Abusing Discretion on Attorney Fees

In its 2014 attorney-fee decisions of Highmark and Octane Fitness, the Supreme Court handed back discretion to lower courts to determine when the “exceptional case” requirement for fee shifting had been met.  Going with that discretion, the Supreme Court ruled also ruled that deference should be given to the determination when appealed.

Interestingly, the two new fee-shifting decisions this week are both reversals – although reaching opposite conclusions on whether fees should be awarded.

Both cases involve successful defendants who requested attorney fees to compensate for their wasted time and money.  The differences between these cases might be the Judges: Judges Newman, Lourie, and Moore deciding Checkpoint Sys in favor of no-fees against the patentee; and Chief Judge Prost, and Judges Wallach and Mayer deciding Rothschild in favor of fees against the patentee.  However, the two cases are also distinguishable on the merits.

In Rothschild, the patentee dismissed its case against ADS after the defendant filed a motion for dismiss on 101 and 102 grounds.  The district court found the case non-exceptional. On appeal, however, the Federal Circuit found that the lower court abused its discretion by failing to (a) expressly consider the defendant’s arguments that Rothschild was willful ignorant of the prior art; (b) consider Rothschild’s pattern of litigation practices as part of the totality of circumstances; and (c) consider exceptional fees under Section 285 as separate and distinct from Rule 11 sanctions.  Judge Mayer added in his concurrence that the complaint was “frivolous on its face” based upon clear failure under Section 101. (Claim 1 of U.S. Patent No. 8,788,090).

In Checkpoint Sys, the district court awarded $6 million in attorney fees following a jury verdict finding that the asserted patent was invalid, unenforceable, and not infringed.  Checkpoint Sys., is also an interesting study case because the original district court opinion awarding fees was Pre-Octane –– that case was rejected in a 2013 Federal Circuit opinion.  Following Octane Fitness, however, the district court again awarded fees — finding that “that Checkpoint’s pre-suit investigation was inadequate” and “improper motivation” behind the lawsuit – that Checkpoint brought suit “to interfere improperly with Defendants’ business and to protect its own competitive advantage” rather than simply to enforce its patent rights.  On appeal here, the court again rejected fee award — this time as an abuse of discretion.  The court particularly rejected the notion that the suit was filed for improper motive: “motivation to implement the statutory patent right by bringing suit based on a reasonable belief in infringement is not an improper motive.”

The legislative purpose behind § 285 is to prevent a party from suffering a “gross injustice”: “The exercise of discretion in favor of [awarding attorney 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 of the particular law suit be left to bear the burden of his own counsel fees.” S. Rep. No. 1503, 79th Cong., 2d Sess. (1946) (addressing the § 70 precursor to § 285); see also Octane Fitness, 134 S. Ct. at 1753 (“The provision enabled [district courts] to address ‘unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force,’ which made a case so unusual as to warrant fee-shifting.” (quoting Park–In–Theatres, 190 F.2d at 142)). We conclude that the district court erred, and thus abused its discretion, in its assessment of “exceptional case,” for the record shows that the charge of infringement was reasonable and the litigation was not brought in bad faith or with abusive tactics. The award of attorney fees under 25 U.S.C. § 285 is reversed.

Despite these two reversals, we do know that there have been an increase in fee awards since the 2017 decision.  I wonder if there is any steady-state percentage (or are these not judged on a curve?).

 

 

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

33 thoughts on “Abusing Discretion on Attorney Fees

  1. “The differences between these cases might be the Judges: Judges Newman, Lourie, and Mooredeciding Checkpoint Sys in favor of no-fees against the patentee; and Chief Judge Prost, and Judges Wallach and Mayer deciding Rothschild in favor of fees against the patentee.”

    Arbitrary and capricious judiciary? Let’s hope not.

    1. I thought I noted that spin as well. Not sure if this is the set of cases to make that observation though – especially given the follow-up of:

      However, the two cases are also distinguishable on the merits.

  2. In Rothschild, it was alleged that 50 different nuisance lawsuits had been filed by Rothschild on the patent attempting to get cost of defense settlements, and that Rothschild continued to assert validity even after having been served with 102 prior art and w/o ever even examining that prior art, and made attempted 101 rebuttal arguments that even E.D.TX Judge Gilstrap had found incredible.

  3. The real problem with those Rothschild claims is that they recite “beverage” instead of “delicious trademarked beverage.”

    At least that’s what the AIPLA and IPO would have everyone believe.

    Really deep thinkers. You can trust them!

    LOL

  4. Unrelated, but Oil States is on the blocks.

    1. Oil States is on the blocks.

      What does “on the blocks” mean to you?

      1. No idea what that expression’s supposed to mean here, but this morning it was relisted.

        link to supremecourt.gov
        Jun 5 2017 DISTRIBUTED for Conference of June 8, 2017.

