Fee Shifting Provision in the Innovation Act

by Dennis Crouch

In his discussion of the Fee Shifting provision in the Innovation Act, Chairman Goodlatte argues that the law would not create any presumptive shifting of fees but instead, the that law simply clarifies when fee shifting will and won’t occur.

Under the current rule, the first question is whether the case is ‘exceptional’ and then, if so, the court ‘may’ award fees.  In Octane Fitness (2014), the Supreme Court re-construed the meaning of exceptional, but not in any way that offers clarity or predictability but rather the new determination provides wide discretion to district court judges to determine whether to make an award.

Under the new rule, the first question would be whether the losing party’s “position and conduct . . . were reasonably justified in law and fact?” If they were reasonably justified, then no fee award.  If not reasonably justified, then the court will award fees absent ‘special circumstances.’

Tying these first-steps together, it does make sense that “exceptional cases” should roughly correlate times when the losing party’s position or conduct was not reasonably justified.   In my mind there is a linkage here between FRCP 11 and the provision here. Rule 11 requires that any legal contention made to court be “warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law” and that factual contentions or denials “have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery.”  An important question is whether following those guidelines set out by Rule 11 would also safeguard a party from an unreasonableness finding.

Back to the Presumption: The weight of the presumption does come in at the next step of the analysis. Under the current rule, an exceptional case finding does not create a presumption of fee-award, but rather only provides the district court with discretion to make such an award.  The new law would require a fee award after the not-reasonably-justified finding (absent “special circumstances).

Increase in Costs Available: A second major change in the provision is a shift from awarding “reasonable attorney fees” in the old law to “reasonable fees and other expenses incurred by [the prevailing] party in connection with a civil action.”  Presumably, the award under the new law could be substantially greater.

For its part, the Intellectual Property Owners Association (IPO) supports the proposed change and argues that the Supreme Court’s recent decisions are insufficient.

51 thoughts on “Fee Shifting Provision in the Innovation Act

  1. 6

    The argument of proponents of the so-called “Innovation Act” that it “simply clarifies when fee shifting will and won’t occur” is simply hogwash. One should read the bill in its entirety and pay attention to substantive and pernicious one-sided provisions that have nothing to do with “clarification.”

    For example, the joiner provision to recover fees and costs from an “interested party” – an investor having influence (such as a board member) on actions of a “non-prevailing” patentee that is unable to pay – only applies to patentees. There is no similar joinder provision for recovering from an “interested party” in a plaintiff filing a DJ asserting that a patent is not infringed or is invalid. Good luck for patent-dependent startups in finding investors.

    This facially one-sided “clarification” also provides that a patentee asserting claim, who later settles and extends covenant not to sue, is deemed “non-prevailing party.” There would be much fewer settlements as a result, with more cases going to trial and clogging the courts. The bill provides no similar “clarification” that a plaintiff filing for a DJ challenging a patent who later agrees to settle without proving its case is deemed “non-prevailing party.”

    This bill is clearly intended to be stacked against patentees. It would substantially discourage venture investment in patentees and encourage a shift for investing in infringers.

    1. 6.1

      I would like to add something like this for patentees:

      An accused infringer who fails to bring a motion for summary judgment of non infringement or invalidity of any claim within a month after a final claim construction order shall be thereafter be estopped from later claiming attorneys fees on grounds of non infringement or of invalidity.

  2. 5

    The big question here is what does special circumstances include or not include. Certiantly new arguments that havent been ruled on before should be included. But are previously ruled on arguments with new circumstances based on such things like indegence denial of court acess or fees nonpayments due to frivelious or valid denial of justice in need of correction.

  3. 4

    Can you imagine clients that don’t have a lot of money dealing with this? I can. I can image one client I worked with. I am sure he would have settled rather than fight. Seriously can image the costs some of the big corporations are going to let the law firms rack up. The small company may keep the budget tight at $2-3 million, but have no idea how much the big corp is racking up. Seriously.

    I think most client would want a monthly bill not just from my firm, but the opposing firm to just to see for how much they are potentially in for. Plus the judge is going to have enormous leverage over small clients to settle. Judges are already bullies.

