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May 1, 2014
Two Patent Cases from Sotomayor
The Supreme Court handed down two patent-related decisions this week, both with lead opinions authored by Justice Sotomayor.
In Octane Fitness, LLC v. ICON Health & Fitness, Inc. the Court addressed the issue of attorney fee awards. If you've been following the patent troll debates you have probably seen the idea that awarding attorney fees could be a way to curb some of the worst abuses of the patent system. The law presently allows awarding fees in "exceptional cases" but gives only only general guidelines for what could be considered an exceptional case. In a unanimous ruling, the Supreme Court effectively reigned in the Court of Appeals for the Federal Circuit's current method of exercising discretion in these cases and moved that discretion back to the District level.
I'm not well-enough versed in the law to have an opinion whether the Court got it right in this case, but I think this is a desirable outcome. Lately the CAFC has been arrogating extra powers to itself, making de novo findings and so on. I think these matters are much better handled at the district level, where evidence and findings of fact are normally argued. Yes, this will likely lead to more differences of opinion and I suspect that the CAFC and SCOTUS will end up having to make additional decisions that set guidelines but we need a rich debate in the Courts over how to apply the law as it's increasingly clear that Gridlockress isn't going to help.
Most crucially for those fighting against trolls right now, this decision provides a sharp rebuke to the CAFC's narrow and restrictive view of when fee awards are appropriate. Ronald Mann on SCOTUSblog has a nice summary of the four main errors that the Supreme Court saw and wished to correct.
In Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. the Court addressed the specific grounds for finding a case exceptional and handed another weapon to the anti-troll fighters. By specific reversal, the Court held that continuing to litigate cases that should reasonably be known to be baseless (e.g. from previous losses) is grounds for fee awarding.
This is important as it can curtail two bad-actor practices: "forum shopping" in which a troll continues trying to win cases in different jurisdictions until it finds a friendly judge. Then that single victory can be used to pressure settlements from other companies. Additionally, some trolls have filed RIAA-style mass lawsuits, trying to hit as many targets at once as possible. Under Highmark a defendant against such a suit can reasonably ask a judge to suspend trial pending other outcomes since the mass-filer now would face the risk of having continued suits being subject to penalty awards if it lost a lead case.
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