        The odds are still against a cert grant, but this is a sign that the court finds this at least slightly more interesting than the run-of-the-mill easy-deny petition. Sometime later this month we’ll probably find out if it’s going anywhere.

  5. “In assessing patent eligibility under 35 U.S.C. § 101,
    “the underlying functional concern . . . is a relative one:
    how much future innovation is foreclosed relative to the
    contribution of the inventor.” Mayo Collaborative Servs.
    v. Prometheus Labs., Inc., 566 U.S. 66, 88 (2012); see also
    Motion Picture Patents Co. v. Universal Film Mfg. Co.,
    243 U.S. 502, 511 (1917) (explaining that “the primary
    purpose” of the patent system is to promote scientific
    progress, not to “creat[e] . . . private fortunes for the
    owners of patents”). The ’090 patent falls far beyond the
    bounds of section 101 because its potential to disrupt
    future innovation is staggering while its technological
    contribution is non-existent.”

    Meyer in concurrence.

    1. “the primary purpose” of the patent system is to promote scientific
      progress, not to “creat[e] . . . private fortunes for the owners of patents”).

      B-b-b-but the Most Important People Ever! How will I know what to do with my money if we don’t hand out a zillion “use a computer to shove an ad into your face while sitting in a robot car” patents? We might as well all just be Amish with a bad attitude like this.

    2. This is a poster-child case as to why 102/103/112 cannot do the work of 101. The latter three statutes operate and are intended to operate on otherwise patentable subject matter. When the only differences from the prior art lie in ineligible subject matter ….

      The PTO has been allowing cases that violate 101 forever, but at an enormously increase rate since Alappat and State Street Bank. Hopefully being sanctioned for even filing a patent that obviously fails 101 is going to help solve this problem.

      1. but at an enormously increase rate since Alappat and State Street Bank.

        First, you STILL are not getting Alappat correct (and your inclusion here indicates such).

        Second, the overplay of “State Street” is a fallacy. As the data at:
        link to ipwatchdog.com

        shows, “State Street” simply did NOT open a flood gate.

        Once again, we have the sAme propaganda and sAme Windmill Chases from the sAmeones here.

        1. Anon, I agree with the holding of Alappat. But the patent office latched onto its dicta.

          1. You have to this day failed to understand the difference between holding and dicta in that case.

            As I have pointed out to you previously, ANY item that can decide the case goes to a holding and a case can thus have more than one holding as more than one legal argument can be decisive.

            1. I enjoy the mewling about Alappat, which has the same life expectancy and cite value as Dred Scott v. Sandford .

              Dead. Letter.

              1. Except not, Mr. Snyder.

                But your attempted analogy is “cute.”

      2. Hopefully being sanctioned for even filing a patent that obviously fails 101 is going to help solve this problem.

        says the guy who crows about due process….

        Unglaublich.

    3. Is not “potential to disrupt future innovation” a notion that escapes the power of an Article III court to decide only on present “case or controversy”…?

      What exactly is THIS future innovation that is disrupted? Or is it merely enough that a “potential” (unknown and unstated) is somehow magically determined to exist that MAY disrupt this “future innovation” (ALSO unknown and unstated)…?

      There is more “inte11ectual honesty” in the witch trials….

      1. Is not “potential to disrupt future innovation” a notion that escapes the power of an Article III court]

        Give everyone a break with this nonsense already.

        1. Empty ad hominem while you ignore the point presented.

          Oh, so Malcolm of you.

      2. Anon, the answer to your question about what the future innovation is disrupted, you actually might want to read Wyeth v. Stone. Justice Story was one of the first the hit upon the principal that one could not claim in the abstract.

        link to law.resource.org

        “It is plain, then, that here the patentee claims an exclusive title to the art of cutting ice by means of any power, other than human power. Such a claim is utterly unmaintainable in point of law. It is a claim for an art or principle in the abstract, and not for any particular method or machinery, by which ice is to be cut. No man can have a right to cut ice by all means or methods, or by all or any sort of apparatus, although he is not the inventor of any or all of such means, methods, or apparatus. A claim broader than the actual invention of the patentee is, for that very reason, upon the principles of the common law, utterly void, and the patent is a nullity. …

        “I agree, that the patentee is bound to describe, with reasonable certainty, in what his invention consists, and what his particular claim is. But it does not seem to me, that he is to be bound down to any precise form of words; and that it is sufficient, if the court can clearly ascertain, by fair interpretation, what he intends to claim, and what his language truly imports, even though the expressions are inaccurately or imperfectly drawn. …”

        1. I agree, that the patentee is bound to describe, with reasonable certainty, in what his invention consists…

          Naturally I agree with Justice Story’s worthy words here, but does this not rather undercut the assertion you make in 3.2 that “102/103/112 cannot do the work of 101. The[y]… are intended to operate on otherwise patentable subject matter…”?

