New York Times

Two Rulings May Curb Lawsuits Over Patents

By ADAM LIPTAK APRIL 29, 2014

WASHINGTON — In a pair of unanimous decisions, the Supreme Court on
Tuesday made it easier for the winning side in patent cases to recover its legal fees
from the loser. The decisions were welcomed by some technology companies,
which said the rulings would help address what they say are abusive and coercive
lawsuits brought by “patent trolls,” or companies that buy patents not to use them
but to collect royalties and damages.

The first case, Octane Fitness v. Icon Health & Fitness, No. 12-1184, was
brought by a maker of exercise equipment against a smaller competitor, accusing
it of violating a patent. The smaller company, Octane Fitness, won after paying
$1.3 million in legal fees. It asked lower courts to order the larger company, Icon
Health & Fitness, to reimburse it.

Federal patent law allows such fee shifting in “exceptional cases.” The United
States Court of Appeals for the Federal Circuit, a specialized court in Washington
that hears patent cases, interpreted that to set a high bar. Fees may be awarded, it
has said, if the suit in question was tainted by misconduct or was “brought in
subjective bad faith” and “is objectively baseless.”

That standard was “unduly rigid,” Justice Sonia Sotomayor wrote for the
Supreme Court. All that the winning side need show to be awarded fees, she said,
was that the case was exceptional in the sense that it “stands out from others”
given the strength of the losing side’s position or its conduct in the litigation.

Justice Sotomayor wrote that the Federal Circuit had erred in other ways,
too. Winners should not always be required to prove both that their adversaries
had acted in subjective bad faith and that the losing side’s claims were objectively
baseless. And winners, she added, should not be required to prove their
entitlement to fees by “clear and convincing” evidence, a demanding level of
proof.

The Supreme Court returned the case to the lower courts for application of
the new standards. In a footnote reproducing emails from Icon officials, Justice
Sotomayor suggested that they might have acted with subjective bad faith.

Justice Sotomayor also wrote for the court in the second case, Highmark v.
Allcare Health Management System, No. 12-1163. She said appeals courts should
not lightly second-guess trial court decisions awarding legal fees in patent
disputes.

The New York Times Company submitted a supporting brief in the cases. It
urged the court to make it easier to obtain fee awards, saying that would protect
innovation.

A version of this article appears in print on April 30, 2014, on page B4 of the New York edition with the
headline: Two Rulings May Curb Lawsuits Over Patents.