Intellectual Property Law: Counseling, Licensing, Litigation & Procurement

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Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare

Banner & Witcoff offers the following content as a resource to help clients understand and prepare for the potential impact of these cases:

Background

On April 29, 2014, in two unanimous decisions, the U.S. Supreme Court laid down a pair of pivotal changes to the rules governing court awarded attorney’s fees in patent litigations. The two cases, Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare, centered on 35 U.S.C. § 285, which provides that district courts “in exceptional cases may award reasonable attorney’s fees to the prevailing party.”

In Octane, patentee Icon Health & Fitness sued Octane for infringement of Icon’s U.S. Patent No. 6,019,710. The district court granted Octane’s motion for summary judgment of non-infringement but, under Brooks Furniture, denied Octane’s motion for attorney’s fees under § 285. The district court found Icon’s claims neither objectively baseless nor brought in bad faith. After the Federal Circuit affirmed and declined to “revisit the settled standard for exceptionality,” the Supreme Court granted certiorari and heard oral arguments in February.

In a concise, textually-based opinion authored by Justice Sotomayor, the Supreme Court cited the plain language of “exceptional” to unanimously strike down the Federal Circuit’s “rigid formulation.” The Brooks Furniture test, the Justices opined, “superimposed an inflexible framework onto statutory text that is inherently flexible.” The high court found both prongs of the Federal Circuit’s test problematic: the misconduct category as unnecessarily requiring independently sanctionable conduct, and the second category as improperly requiring both objectively baseless litigation and bad faith.

With respect to the former, the Court held that unreasonable activity not rising to the level of sanctionable conduct may nonetheless be sufficiently “exceptional” to render an award of attorney’s fees appropriate. Similarly, with respect to the latter, the Court held that “a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.”

In addition to finding the Brooks Furniture formulation “so demanding that it would appear to render § 285 largely superfluous,” the Supreme Court also loosened the burden of proof placed on parties seeking attorney fee awards. In place of the Brooks Furniture “clear and convincing evidence” standard, the Court imposed a lesser “preponderance of the evidence” standard. “Section 285,” the Court explained, “demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less a high one.” Accordingly, the Court furthered, the preponderance of the evidence standard is appropriate because it “allows both parties to share in the risk of error in roughly equal fashion.”

In Highmark, the district court granted summary judgment of non-infringement in favor of alleged infringer Highmark and subsequently awarded attorney’s fees in light of patentee Allcare’s “vexatious” and “deceitful” conduct. On appeal, the Federal Circuit reversed the district court’s “exceptional case” determination as to one claim using a three-tiered standard of review. The Federal Circuit applied de novo review to the “objectively baseless” prong, applied a clearly erroneous standard to the “subjective bad-faith” prong, and held that if the case is deemed “exceptional,” the resultant award of fees should be reviewed for an abuse of discretion.

The Supreme Court issued a brief five-page opinion holding that “an appellate court should apply an abuse of discretion standard in reviewing all aspects of a district court’s § 285 determination.” Citing its concurrently-issued Octane opinion, the Court noted that “[b]ecause § 285 commits the determination of whether a case is ‘exceptional’ to the discretion of the district court, that decision is to be reviewed on appeal for an abuse of discretion.”

Important Dates

 

  • April 29, 2014 – U.S. Supreme Court hands down decisions
  • Feb. 26, 2014 – U.S. Supreme Court hears oral arguments
  • Oct. 1, 2013 – U.S. Supreme Court agrees to hear both cases
  • March 27, 2013 – Octane Fitness files petition for a writ of certiorari
  • March 25, 2013 – Highmark files petition for a writ of certiorari
  • Oct. 24, 2012 – Federal Circuit decision in Icon Health & Fitness v. Octane Fitness
  • Aug. 7, 2012 – Federal Circuit decision in Highmark v. Allcare Health Management

Court Documents

Media

Banner & Witcoff attorneys are available to answer questions and discuss these cases. Media inquiries should be directed to Amanda Robert (312) 463-5465 or arobert@staging.banner.flywheelsites.com.

Intellectual Property Law: Counseling, Licensing, Litigation & Procurement