuit’s Exceptional Patent Case Standard

By George Schooff

Categories: The Software IP Report

A unanimous Supreme Court announced that the Federal Circuit’s “objectively baseless” test for awarding attorney fees to the prevailing party in patent cases is “unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”  Octane Fitness, LLC v. Icon Health & Fitness, No. 12-1188, at 7 (U.S. Sup. Ct. Apr. 29, 2014).

Per the Court, the analysis “begins and ends” with 35 U.S.C § 285.  Section 285 states that “[t]he court may in exceptional cases award reasonable attorney fees to the prevailing party.”  Id.  The Court looked to the ordinary meaning of “exceptional” in ruling that an “exceptional” case is one that “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and facts of the case) or the unreasonable manner in which the case was litigated.”  Id. at 7-8.  The Court went on to direct district courts to determine the issue on a cases-by-case basis, considering the totality of the circumstances.  Id.  Moreover, the Court rejected the requirement that an “exceptional case” requires clear and convincing proof.  Id. at 11.  Rather, it need only be shown by a preponderance of the evidence.  Id.      

The take away?  As the Justices recognized at oral argument, the decision merely swaps out one set of words for another.  And, in remanding the case “for further proceedings consistent with this opinion,” it will be left to the lower courts to define the metes and bounds of an “exceptional case.”  That said, look for a spike in district courts awarding fees to “prevailing parties”—especially accused infringers—and for the Federal Circuit to be more circumspect in reversing those awards.