Federal Circuit in Kilopass: Section 285 is not as rigid as Brooks Furniture Suggests

Kilopass  is an important case, given the pending case on 285 before the Supreme Court, and in my view is a big step toward a proper interpretation of Section 285.  However, what drives me nuts is that the majority opinion, by Judge O'Malley who I respect enormously, talks about "chaning the standard" for imposing fees.  The Court can't do that:  Only Congress can.  The question should be:  what standard did Congress set in 1952?  For the reasons that follow, I believe Chief Judge Rader's concurrence is ultimately correct.  (Disclaimer:  I clerked for Chief until a few months ago.)

 

Down in the comments I explain there is no constitutional right implicated by fee shifting, so the PRE standard is irrelevant, and the statute means what it says.  Here is a clip from a California case, quoted in a comment below:

 

Hundreds of California statutes provide for an award of attorney fees to the prevailing party. (See Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2001) § 2.1, p. 12; see also id., ch. 17 [charting many such statutes].) Fee shifting simply requires the party that creates the costs to bear them. (Premier Elec. Const. Co. v. N.E.C.A., Inc. (7th Cir. 1987) 814 F.2d 358, 373.) It does not make a party “liable” for filing a lawsuit. This distinguishes Professional Real Estate Investors, supra, 508 U.S. 49, Equilon’s central authority, which concerns not fee shifting but the scope of antitrust liability for engaging in litigation. There, when movie studios challenging the rental of videodiscs to hotel guests brought a copyright infringement action against certain hotel operators, the operators filed counterclaims alleging the studios’ action was intended illegally to restrain trade. The high court held that one who initiates litigation is immune from antitrust liability for doing so unless the litigation is a “sham.” (Id. at pp. 60-61.) The case did not involve a fee-shifting provision nor did the court anywhere suggest that its “sham” litigation rationale might apply in the fee-shifting context. Equilon cites no case in which a fee-shifting provision has been held unconstitutional under Professional Real Estate Investors or its rationale. (See generally Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, 262, 44 L. Ed. 2d 141, 95 S. Ct. 1612 [finding it "apparent that the circumstances under which attorneys' fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine"].)

 

27 thoughts on “Federal Circuit in Kilopass: Section 285 is not as rigid as Brooks Furniture Suggests

  1. And yet again, Ned, you fail to address the controlling law of the exceptions to the printed matter doctrine.

    Amazing. Absolutely amazing.

  2. You mean, functionality? Clearly there is a functional relationship to the CPU that depends on the instructions. But not when the claim is to the media itself.

    Sent from Windows Mail

  3. So I have to wonder what does it take to get you to comment on the exceptions to the printed matter doctrine on any number of threads that involve that concept.

  4. David, I think the courts exist to resolve genuine disputes and both sides should bear their own attorneys fees as a matter of course. The problem is that today, if not always, law firms litigate to drive costs up to the other side as a means of forcing settlements. I once had a long discussion on litigation tactics with a district court judge who used to be a litigator with a small firm who described in detail just how mainly large law firms did this to drive up revenue to themselves as well.

    One real solution to this problem is keep litigation costs low. The very best way to do this is shorten time to trial. It is amazing just how much this reduces litigation costs all by itself. This also explains why defense counsel avoid rocket dockets like the plague and patent owners prefer them.

  5. anon, the court in Bertero required apportionment between tthe attorneys fees for defending against he bad faith counter claim, and prosecuting the cause in action that he himself had file. Based on the apportionment the court reduced the award of attorneys fees by $25k.

    It is noteworthy that the burden of apportionment was placed on the defendant in the MP case, otherwise all attorneys fees would have been awarded.

    The bottom line, attorneys fees for MP are damages. Attorneys fees for defense of meritorious claims can be apportioned because they are not damages.

    What David proposes is that attorney fees be awarded to prevailing defendants even for meritorious patent infringement claims filed by a patent owner. That is so beyond the pale —

    I am sure the Supreme Court would strike such a statute down as facially unconstitutional.

  6. Ned,

    That case does not support your position.

    Read it.

    Then read my comments here. Regular lawsuit activity (as in non-m@licious) is not something that makes the lawyer fees into a damage item.

  7. Attorney fees are recoverable as damages in an action for * prosecution. Balera v. National, 13 Cal.3d 43 (1974)

    Your whole thesis is that such damages can be awarded without proof of * prosecution, i.e., that one need not prove the cause of action was a sham. I really disagree.

