Whether you’re in the market for legal representation or car repair, one of the most important questions is how to minimize costs associated with services. In the United States, it’s typical for each litigating party to pay its own attorney fees no matter the outcome. But is it possible that one party could ever be required to pay the attorney’s fees of another? In the patent litigation context, the answer is yes.
In order for a prevailing party to receive attorneys’ fees in a patent matter, a court must first deem a case to be “exceptional.” As to when a court ought to deem a case “exceptional,” that’s precisely what the Supreme Court has on its plate after last week’s oral arguments in a pair of patent law cases.
On Wednesday, February 26, 2014, the Supreme Court heard oral arguments in Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare Health Mgmt. The outcomes of both cases should help us understand when the prevailing party in litigation may receive attorneys’ fees from the losing party. Both the Octane Fitness and Highmark cases feature efforts to properly define the term “exceptional case.” In Octane Fitness, the Court is considering whether to lower the bar that a successful party has to meet when attempting to prove to a court that a case is exceptional. In Highmark, the Court is considering whether to use the exceptional case standard offered by district courts as opposed to circuit courts or Congress.
In the Octane Fitness oral argument, a central question was whether the term “objectively baseless” ought to be used to signify an exceptional case. For example, if a plaintiff brought an “objectively baseless” claim against a defendant in a patent case, and the defendant succeeded in defending said case, should a court find the case exceptional and award attorneys’ fees to the successful defendant? Octane’s attorney, Rudy Telscher, attempted to persuade the Court that the “objectively baseless” standard for an exceptional case was too difficult to prove. Mr. Telscher offered the term “meritless” as a more prudent term, but the Court, in particular Justice Scalia, pushed back, predicting that a “meritless” standard might lead to too many cases being deemed exceptional. Mr. Telscher continued to attempt to strike a balance with a proper term – something in between “meritless” and “objectively baseless” – throughout the oral advocacy session. Finally, Mr. Telscher suggested the phrase “necessary to prevent gross injustice” as a way to measure whether a case could be called exceptional, listing several factors as a way to prove whether “gross injustice” would result in a particular case. But, even here, the justices balked, questioning the justifiability of using this proposed new standard. Chief Justice Roberts, for example, expressed his belief that “gross injustice sounds like a very tiny portion of cases.”
As for the Highmark case, the majority of the oral argument focused on the proper legal standard for evaluating exceptional case characterizations from district courts. But, even in this discussion, elements of the Octane Fitness case emerged – including assessment of the “objectively baseless” standard – and the Court underscored the current uncertainty regarding the standard for an exceptional case. It’s likely that the Supreme Court will first have to clarify the preferred standard for an exceptional case on its own before it can rule as to the validity of existing district court standards for defining exceptional cases.
What will come of this battle of semantics? The question of when prevailing parties can recover attorneys’ fees in exceptional cases is one that has resonated in the patent community for quite some time. It’s now up to the Supreme Court to decide. And once it does, later this spring most likely, attorneys and clients alike will feel the shockwaves. After all, prevailing in an exceptional case would help ease quite a bit of financial strain for victorious parties.
(Neeraj Joshi)