    1. 4.1

      Good points here. The legislation again almost assumes a level playing field in terms of resources. Because this is hardly the case in America, although it might be the case in England because of the “English rule,” the powers that be in Congress should seek advice from English barristers who would actually want to represent small companies or plaintiffs.

      I posted here about an English medical malpractice case that was lost. The injured victim had to pay the doctor his litigation costs even though the doctor was insured. The result seems to insulate the wealthy from malpractice suits.

      1. 4.1.1

        Ned, the point about awards of costs in England is that they are “taxed” costs, determined by a Taxing Master of the court. The MOST you are likely to be awarded is about two thirds of what you paid your own lawyers. And if you are Monsanto pursuing Bowman, and throwing at him everything you possibly can, it would be a lot less than that.

        Any David lacking a deep pocket can insure against the possibility that Goliath comes after him with a poor case, coldbloodedly to put him out of business.

        If David wins, the Taxing Master will decide that Goliath has to pay David his insurance premium and, further, pay David’s lawyers a good part of their accumulated fees. Of course, if by any chance David loses, well then, he loses his insurance premium doesn’t he.

        That said, you are right of course, that in England it is bold and rare for an individual to pursue for malpractice an insured doctor. Losing will bankrupt all but the mega-rich.

        Meanwhile, in Germany, most folks take out legal expenses insurance. The premiums are very affordable. Those with such insurance can sue doctors without a second thought, but (as we all know) it is still hard ultimately to win such a case, even if costs are not a worry.


          And if you are Monsanto pursuing Bowman, and throwing at him everything you possibly can, it would be a lot less than that.

          Given that Momsanto prevailed – and for argument’s sake, let’s say that their “value” is appropriately set in the Billion dollar range (as opposed to any pittance fraction of such), how exactly does this “lot less” by the Taxing Master work out?

          Is it like the “fair as possible” (but not really) German artificial cap? That same cap by the way that would likely not please either Farmer Bowman, nor Mega-Corp Monsanto… (after all, who really wants half a dead baby?)


            anon I remain perplexed why you pursue this point.

            It is not the job of the court to “please” Monsanto. Awards of costs are part of the over-riding objective (in England at least) of “doing justice”.

            It is not automatic, is it, and it does not go without saying, does it, that a dispute over a patent worth ten billion USD costs ten times as much in legal fees as a dispute about a patent worth only one billion. Why should it?


              I don’t know why you are perplexed and I don’t know why you now think that it is me trying to tie the legal fee cost to the value of the case.

              Your question of “Why should it? then is but a smokescreen, as it is evident that the courts themselves are resting on that proposition.

              I am merely pointing out the foibles of doing so, pretending that any artificial cap can be related to a “most fair” line of justification.

              It really is not that perplexing at all to see the points that I have out on the table. If anything, it is perplexing why you continue to post as if those points don’t exist.

              Now, with that dust settled, how again would the Taxing Master work out the Monsanto-Bowman case?


                Better ask an English litigator, which I am not. But I imagine the answer is that the Master would assess what legal costs were reasonably incurred in resolving the specific issues of fact and law particular to the case in dispute.

                Can anybody intervene here, to elucidate a difference of understanding?

                1. Better ask someone else..?


                  You brought up the Taxing Master to state your “definitive” point, and then all but admit that you can only “imagine” the answer…?

                  In other words, you pulled your statement at post 4.1.1 (Monsanto getting a lot less) completely out of your arse.

                  No wonder you are so eager to be “perplexed” when I seek clarity in your comments.

                  How embarrassing for you.

                2. For the avoidance of doubt, or confusion, in the minds of anybody (if there is anybody left) following this thread, the English Regime of legal cost awards makes no reference to the “value” of a case or recourse to Tables of cost awards set by reference to the “value” of a case controversy. That would be the system operating in Germany. Germany and England have different procedural regimes for civil litigation. It is desirable not to get the two regimes muddled up.

                  The Taxing Master in England can take into account whether the winning party won on all issues, or lost on most of them. The German Tables are not that sophisticated.

                3. That’s great MaDrei – nice strawman as no one is intimating that the two systems of English and German are being confused one with the other.

                  Such “offerings” for the sake of nonexistent “doubt or confusion” do not dispel the fact that you pulled your earlier statement out of your arse.

