Remember when you were in high school, and you needed a lead for your essay, and, when you had nothing better in mind, you’d start with “Webster’s defines ‘exceptional’ as…” In retrospect, it seems like a bit of a cheat to lean so heavily on the dictionary. Yet that is exactly what the Supreme Court did in the case of Octane Fitness LLC v. Icon Health & Fitness Inc.
In its decision, the Court discarded the Federal Circuit’s test for determining the awarding of attorney’s fees, which previously consisted of testing whether a case was “objectively baseless” and brought in “bad faith,” thereby making it exceptional. “The strange thing about [the decision] was in discarding the test, the Court gave a dictionary definition of what ‘exceptional’ is,” explains Ken Parker, partner at Haynes and Boone and co-leader of the Patent Litigation Practice Group
The problem with this, of course, is that it tells the courts what not to do but gives precious little guidance on what the new test should be. “After the decision came out, the general consensus is that no one knows what the new standard should be,” says Colette Verkuil, partner in Morrison Foerster’s Intellectual Property Group. “They went to the dictionary definition, but what does that mean? What’s clear, though, is that, for a long time, we as counsel have rarely filed for fees, since it was so clearly a high standard, you were never going to get them. But the Court has sent the signal now that it should be an option.”
Parker notes that the biggest impact the decision might have on the future of patent litigation may not turn up in measurable numbers. “There will be an effect on conduct. You won’t see outcomes that create data points, but you’ll see a change in behavior,” he explains. Since only a small percentage of cases go to verdict, and only a small percent of those will be subject to fee motions, Parker believes parties will test the water more often. But Octane will also create economic shifts in bargaining power, when one party feels that claims are aggressive or frivolous, the threat of the fee-shifting can cause certain parties to back off.
Both attorneys agree that it is too early to tell exactly what impact Octane will have on the future of patent litigation, as courts work out the exceptionality test and we see how often fee shifting occurs. The case marks just one of many IP-related cases that the Supreme Court has seen this term, which just goes to show how important intellectual property and patents have become to American businesses.