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.
- Checkpoint Sys., Inc. v. All-Tag Security S.A.: District Court abused its discretion by finding an exceptional case and awarding fees.
- Rothschild Connected Devices Innovations, LLC v. Guardian Prot. Servs., Inc.: District court abused its discretion by not finding an exceptional case.
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?).