                  Here’s a word of advice: stop flailing – you are only drawing more attention to your shortcomings.

      1. 4.2.2

        MM says that the issue of defendants running up costs is a myth.

        “Bluto Blutarsky” says he likes to put kittens in a bag and drown them.

        And “anon” says he likes to hides behind bushes at the kindergarten so he can take pictures of the kids without the hassle of wearing pants.

        Fun game! You two really know how to liven up a place.

    2. 4.3

      That’s why the fee recovery should apply only to defendants. Plaintiffs should be responsible for bringing a case that is reasonable, responsible, and likely to win. Defendants are the ones that have no choice in the matter.

      Those who seek a DJ or accuse others of infringement or initiate IPRs (except as defense against an accusation in suit) should pay the costs of those who have to defend them if they lose. The defendants didn’t start the meter running in court on their own initiative and are the ones who should be made whole when they win.

      1. 4.3.1

        Such a naieve view. You do realize that defenses and counter claims can be (and often are) frivolous?


          It is an Infringer’s Rights view.

          Perfectly consistent with Owen’s overall philosophies.

          It rather misses the fact that the filing of a suit is a perfectly legitimate path created by government to obtain proper redress. The incessant “lawyers are evi1 – all lawsuits are bad” tripe that is routinely trotted out feeds this warped perception, and Owen’s history of posts (and upvotes, when those were viewable) confirm an overall anti-patent platform.

          It is (and should be) no surprise then that any measure that weakens the position of patent holders would be supported by Owen.

          The slope is in fact slippery. So while certain aspects may have merit, one must step carefully.

    3. 4.4

      Night, you might want to look to other “loser pays” jurisdictions to see how these costs issues (and by costs I mean all of a litigant’s costs, not just court costs or attorneys’ fees) are dealt with. Here in Israel, the courts rarely award costs that are commensurate with the winning party’s actual – that applies not just patent litigation, but to litigation generally. And I think US federal court judges are smart enough to who know when law firms are just racking up costs to be able to weed out inflated bills.

      Besides, none of the corporations I’ve ever worked with, big or otherwise, have ever just “let the law firms rack up” the bills. By Dennis’ reading, if the other side has a colorable argument, there’s not going to be an award of costs. And as the thread below re: Monsanto pointed out, albeit obliquely, if a big player wants to spend megabucks going after a small fish like McFarlane or Bowman, it’s going to do so not in the expectation of getting its costs back via a fee award from the court, but in the expectation that by prevailing, it will establish that the law is on its side, thus dissuading others similarly situated from infringing.

      1. 4.4.1

        I’ve seen the costs of litigation first hand. And read a number of judge’s award of attorney fees. The problem is that there is a big difference between a frugal action and a top-shelf all the bells and whistles action.

        Let’s say, $1-$3 million for the frugal version and $3-$10 million for the top-shelf action. Huge difference. And a judge is going to say a firm like
        Fish and Richardson has been extravagant or did they merely defend their client as per their ethical duties. My guess the latter would win out, and so we are left with my original comment.

  4. 3

    Re: Under the new rule, the first question would be whether the losing party’s “position and conduct . . . were reasonably justified in law and fact?”

    But is not a second question who has the burden of proof on that issue? I fear that the Goodlatte bill as presently drafted places it on every losing party, not on the party seeking this very large sanction (as is normal)? Will that financial risk seriously deter universities from enforcing their patents against infringers?

    1. 3.1

      Paul, well back. This is the first post you have made in years (at least that I can recall) that has been pro-patentee in any regard.

      Of course, universities, small inventors, startups and the like will likely abandon the patent system entirely because of bills like this one. And yet, it is these inventors who bring new ideas to the table, and are the source of most new jobs.

      We tend to forget why the patent systems exists when we seriously consider bills like Goodlatte’s.

      1. 3.1.2

        Goodlatte’s response to the mounting criticism…?

        Don’t listen to the “Tr011s”

        Need anyone be reminded of which type of entity coined that term – and why (hint: it was NOT for the benefit of the consumer).

  5. 2

    Consider the Monsanto v. Bowman. The case was heavily litigated even though the amount in controversy was small. Bowman was a farmer. 80 years old. All he wanted to do was avoid buying commodity seed every year and instead retain seed to replant. He lost at the Supreme Court.

