US Supreme Court on patent trolls: make 'em pay when they lose

The US Supreme Court yesterday issued decisions in two cases essentially relating to patent trolls, Octane Fitness v. Icon Health & Fitness and Highmark Inc. v. Allcare Health Management System, Inc.
US law (35 USC § 285) says patent suit losers should pay the winners legal costs but only in "exceptional circumstances". In practice, in spite of the mountains of ridiculous patents and strategic business patent lawsuits, very few cases are held to be sufficiently exceptional for the court to award such costs. Which is a licence for patent trolls to pursue their extortion rackets with relish.

The decisions in the Octane and Highmark cases theoretically make the awarding of legal costs to winners easier. Take the Octane decision:

"No. 12–1184. Argued February 26, 2014—Decided April 29, 2014

The Patent Act’s fee-shifting provision authorizes district courts toaward attorney’s fees to prevailing parties in “exceptional cases.” 35 U. S. C. §285. In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378, 1381, the Federal Circuit defined an “exceptional case” as one which either involves “material inappropriate conduct” or is both “objectively baseless” and “brought in subjective bad faith.” Brooks Furniture also requires that parties establish the “exceptional” nature of a case by “clear and convincing evidence.” Id., at 1382.

Respondent ICON Health & Fitness, Inc., sued petitioner Octane Fitness, LLC, for patent infringement. The District Court granted summary judgment to Octane. Octane then moved for attorney’s fees under §285. The District Court denied the motion under the Brooks Furniture framework, finding ICON’s claim to be neither objectively baseless nor brought in subjective bad faith. The Federal Circuit affirmed.

Held: The Brooks Furniture framework is unduly rigid and impermissibly encumbers the statutory grant of discretion to district courts.Pp. 7–12.

(a) Section 285 imposes one and only one constraint on district courts’ discretion to award attorney’s fees: The power is reserved for“exceptional” cases. Because the Patent Act does not define “exceptional,” the term is construed “in accordance with [its] ordinary meaning.” Sebelius v. Cloer, 569 U. S. ___, ___. In 1952, when Congress used the word in §285 (and today, for that matter),“[e]xceptional” meant “uncommon,” “rare,” or “not ordinary.” Webster’s New International Dictionary 889 (2d ed. 1934). An “exceptional” case, then, is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-caseexercise of their discretion, considering the totality of the circumstances. Cf. Fogerty v. Fantasy, Inc., 510 U. S. 517. Pp. 7–8.
(b)
The Brooks Furniture framework superimposes an inflexible framework onto statutory text that is inherently flexible. Pp. 8–11."

Justice Sotomayor, writing for the Court in the unanimous decision, goes on (p7-8):

"We hold, then, that an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.6 As in the comparable context of the Copyright Act, “‘[t]here is no precise rule or formula for making these determinations,’ but instead equitable discretion should be exercised ‘in light of the considerations we have identified.’” Fogerty v. Fantasy, Inc., 510 U. S. 517, 534 (1994)."

So district courts can be confident that decisions (to award legal costs to those successfully defending themselves from bogus patent troll lawsuits) in "exceptional" cases won't be overturned as long as "exceptional" is construed as:

• “in accordance with [its] ordinary meaning” (in 1952)
• "uncommon"
• "rare"
• "not ordinary"

and now, in the wake of the Supreme Court decision yesterday, 29 April, 2014,

• "stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated."

I doubt adding "stands out from to the list of "ordinary" meanings of "exceptional" will make a great deal of difference either to patent trolling or to the US Federal Appeals Court judges willingness to overturn lower court decisions they disapprove of in this area. Call me a skeptic but given the money and power embodied in such patent suits, I suspect it will take something stronger to break the cycle of legitimate patent applicants and defendants paying the price; whilst the well-resourced, wielding sharp-suited lawyers and huge portfolios of often indefensible patents, make off with the prizes.