On April 29, 2014, the United States Supreme Court issued a decision that eases the awarding of attorneys fees to penalize patently bad litigation behavior.
Here is how the Supremes describe the controversy in Octane Fitness v. Icon Health & Fitness in the opinion Syllabus:
The Patent Act’s fee-shifting provision authorizes district courts to award attorney’s fees to prevailing parties in “exceptional cases.” 35 U.S.C. §285. In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381, the Federal Circuit defined an “exceptional case” as one which either involves “material inappropriate conduct” or is both “objectively baseless” and “brought in subjective bad faith.” Brooks Furniture also requires that parties establish the “exceptional” nature of a case by “clear and convincing evidence.” Id., at 1382. Respondent ICON Health & Fitness, Inc., sued petitioner Octane Fitness, LLC, for patent infringement. The District Court granted summary judgment to Octane. Octane then moved for attorney’s fees under §285. The District Court denied the motion under the Brooks Furniture framework, finding ICON’s claim to be neither objectively baseless nor brought in subjective bad faith. The Federal Circuit affirmed.
The Supremes held "The Federal Circuit’s formulation...overly rigid." They clarified that
a district court may award fees in the rare case in which a party’s unreasonable conduct — while not necessarily independently sanctionable — is nonetheless so “exceptional” as to justify an award of fees.
In addition, the Court rejected
the Federal Circuit’s requirement that patent litigants establish their entitlement to fees under §285 by “clear and convincing evidence."
Instead, the Supremes explained that
[s]ection 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one.
This decision rebalances the power to decide what constitutes an "exceptional" case away from the Federal Circuit, restoring considerable discretion to federal district courts.