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.