Although Section 285 of the Patent Act provides district courts with discretion “in exceptional cases to award reasonable attorney fees to the prevailing party,” such sanctions are too infrequently levied. That may change as a result of two Section 285 cases pending before the U.S. Supreme Court: Highmark Inc. v. Allcare Health Management Sys. and Octane Fitness, LLC v. ICON Health & Fitness, Inc. These two cases could significantly impact the current litigation landscape, especially in the technology sector, which is saturated with patent trolls that exploit baseless infringement litigation to extract large settlements from the industry’s leading companies. The Supreme Court’s granting of certiorari in both Highmark and Octane has generated optimism that bad faith patent assertion will be deterred by changes in the law that enable more frequent and more significant sanctions. That optimism has been heightened both by recent commentary from the Federal Circuit’s Chief Judge Rader, and by the inclusion of fee-shifting provisions in pending proposed Congressional legislation.
Under the current legal framework, after finding that the party seeking attorneys’ fees has prevailed, the district court uses a two-step process to determine whether to award fees, per Forest Labs., Inc. v. Abbott Labs. First, the court must find that the moving party has proven by clear and convincing evidence that the case is, in fact, “exceptional.” If so, then the court must determine the propriety of an award, and the amount, if an award is deemed appropriate. Absent litigation misconduct, sanctions should be imposed only if both “(1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless,” per Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc.