Today, the U.S. Supreme Court issued two opinions (Octane Fitness and Highmark) that create a more flexible, deferential standard for determining what constitutes an “exceptional” patent case in which a district court has discretion to award reasonable attorney’s fees to the prevailing party.  The Court rejected the Federal Circuit’s rigid test that required

(Note: the subject matter of this post is a bit off-topic for this blog, but with all of the attention being paid to non-meritorious patent lawsuits and potential solutions, we thought this warranted mentioning.)

Patent litigation, like most litigation in this country, is generally controlled by the “American Rule” — the general rule that each party pays its own litigation-related costs and attorneys’ fees.  This stands in contrast to the rules in other countries such as England, where the losing party generally pays the other’s attorneys’ fees.  There are exceptions to the American Rule in various jurisdictions and types of litigations, including the patent-related provision in 35 U.S.C. § 285.

Section 285 provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.”  However, it’s well-known that courts rarely award fees under Section 285 except in the most egregious circumstances (in fact, we recently posted a patent alert about a denial of fees).  Under current Federal Circuit precedent, cases are only deemed exceptional if there has been litigation misconduct or fraud in securing the patent, or if an infringer’s claim is both objectively baseless and brought in subjective bad faith.  See Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1308 (Fed. Cir. 2012).

In a recent petition for certiorari, Octane Fitness LLC has asked the U.S. Supreme Court to overturn this precedent and make it easier for prevailing patent infringement defendants to recover attorneys’ fees from infringement plaintiffs.
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Today, March 25, 2013, in Checkpoint Systems, Inc. v. All-Tag Security S.A., No. 2012-1085, the Federal Circuit (Newman, Lourie, and Schall) reversed both the district court’s award of $6.6 million in attorneys’ fees and the determination of an “exceptional case” under Section 285 of the Patent Act.  The awarding of attorneys’ fees has received