On Wednesday, the Supreme Court will hear oral arguments of two patent infringement cases, Octane Fitness v. ICON Health & Fitness and Highmark Inc. v. Allcare Health Management Systems. Both cases centralize around the “exceptional rule,” which allows the court to award attorney fees to the prevailing party in patent litigation.
ICON Health & Fitness, an alleged patent troll, filed a lawsuit against Octane Fitness, claiming that Octane’s elliptical design infringed on its patent. The District Court issued a summary judgment of non-infringement, and Octane subsequently filed a motion for the court to find the case “exceptional” and be awarded attorney fees. The court denied the motion using a two part test, determining that ICON’s suit was not objectively baseless, nor was the company acting in bad faith. The case then went to the Federal Circuit court, where Octane asked the court to reconsider the “exceptional rule,” claiming that defendants were burdened with a higher standard of proof than plaintiffs in proving exceptionality. The Federal Circuit declined to reconsider, and affirmed both parts of the District Court’s ruling.
Allcare Health Management Systems, also an alleged patent troll, brought suit against Highmark Inc., claiming that Highmark infringed on its patented transaction processing system. The District Court issued a summary judgment of non-infringement. Highmark motioned for the court to find the case exceptional and be awarded attorney fees. The court ruled Allcare’s case to be objectively baseless, and awarded Highmark with $5 million for their attorney fees and court costs. However, on appeal, the Federal Circuit reversed in part. They ruled that some of Allcare’s claims were not objectively baseless. Highmark now seeks the Supreme Court to rule on the decision, petitioning the justices to change the “exceptional rule.” They propose a standard whereby the defendant would be awarded attorney fees and costs if the plaintiff had an “objectionably low likelihood of success” in winning their patent infringement lawsuit.
These cases bear some similarities to a trademark infringement case, Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, in which Justices Scalia and Ginsburg both decided while on the Court of Appeals. The case was originally dismissed because Noxell brought the suit in DC when it should have been brought in San Francisco. On appeal, the Firehouse Restaurant petitioned for an attorney fees award, claiming that because Noxell wrongfully brought the case before a DC court, the case was exceptional. The majority, including Scalia and Ginsburg, agreed with the case’s exceptionality and that the restaurant was due back its attorney fees. The justices rejected the notion that trademark lawsuits could only be rendered exceptional if the case was brought in bad faith.
This could have implications for the Octane and Allcare cases if the court uses the same logic that Scalia and Ginsburg used in regard to trademark lawsuit defendants. If defendants no longer need to prove the patent lawsuit was brought in bad faith to have it deemed exceptional, it could be much easier for defendants of patent infringement cases to recover their attorney fees and court costs if found in compliance.