    There is consistency between the Supreme Court cases on this topic and the law of * prosection.

    * the filter would not let me post the word. It begins with M.

  8. The rule that attorneys fees incurred in defending a suit are not recoverable, even though they’re caused by the need to sue (or the fact of having been sued) as “damages” is so settled in American Law it’s not worth discussing, guys. This is ancient.

  9. I too am puzzled by the blanket statement of attorney fees are damages.

    IF the actions are vexious and grossly unwarranted, then (and only then) does the specter of fees as damage arise, since the action is then logically made to cause such fees. But in any normal or non-objectively baseless action the fees incurred are a cost of business (no matter how unfortunate), that cost cannot be considered a damage.

    The whole point here is that in certain circumstances that cost is used as an UNFAIR weapon – but that very idea necessitates that conditions exist where the cost is NOT a weapon per se.

  10. Ned,

    We’ll just disagree.

    But, if attorney fees are “damages” then the American Rule elevates form over substance. It’s done so for 200 plus years, since even if you win a suit, you have to pay your own lawyers’ fees (unless a statute provides otherwise).

  11. I would also ask what are the damages one sustains when someone files a lawsuit against you? Litigation costs.

    I daresay that, for 1st Amendment purposes, the Supreme Court will treat actions for such “damages” in the same manner as a court award of exactly the same “damages” in the same case. To suggest otherwise is to elevate form over substance.

    Now consider that Congress further provided that full costs and attorneys fees could be awarded and would have to be paid interlocutory for filing and losing any motion? I can imagine the big bucks defendant exhausting any small buck plaintiff simply by filing a flurry of motions. Winning only a few might bankrupt the small fry.

  12. David, I really think you are misunderstanding the Supreme Court. Your cite to Alyeska is one example. Your quote about attorneys fees and discretion was discussing the prior passage, I believe, where the court said this about the statute in question:

    “Under Title II of the Civil Rights Act of 1964, 42 U. S. C. § 2000a-3 (b),[35] the prevailing 262 party is entitled to attorneys’ fees, at the discretion of the court, but we have held that Congress intended that the award should be made to the successful plaintiff absent exceptional circumstances.” Then they conclude, “Under this scheme of things, it is apparent that the circumstances under which attorneys’ fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine.”

    “Under this scheme of things” must be given weight. The Court apparently has no problem in protecting the right of the people to petition the courts for a redress of grievances. But we have never seen the opposite, where they have endorsed routinely awarding attorney fees to the prevailing defendant regardless of exceptional circumstances. The very case you quote indicates they are unwilling to do that.

  13. No, I’m not confusing anything. The American Rule is that winner pays fees unless there is a rule/statute otherwise. There are HUNDREDS of those rules and statutes, all of which are, apparently, unconstitutional.

    The Due Process clause led to Gore. This court would NEVER read a substantive due process right into any part of the Constitution.

    It just ain’t there and, again, what you’re arguing is a last-step statutory construction point, disfavored (hugely) by this court.

  14. There’s no way an “implied” in the First Amendment is the American rule (that loser does not pay fees, which is the British Rule). But putting that aside, the party arguing that the statute should not be given what it meant in 1946-52 would have the burden to show that the interpretation given to it by the courts then, and adopted by Congress in 1952, on its face or as-applied violates this “right.” You don’t start with the end, as I said up above: you start with the language of the statute and there’s no doubt what Congress meant by it, due to the Reviser’s note and Federico’s commentaries and the specific adoption of the 1946-52 construction.

  15. Win FOR breach of contract? Let is not confuse the issue here. We are talking about the right of access to the courts for redress of grievances. This means the right holder, not the malefactor.

    I think there are cases about excessive punitive damages that are based on the constitution, but not on the first amendment. See, e.g., BMW v. Gore, 517 US 559 (1996); TXO Production Corp. v. Alliance Resources Corp., 509 US 443 – Supreme Court 1993

  16. But, that only confirms that neither the Supreme Court, nor for that matter, any lower court have ever considered the issue. I daresay, that so long as there is discretion in the court, there may not be a problem.

  17. As the California case states: ” Equilon cites no case in which a fee-shifting provision has been held unconstitutional under Professional Real Estate Investors or its rationale. (See generally Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, 262, 44 L. Ed. 2d 141, 95 S. Ct. 1612 [finding it "apparent that the circumstances under which attorneys' fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine"].)”