    Monsanto sought to make an example of this aged farmer because the stakes involved from their point of view were dramatic. Unless they won, all their investments in plant patents would be ruined. They had to win. I will assume here that Monsanto spent millions on this case.

    Bowman may have invested few thousand in his case, since he kept losing on motions (IIRC), and the facts were not heavily disputed. Nor were the validity of the patents. Infringement was a given – if there was no exhaustion. The litigation was as simple legal issue.

    Under the present rule, both sides bear their own attorneys fees and costs. To me, an award of attorneys fees against Bowman would be unjust particularly because he could not afford to pay these fees being an individual farmer. If in the future, one side is willing to spend billions on a legal principle regardless of the mounting controversy in the particular case, the other side must not be obligated to pay the other side’s attorneys fees regardless of the outcome.

    Any change in the law must, in my opinion, also take into account the amount in controversy in the particular case so that the total amount of award of attorney’s fees is related directly to the mounting controversy. If one side is willing to spend far more to win, they of course have a right to do that, but they should not expect to have their attorneys fees paid by the other side if the amount in controversy does not justify their expenditure.

    1. 2.1

      I see Dragon got me a couple of times there. “Mounting controversy” should read, “amount in controversy.”

    2. 2.2


      I’m not particularly sympathetic to Bowman in this case. No one forced him to litigate this to the Supreme Court, or to violate his license with Monsanto (assuming that’s what happened).

      But, wouldn’t this guy be ‘judgment proof’ in any event? Also, we have bankruptcy laws for a reason.

      But yeah, you choose to fight with a large corporation all the way to the supreme court on a losing argument? You might be bankrupted. Nothing seems particularly unjust about that to me.


          Dennis, good point that Bowman’s legal position was not unreasonable.

          But on the larger issue, the amount in controversy issue where one’s side’s interests are completely different from the other sides interests so that the amount spent dramatically exceeds the actual amount in controversy, I think the parties need to know that if they are spending exorbitant amounts of money to win, far beyond the nominal amount in controversy, that they cannot recover their full amount of legal fees.

          Recall the post by MaxDrei about the German law that limits the legal fees recoverable by the amount in controversy. The judge in an initial hearing sets the number and bases the number on the amount in controversy.

          As we all know, litigation is like war where things tend to get out of hand and people forget why the war started. There is a case like that before the Federal Circuit right now that David and I were discussing in one of his ethic threads. The litigants must be allowed to litigate to the full extent the law allows, but not with any expectation that they will recover their fees if they win. All this does is provide a strong incentive to maximize litigation, not to minimize it.


            Sorry Ned – my post below crossed in passing.

            The point that I think you overlook is that the nominal loss as to aged farmer Bowman was NOT what was on the line for Monsanto.

            I do not think it reasonable to place such a low value on the case when the case could have a market-wide effect.

            The question I put to MaxDrei was what was the percent that the max German court would cover of the (at least for argument’s sake) true multi-Billion dollar value of the patent and business practice to have been found to not be sales-exhausted.

            Sure, you are looking at protecting Monsanto’s preferred business model by limiting exhaustion as the court did, but is that not an indicator that the Court did lean towards the Billion dollar case value?


            Right, I agree that we need more definition on the meaning of: “reasonable fees and other expenses incurred by [the prevailing] party in connection with [the] civil action.” In my mind, the best approach is an up-front estimation that can potentially be modified for cause down the line. This will help keep costs under control.


            Also, a subtle note about playing with the “fire” of setting policy to minimize litigation: certain entities are denigrated because they recognize that policy and aim for what is called “nuisance” settlements. This is NOT a totally unforeseen consequence, and should be seen as a natural result of that policy.

            Another not so unforeseen consequence of the current thinking of reducing court costs is that such reductions should invite more court filings – also a trend that goes against your implicit assumption that less filings is somehow “better.”

            The true “better” is not necessarily a number trending EITHER down nor up. Filings happen when two parties cannot agree – and that can happen for any number of reasons (including uncertainty of both claim coverage and court respect for patents in ge ne ral). The knee jerk reaction that a suit “must be bad,” must be quashed.

            Are there bad suits? Sure. Are there meritous cases NOT brought, but should be brought? Equally as sure.


