Supreme Court says standard set for fees was ‘overly rigid’
By Catherine Martin
The Daily Record Newswire
ST. LOUIS —More than a year after the U.S. Supreme Court ruled in favor of attorney Rudolph A. Telscher’s clients in a case regarding attorneys’ fees in patent cases, the originating court earlier this month agreed his client is entitled to the fees, though how much is still unclear.
The case has also led to similar victories nationwide in the year since the Supreme Court ruling, said Telscher, of Harness, Dickey & Pierce.
The case, Octane Fitness v. Icon Health and Fitness, had justices consider the standard for awarding attorneys’ fees in patent infringement cases.
Octane Fitness, Harness Dickey’s client, contended that the standard for prevailing defendants in such cases to get awarded fees is impossibly high and provides no deterrent against so-called “patent trolls” from filing frivolous suits
The Supreme Court ruled 9-0 in favor of Octane Fitness in April 2014. The court said the U.S. Court of Appeals for the Federal Circuit’s standard for fees was “overly rigid.” That standard, the opinion elaborated, only finds a patent case “exceptional” if a district court “finds litigation-related misconduct of an independently sanctionable magnitude or determines that the litigation was both ‘brought in subjective bad faith’ and ‘objectively baseless.’”
“This formulation superimposes an inflexible framework onto statutory text that is inherently flexible,” the Supreme Court opinion stated.
The litigation standard, “appears to extend largely to independently sanctionable conduct,” but, the court stated, “sanctionable conduct is not the appropriate benchmark.”
“Under the standard announced today, a district court may award fees in the rare case in which a party’s unreasonable conduct — while not necessarily independently sanctionable — is nonetheless so ‘exceptional’ as to justify an award of fees,” the opinion said.
The second category is also too restrictive, the court said, because a district court “must determine both that the litigation is objectively baseless and that the plaintiff brought it in subjective bad faith.”
“But a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award,” the court ruled.
The high court also rejected the federal circuit’s requirement “that patent litigants establish their entitlement to fees under [Section] 285 by ‘clear and convincing evidence.’”
“We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence,” the opinion stated. “And nothing in [section] 285 justifies such a high standard of proof.
The Supreme Court’s decision remanded the case to the federal circuit. From there, the case wound up back in the U.S. District Court of Minnesota.
“Everyone was thrilled [with the Supreme Court victory] but that would have been a hollow victory if we hadn’t gotten fees,” Telscher said.
Judge Ann D. Montgomery ruled for Octane on July 1.
“It boiled down to, she found that their case was unusually weak and found that they engaged in litigation tactics designed to drive up the cost of litigation,” he said.
Harness Dickey attorneys still don’t know how much those fees will be — Telscher said they’re seeking roughly $3 million. But the order meant that they will definitely get some fees. Telscher said that was a cause for celebration at his office.
“There were high fives and champagne going,” he said. “That was a big moment.”
Larry R. Laycock, a Salt Lake City attorney for Icon, did not return a call for comment. In a response filed on Wednesday, Icon’s attorneys countered that Octane should get no more than roughly $1 million in fees and about $130,000 in expenses.
The response alleges that, “despite Octane repeatedly characterizing this case as a simple one, Octane greatly overstaffed this case, with over 80 percent of its attorney billings attributable to partner level attorneys that were often engaged in tasks typically assigned to lower-billing associates.”
It’s not clear when the judge would rule.
Since the Supreme Court ruling, there has been an increase in filings and fees awarded in similar cases. From 2005 to 2011, there were “zero fee awards based on the weak merits of the case,” Telscher said, and since the Supreme Court decision last April, there have been more than 30 fees awarded.
A recent Federal Court Bar Association Report also stated that district courts “have awarded fees to prevailing accused infringers in over four times as many cases in the eleven months post-Octane than in the 12 months pre-Octane.”
“Part of it is the new standard that gives district courts more discretion,” Telscher said. “Also, it had to do with a lot of bad patent cases in the system.”
