The U.S. Supreme Court heard oral arguments in two cases involving the attorney fee provision of 35 U.S.C. § 285.  That statute provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.”  The cases relate to when a federal judge can order a plaintiff to pay the defendant’s attorney’s fees.

In the two cases, Highmark Inc. v. Allcare Management Sys., Inc. and Octane Fitness v. Icon Health and Fitness, the Court heard arguments over arcane, decades-old patent law, their arguments hinged on the semantic difference between “meritless,” “baseless,” and “objective unreasonable” and who should pay the attorney fees in such cases.  What does "exceptional" really mean?  There has never been a clear, uniform standard since the language was adopted in the Patent Act of 1952.

Many in the business community want the Court to relax the high fee-shifting standard which would make it easier for a federal judge to order that a plaintiff pay the attorney fees of a winning defendant.  Those suits can sometimes cost millions of dollars to fight off, and under the current law, attorney fees are rarely shifted—a reality that encourages “patent trolling.” 

“Patent trolling” is a term used to describe companies that purchase cheap patents with the sole intention of using them to threaten questionable infringement suits against others in hopes of leveraging their claims into lucrative settlements.  These companies are known as “non-practicing entities” (NPEs) or “patent assertion entities” (PAEs).

Patent litigaiton costs have grown from $7 billion in 2005 to $29 billion in 2011, when 8,842 lawsuits were initiated by PAEs against 2,150 companies, an official at tech company EMC Corp told a congessional panel in October.  Major tech firms, including Apple, Google, IBM, and Microsoft, are following the intonations of the Court closely, as all have large financial interests in how the judiciary and Congress may reshape the attorney fee award structure in patent litigation.

NALFA also reported on these issues in “Senate Weighs Fee Shifting Provision in Patent Reform Litigation” and “Supreme Court to Consider Patent Attorney Fee Awards”