              It always seems to me like there really just needs to be a small claims patent court to handle these nuisance issues. How expensive could it possibly be to set such a thing up?


                I love the way you Americans keep flirting with English ideas, despite the fact that everything in your history and general philosophy indicates that there is no prospect you will ever actually adopt them. You are describing some variation on the Intellectual Property Enterprise Court. Add in a few provisions of the Goodlatte Innovation Act, and that is exactly what you have.

                But I’m guessing it’s not what anyone over there much wants!

      1. 2.2.2

        This stemmed from a discussion on another thread which also keyed in on the fact that “value of a case” (or as Ned refers to here as ‘amount in controversy’), may in fact be two wildly (and extremely so) different amounts. That discussion also included the observation that Germany has decided on a set (and limited table) of such a “value of the case,” and how the detonation of that value by the court may not reflect Justice in one or even both of the parties. In Germany as well (apparently), there exists – and can be even called influences – a bifurcation and possible reluctance to challenge patent validity that the courts here in the States would not likely permit (for public policy reasons).

      2. 2.2.3

        go Arthur, you agree then that Monsanto, one of the largest companies on the planet, was trying to make an example of Bowman. He stood his ground and tried to fight, like Jimmy Stewart when, as Senator Smith, he fought the big boys by holding the floor of the Senate for a long as he could. link to youtube.com

        And yet you denigrate Bowman? He is a hero to many.



          I hear you. I’m not trying to denigrate him, exactly. Good for him for standing up.

          I’m just saying IF he chooses to fight and IF he loses and IF his position wasn’t reasonable under the statute, I don’t have a problem with him footing the (huge) bill of the corporation.

      3. 2.2.4

        The license with Monsanto was not dispositive in the case. At all.

        Had Bowman had no license, and bought purely from those that had no license, the holding of the case would be exactly the same.

        This is why – at least in part – previous discussions on that case have highlighted the fact that the holding has implications for all graineries, even if Monsanto did not pursue action against them in that case and has not (as of yet) pursued separate action.

        I invite you to review some of the archives discussing that case.

  6. 1

    I listened to Lenny Bruce talk about obscenity and how the courts were using their definitions as just a way to control people. I think we are seeing that same behavior with patents. This whole thing in Alice where patentability has been resurrected from the ashes of flash of genius and now this fee shifting which will basically leave the judge in about the position they are in now with Alice–that is they can do just about anything they want.

    We have laws to prevent this type of behavior from the courts.

    1. 1.1

      Night, courts are not always the villain, Night. They are there to protect the people against arbitrary rule by the “King.”

      Judges normally try to do the right thing in a particular case. At the appellate level, however, politics does seem to get involved. Who gets to appoint judges is a political issue as a result.

      I would like to get politics out of decision making as much as possible. That is one of the reasons I would like to have patent issues again decided by all circuits so that the decisions are based on the law, not what is best for
      so- called stakeholders.

      1. 1.1.1


        And sometimes the Court IS the villain – and more likely so when the robed ones CAN act like Kings. And I would also add that the “politics” of selection absolutely pails in comparison to the “politics” of ideology. You want to fuss over a splinter, while the log goes untreated.

        You seem to have a (very large) blindspot to this notion.


          I have no blindspot, anon. I know that judges often pursue their own agendas depending on their personal ideology. I just think that putting all the power into one circuit court maximizes the likelihood that agendas will affect the outcome in particular cases.


            You do have a blindspot.

            You keep on wanting to focus on the splinter of the CAFC and you want to ignore the log of the USSC.

            You want to compare likelihoods that unchecked politics of ideology are at play?



              anon, I have never personally been in a case where I felt I received rough justice by the Supreme Court because they were pursuing agendas. Their cases are narrowly decided on the issue presented. In contrast, the Federal Circuit tends to write broadly on narrow issues, at times giving the parties before them rough justice.

              I have had numerous discussions with Federal Circuit litigators who will tell you the same thing about that court.


                Ned, let’s put this in a little better context.

                I have never personally been in a case where I felt I received rough justice by the Supreme Court because they were pursuing agendas

                Please tell me how many total cases that you personally been IN a Supreme Court case?

                (My guess would be zero)

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