A while back, Chief Judge Rader, Professor Chien and I wrote an op-ed in the New York Times about how section 285 could be used to cure any "patent troll" problem. (It's here with a really cool patent troll graphic.) I've been meaning to explain why for a while, and, now with the Supreme Court taking a look, it seems a good time. (An article on the petition for cert, which quotes that article, is here.)
To me the answer is quite simple, if one does what one is supposed to do with statutes: consult them.
Section 285 and its Legislative History.
Fee shifting became available in patent cases for the first time in 1946, when Congress adopted 35 U.S.C. § 70. That statute gave federal courts broad equitable powers to allow for fee shifting to prevent injustice to accused infringers, as well as to ensure that an accused infringer would not only pay a reasonable royalty. See S. Rep. No. 1503 (79th Cong. 2d Sess. 1946). In the years immediately following the adoption of Section 70, courts emphasized that the statute focused on equity, fairness, and justice. For example, courts stated that awarding fees should be “bottomed upon a finding of unfairness, or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which makes it grossly unjust that the winner . . . be left to bear the burden of his own counsel fees . . . .” Park-in-Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (9th Cir. 1951). Courts considered all factors, including whether the patentee could have simplified the case earlier, whether there were unreasonable infringement allegations, delay in suing, dropping customer-defendants, and so on. E.g., Merrill v. Builders Ornamental Iron Co., 197 F.2d 16 (10th Cir. 1952); Aeration Processes, Inc. v. Walter Kidde & Co., 170 F.2d 437 (2d Cir. 1948); Brennan v. Hawley Prods. Co., 98 F. Supp. 369 (N.D. Ill. 1951).
Nothing changed in 1952. Instead, Congress re-codified Section 70 into what we now have as Section 285. "Exceptional case" has no clear meaning. Congress could have said "in frivolous cases, fees can be shifted," but for some reason it added "exceptional case." The Federal Circuit in 1985 analyzed the legislative history (always risky, but in this case, correct I believe) and recognized Congress made clear that it was adopting the cases that had been decided between 1946 and 1952 under Section 70. Congress explained that was it was adding the phrase “exceptional case” to the Section 285 to capture the approach of those cases. See Mach. Corp. of Am. v. Gullfiber AB, 774 F.2d 467 (Fed. Cir. 1985) (explaining addition of the “exceptional case” language). Thus, Section 285 focuses on fairness, justice, and equity. It is a flexible statute, by design no different from Section 70.
Section 285 as Interpreted by The Federal Circuit
Early decisions of the Federal Circuit were generally consistent with the intended meaning of the state. For example, the Federal Circuit stated that unintentional errors were not enough to establish an exceptional case, but gross negligence in asserting infringement was sufficient. Machinery Corp., 774 F.2d at 473 (“The end inquiry . . . is whether [the patentee] recklessly concluded that [there was infringement] . . . .”). Again, equity was the real issue, and there was no finding of intent necessary: gross negligence was enough.
However, a 2005 decision suggested that Section 285 had a radically different meaning. Without discussing the statute's meaning or these early Federal Circuit decisions, the court in Brooks Furniture Mfg., Inc. v Dutailer Int’l, Inc., 393 F.3d 1378 (Fed Cir. 2005) stated that the standard developed by the Supreme Court in Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993) governed fee shifting under Section 285. According to Brooks Furniture, to obtain fees under Section 285, an accused infringer must establish both that the infringement suit was objectively and subjectively baseless.
In my view, this is simply wrong.
Foremost, the interpretation is inconsistent with and unsupported by the statute’s text and history.
It is also absurd to assert that the text Congress adopted in 1952 included standards developed 40 years later.
Further, the policy behind the high standard in PRE has nothing to do with fee shifting. PRE was a liability case: the Court held that, because of the First Amendment right to petition government, a party can be sued for having previously sued someone only upon a showing the suit had been objectively and subjectively baseless. If one extends PRE to fee shifting, then Congress (and presumably state legislatures) can shift fees only if a suit is objectively and subjectively baseless. If that is true, then no doubt dozens of statutes are unconstitutional.
My View
As I wrote in the New York Times, Section 285 is flexible enough to cure any problem. The Federal Circuit just needs to do what Congress told them to do.