We all know, if we’re geeks, that in Octane the Supreme Court significantly relaxed the standards under which fees can be shifted in exceptional cases to the prevailing party. Legally, as I pointed out months ago on this blog, that’s the right result. We also know the Senate has dropped, for now, patent “reform” which would have included easier fee shifting, especially against “trolls.”
Is a relaxed standard under 285 enough? (I don’t mean on everything on patent reform, just this narrower issue). The main criticism I’ve heard relates to collectibility: even if the defendant prevails, the award will be meaningless because the troll has no assets, particularly if it’s a shell LLC. Fair enough.
But why doesn’t 285 allow the prevailing party to go after the patentee’s attorneys? The statute only says who wins the fees, not who must pay them: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” Several points.
First, in my view, it often would not make any sense, or be equitable (a key concern underlying this statute), for the patentee to pay fees to the other side. Suppose the patentee doesn’t know that its lawyers are making wild accusations of infringement: it’s been told the arguments are reasonable. It may be unfair to penalize the client, under those circumstances, rather than the lawyer.
Further to that point, if the lawyers are at fault, Rule 11 would generally prohibit awarding fees against the client. When it’s a frivolous legal argument, the client can’t be punished. That makes sense and doesn’t seem to lose any force in the context of interpreting 285.
So, under some circumstances the award almost has to be against the patentee’s lawyer or it would be unfair to the patentee.
Looking at this from the prevailing defendant’s side, if the patentee is asset-less, and particularly if it was made to be so by the lawyer to avoid being able to pay any fee award, it would obviously be inequitable to award a meaningless judgment to the defendant. Joint and several liability may be proper, too.
So, in many circumstances, I can see strong arguments that the award ought to be made against the attorney, not the patentee, or at least against them jointly.
What I don’t know is whether that interpretation of 285 is foreclosed. The plain text sure doesn’t do that… Hmmm… maybe there’s my next law review article. Note that what this means is that any time a patent owner loses the lawyer may need to carefully analyze whether he has a conflict of interest with his client — lawyer will want to shift blame to patentee, patentee will want to shift it to lawyer… oh, and vice versa!
Some random thoughts. First, 28 U.S.C. 1927 would seem to address the situation where you want opposing counsel to pay. Second, while I agree that collectability is an issue, I think a more important issue/problem with using fee shifting as a “cure” to the NPE “problem” is that you need to first determine that the case is exceptional. That requires getting to the merits and more importantly expending the resouces to get there. The cost of litigation means that many targets of frivilous suits won’t get to the point where 285 may be useful. Lastly, hitting attorneys with 285 fees is a scary proposition for litigators. You listen to the arguments in Octane and Highmark, and I think SCOTUS realized that sometimes it’s hard to tell frivilous arguments from reasonable but losing arguments brought in good faith. If I were routinely the subject of 285 for every case I was involved in, I’d think about trying a different profession (I borrowed the last sentence from comments I heard from someone way smarter than me speaking on this topic).
Yes, lots of tools — 1927, rule 11, 285, inherent power, discovery rules. Each has its own purpose and limitations, but Congress added 285.
It would be interesting… my research assistant has sent me some case law on this, which I need to read…
“Note that what this means is that any time a patent owner loses the lawyer may need to carefully analyze whether he has a conflict of interest with his client
If I take a step back and realize that if we embrace a loser pays system, then the risk you point out becomes a systemic and (a priori) known risk that will need to be discussed with the potential client prior to taking on the client.
You further risk escalating matters into a Game of Kings. The risk/reward win-at-all-costs aspect is only heightened when winning brings a shift of those costs. It is the well-funded that more easily countenances (and benefits) such a system, and making counsel potentially liable for mere loss will have a chilling effect – regardless of the ends desired of making sure that one party has an equitable result.
You also have a fundamental issue afoot in conflating a lawyer and his client. There is a distinction that should not be lost. We purposefully allow that an attorney may represent a noxious client or a noxious cause without impugning the beliefs of that client or cause to the attorney. If we did not do so, then those merely accused of being noxious would be at a serious disadvantage and justice would be severely thwarted.
Here, the “Troll” aspect is no different. “Making the lawyer pay” is an attack on the client. As I have oft posted, this is not truly a patent law question. Rather this a corporations style question. If you want to remove from our society all entities that can have personal property and have the ability to enforce those personal property rights that are judgment proof, then such a mechanism needs to be considered FOR ALL personal property regimes.
Of course, the dichotomy and philosophical schism is not limited to this issue.
So often (I am thinking eBay style) we hear that special features of patents should not be removed from the rest of the law, that patent law should not be made “special” – and yet, that is EXACTLY what is being considered here.
Does anyone even begin to think that patents are the only tool used by corporations to compete and are the only tool that benefits from the ability to create corporate shell games? Anyone want to consider tax law?
Such inordinate and singular focus on patents comes across poorly in a very hypocritical anti-patent manner. Remove any benefits that might inure due to the nature of a patent, but make sure that penalties apply in a special way.
If you want to address a problem, then address that problem. But realize the not-so-unforeseen effects that will come.
Court costs a problem? Perhaps. But seriously, can anyone honestly say that they cannot see that by reducing court costs that we will not also create the possibility of an exponential rise in cases seeking that avenue of remedy? One only has to look at the AIA joinder rules and the false flag effect of “gee – look at the explosion of ‘Troll’ court filings” to see otherwise.
Corporate structure creates an asset visibility problem? Perhaps. But patents are not the only asset in play.
Let’s look at the set-up in front of us with eyes wide open and not only fixated on one desired ends. The means we use to get to that end do matter.
Why should the court get into who pays?
Make the award against the patent owner. After the award is made, if the action to collect is against the patent owner, the patent owner might cross claim against the firm if it was at fault.
For the same reason they do under Rule 11. A client can’t (usually) be faulted for a lawyer’s frivolous legal argument. Equity plays a hand under 285.
Except that ignores the reality of many NPEs who have many in-house counsel on staff and/or are owned by attorneys.
Also, any effect on punishing an attorney for a mere loss (in cases of no Rule 11 sanctions), and the inherent “chilling” effect against counsel in general cannot be lightly ignored.
“The main criticism I’ve heard relates to collectibility: even if the defendant prevails, the award will be meaningless because the troll has no assets, particularly if it’s a shell LLC. Fair enough.”
I have long maintained that this is a corporations (and tax) law question – not a patent law question.
Anon,
There’s a primary issue — who should the court impose sanctions on, the lawyer or the client — and then the secondary issue of can the prevailing party “pierce the veil” of the LLP/LLC/whatever. But if the award is against the patentee, only, I can’t see how the prevailing party can impose liability on the lawyer. (I can see how the patentee-loser can seek indemnity/contribution from its lawyer.)
That’s a nice way of putting it.
In what other action would the distinction be available to attach (distinctly) a “win” straight up against the counsel of the other side? This on its face would appear to be a direct chilling of the ability to obtain counsel – without more, the notion that if, as counsel, you choose to represent me, your own separate worth is placed at risk…
Well, it has to be an exceptional case…. But what I’m talking about is simply what Rule 11 already does: lawyer, not client, is subject to sanctions for frivolous legal arguments. That only makes sense since, most of the time, clients’ aren’t lawyers and/or don’t control the legal arguments.
I think that we are already in agreement that mechanisms are already in place -instead, my umbrage is directed to additional mechanisms being contemplated, and the effects of such are being questioned, specifically those that appear to be far too intrusive, aimed at a type of entity as opposed to any actual egregious conduct, and serve to chill a basic right (to address grievances in a court of law).
My research assistant is looking at this question… so stay tuned.
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