Supreme Court Addresses Fee Shifting in Patent Infringement Cases: In Pair of Rulings, the Supreme Court Relaxes the Federal Circuit Standard for When District Courts May Award Fees in Patent Infringement Cases and Limits Appellate Review of Those Awards

Sullivan & Cromwell LLP - April 30, 2014

On April 29, the Supreme Court issued two unanimous opinions that: (1) give federal district courts broad authority to award attorneys’ fees in patent infringement cases and (2) limit appellate review of those awards.  Section 285 of the Patent Act provides that attorneys’ fees may be awarded to prevailing parties in a patent infringement action “in exceptional cases.”  In Octane Fitness, LLC v. ICON Health & Fitness, Inc., the Supreme Court overturned Federal Circuit precedent limiting “exceptional cases,” and instead held that “an ‘exceptional’ case is simply one that stands out from others with respect to” either “the substantive strength of a party’s litigating position” or “the unreasonable manner in which the case was litigated.”  The Court also rejected the “clear and convincing evidence” standard for this inquiry, holding that only a “preponderance of the evidence” is required to find a case exceptional.  In Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., the Supreme Court also held that a district court’s grant of attorneys’ fees to a prevailing party is reviewable by an appellate court only for “abuse of discretion” by the district court rather than de novo (without deference to the district court).