Will a new SCOTUS ruling help curb patent trolls? In recent unanimous U.S. Supreme Court opinions, Highmark Inc. v. Allcare Health Management Systems, Inc., and Octane Fitness v. Icon Health & Fitness, the justices effectively made it easier for successful litigants to obtain awards of attorney’s fees in patent infringement cases.
Some experts are suggesting that these rulings are a result of lack of momentum to reform the patent laws in Congress. Experts are lauding this as a victory for patent holders against so-called patent trolls. (Patent trolls are generally considered to be entities that prey upon distressed companies, purchasing or licensing their patents, and then aggressively suing competitors for patent infringement.)
In both Highmark and Octane, the high court was clear that it was moving beyond the language of Patent Act Section 285, which allowed the court to award reasonable attorney’s fees only in “exceptional cases.” The high court also dismissed the Federal Circuit’s adoption of a standard whereby attorney’s fees could be awarded only in cases of “material inappropriate conduct” or where a suit was “brought in subjective bad faith…[and was] objectively baseless.” Emphasis added.
Up until this point, the Federal Circuit’s standard set a high bar for companies fending off patent trolls—one that the justices felt was an unreasonably high one for successful patent litigants. In sum, the rulings throw out the current Federal Circuit standards and allow a District Court to review a patent case as “exceptional” if it either involves “subjective bad faith” or is “objectively baseless” (but doesn’t require both), thereby lowering the bar to demonstrate that the successful litigant should be awarded attorney’s fees.
Many companies are welcoming this “activist” ruling by the Supreme Court. Patent trolling is becoming an increasingly troublesome issue for both large and small companies, costing litigants millions of dollars annually. Supporters of patent reform point to the European Union, where successful litigants are automatically awarded attorney’s fees, and accordingly, there is a much, much lower incidence of patent trolling. Whether the U.S. Congress will act in the upcoming session is unclear, but bills to reform the federal patent laws have stalled in recent sessions, and many are lauding these decisions by the Supreme Court as a step in the right direction in lieu of legislative action.
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