  18. Ned,

    There are hundreds — and I mean it — statutes that shift fees to the loser, regardless of merit. Win by a narrow verdict at trial in Texas for breach of contract, and the other side pays your fees, for example.

    As the California case I quoted noted, no one has, ever, said the First Amendment has a thing to do with fee shifting. It does not.

  19. David, in your two posts you haven’t cited one case, not one, that discussed the constitutionality of fee shifting. You simply assume that is constitutional to do so.

    Now, if there is a 1st amendment right to file suit against a party that has caused one damage, I would suggest that that right will be burdened if there is a fee shift upon loss without regard to whether the lawsuit was objectively reasonable. Such a rule will all but insulate the rich and powerful from suit by smaller companies and individuals and it frankly reeks of injustice.

    Courts should have the authority to shift fees when there is abuse, but not otherwise.

  20. I did a brief google and found this in a California case:

    Hundreds of California statutes provide for an award of attorney fees to the prevailing party. (See Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2001) § 2.1, p. 12; see also id., ch. 17 [charting many such statutes].) Fee shifting simply requires the party that creates the costs to bear them. (Premier Elec. Const. Co. v. N.E.C.A., Inc. (7th Cir. 1987) 814 F.2d 358, 373.) It does not make a party “liable” for filing a lawsuit. This distinguishes Professional Real Estate Investors, supra, 508 U.S. 49, Equilon’s central authority, which concerns not fee shifting but the scope of antitrust liability for engaging in litigation. There, when movie studios challenging the rental of videodiscs to hotel guests brought a copyright infringement action against certain hotel operators, the operators filed counterclaims alleging the studios’ action was intended illegally to restrain trade. The high court held that one who initiates litigation is immune from antitrust liability for doing so unless the litigation is a “sham.” (Id. at pp. 60-61.) The case did not involve a fee-shifting provision nor did the court anywhere suggest that its “sham” litigation rationale might apply in the fee-shifting context. Equilon cites no case in which a fee-shifting provision has been held unconstitutional under Professional Real Estate Investors or its rationale. (See generally Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, 262, 44 L. Ed. 2d 141, 95 S. Ct. 1612 [finding it "apparent that the circumstances under which attorneys' fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine"].)

  21. I disagree quite strongly.

    First, what you’re discussing is the avoidance doctrine: interpret a statute narrowly to avoid a constitutional problem. It’s not favored. You only get there if you first determine that the natural read of the language renders it unconstitutional. You end there, don’t start there, in other words.

    But, more importantly, second, there is absolutely no first amendment right to bring a lawsuit and not have to pay the other side’s fees if you lose. Period. PRE is a case about liability for damages: if you sue someone, the right to petition government means you can’t be liable for damages caused unless the claim is subjectively and objectively unreasonable.

    So let’s back up: if the first amendment has anything to do with fees, then: (a) Rule 11; (b) 1927; (c) inherent power; and (d) every single statute (of which there are dozens, if not hundreds) authorizing fee shifting is unconstitutional unless it complies with the first amendment. (I’ve litigated a lot of state law claims; no one has ever suggested that fee shifting is unconstitutional absent PRE’s standard.)

    So no constitutional issue, at all; so, no avoidance interpretation. So, 285 means what it says and what, I think, Chief said in his concurrence: it’s a flexible standard. (See our NYT op-ed…)

    Now the real point about how wrong this analysis is: if you read PRE and its progeny, they’ll say things like “well, you can always get sanctions for fees and so on even though you can’t get damages.” But, under your analysis you can’t: you can’t get fees unless the same PRE standard is met…

    So, Chief has it right, more or less. I’ll wager a dollar the opinion from the Supremes reads a lot like his opinion mixed with the analysis in this post.

  22. Rader would require proving objective baselessness when lack of merit is the reason for an award. I see nothing inherently wrong on this.

    O’Malley distinguishes the Supreme Court case that seems to require proof of knowledge of baselessness. The Court substitutes Seagate’s recklessness standard. I see no problem here as well.

    Prediction: going forward, O’Malley opinion will remain good law.

    Also, it seems that Congress cannot shift fees on a lesser showing because that would impair the recognized fundamental right to petition protected by the 1st Amendment. I would be surprised if the Supreme Court did not hold such a statute, if enacted, unconstitutional.

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