          The problem with “do it on a computer” patents is not that they fail §101. The problem is that they are not “describe[d] with reasonable certainty.” If I disclose one way of (e.g.) executing an exchange in escrow on a computer, and claim every way of executing an escrow exchange, I have not described my claimed invention with the requisite particularity. This is a §112(a) problem, not a §101 problem.

          We need not twist §101 out of all recognition to solve a problem that is better handled by the §112(a) written description requirement.

          1. Greg The problem with “do it on a computer” patents is not that they fail §101.

            In fact, it’s a huge problem. And everybody knows that.

            I hope you do a better job educating your clients than this.

          2. Certainly, Greg, that claims more than it has a right to claim is not particularly pointing out the invention. Furthermore, such a claim does not have full written description support for what it claims.

            And yet, for generations, the PTO has been issuing patents that fail both these requirements, and the Federal Circuit has not observed a robust regime requiring such a full written description, nor has it placed any emphasis whatsoever on particularly point out.

            The Supreme Court jurisprudence in this area can be viewed as a rebuke of the Federal Circuit and of the patent office.

        2. Ned,

          You could not miss the point about “future” any worse.

          Think of what it takes for U.S. Federal courts to have any authority in the first place.

  6. However, the two cases are also distinguishable on the merits.

    The Rothschild case was quintessential trolling and Gilstrap was doing everything in his rapidly diminishing “power” to give the patentee’s a break and keep the gravy train running.

    The circus is folding up, folks.

  7. 13. A beverage dispenser comprising:

    at least one compartment containing an element of a beverage;

    at least one valve coupling the at least one compartment to a dispensing section configured to dispense the beverage;

    a mixing chamber for mixing the beverage;

    a user interface module configured to receive an identity of a user and an identifier of the beverage;

    a communication module configured to transmit the identifier of the beverage to a server over a network; and

    a controller configured to actuate the at least one valve to control an amount of the element to be dispensed and to actuate the mixing chamber based on user generated beverage product preferences.

    Claims priority to 2006 but this case was filed in 2013! These guys must have used power tools to jam their heads so far up into their behinds. How do adults convince themselves to believe in nonsense like this? What kind of l 0w lifes are that desperate?

    Computers receive, transmit and store data. They can do this over a network. That’s ancient history. Computers can control machines. That’s ancient history. What’s left? “Beverage identifier data”. Totally different from other kind of data! The computer really cares.

    1. Your Big Box of Protons, Neutrons, and Electrons mentality is showing.

      After all, once you have protons, neutrons, and electrons, all else is merely these things “configured to” something else, and it is FAR MORE ancient history that protons, neutrons and electrons configure themselves into things.

      As to “The computer really cares.” the term “care” Is nothing but anthropomorphication and to answer that, YES, the computer really does “care.” That “caring” is called “functionally related” and as I have told you in the direct, simple and easy to understand English terms of my Simple Set theory explication, the exceptions to the judicial doctrine of written matter covers exactly this point.

      Funny too – even outside of my Simple Set theory explication in direct, simple and easy to understand English terms, you volunteered an admission against your interests as to knowing and understanding the controlling law in this area.

      But nonetheless, you continue (ad nauseum, ad infinitum) to advocate as if your own admission did not exist.

      Is that also one of your “grown up” thingies….?

      1. As to “The computer really cares.” the term “care” Is nothing but anthropomorphication

        It’s called “sarcasm.”

        The fact that the computer does not and can not care about the meaning of the bits being thrown at it is the point.

        Honest adults can understand and admit this in two seconds. Some patent attorneys have great difficulty with the concept. Go figure.

        1. Actually – as you miss the return point, computers DO “care” from the functionally related standpoint.

      2. even outside of my Simple Set theory explication in direct, simple and easy to understand English terms, you volunteered an admission against your interests as to knowing and understanding the controlling law in this area

        Stay off drugs, kids.

        1. And yet more mindless and empty ad hominem.

          That still grinds you that you volunteered that admission as to knowing and understanding the exceptions to the judicial doctrine of printed matter, doesn’t it?

          Something about “coming to grips” (in an inte11ectually honest manner) with THAT always seems to evade you.

    2. Sail cloth receives, harness and divert air flow. They can do this over a a wooden frame. That’s ancient history. Humans can control machines. That’s ancient history. What’s left? “frame can fly”. Totally different from other kind of flying! The air really cares.

      1. …and guess what? ALL of that: the sail cloth, the wood frames, even the air are merely configured from protons, neutrons and electrons, and those configurations care too.

        😉

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