Header graphic for print
WinTech Legal Insight for Start-Up and Established Technology Businesses

Victims of Patent Trolls Get Re-Sharpened Weapon in their Defense

Posted in Intellectual Property Litigation, IP Counseling and Strategies, Technology News & Events, Technology Transactions

 Fee-shifting in patent infringement suits has been authorized by statute since 1952, for application in “exceptional cases.” [1] For the past nine years, that statute has not often been applied as a result of the Federal Circuits’ decision in Brooks Furniture, which requires the prevailing party in a patent infringement action seeking attorney’s fees establish either: (1) their opponent had committed an act independently sanctionable under federal rules; or (2) that the claim against them was objectively baseless and subjectively brought in bad faith. [2] Given that both tests were governed by a “clear and convincing” evidentiary standard, the fee-shifting statute was effectively neutered and the modern patent troll – a non-practicing patent holding entity hoping only to coerce a licensing fee via the threat of litigation – had little to fear when asserting their potentially dubious rights.

The Supreme Court has recently taken steps that may loosen the Federal Circuit’s “unduly rigid” definition of that fee-shifting statute in April’s Octane Fitness decision. In place of structured tests the Supreme Court returned to pure judicial discretion – “exceptional cases” in the post-Octane Fitness world are to be determined on individualized basis that factors in any and all aspects of the litigation the presiding judge finds relevant. [3]

In the Southern District of New York, Justice Denise L. Cote swung the sword handed to her in Octane Fitness. Cote awarded attorney’s fees to a plaintiff who had been met with threats of extensive litigation, including “all motion practice as well as protracted discovery.” The court didn’t just look at what the defendant’s said and did with regards to the plaintiff, but analyzed their behavior in general, finding they employed a “predatory strategy” that resulted in a number of nearly identical suits filed in a small time frame. The plaintiff had even continued to assert their claim despite leaving it undisputed that the defendant did not infringe the plaintiff’s patent. Without utilizing the term, Cote made it clear that the plaintiff was a patent troll and one who would be paying for his own day in court in addition to his opponent’s. [4] Other courts are following in Cote’s footsteps and using Octane Fitness to punish plaintiff’s bringing questionable patent infringement claims. [5]

The transition back to freer fee-shifting is undoubtedly a positive development in the fight against patent trolling. However, concerns still exist for defendants, namely that even should they prevail in an action the judge might not find the behavior of the opposing party offensive enough to grant fees, even under the relaxed Octane Fitness framework. For a litigant who fears the worst outcome, the same motivation to settle the suit early on in the judicial process still exists and the patent troll behavior isn’t curtailed.

At the least, however, Octane Fitness has freed courts’ hands from the Federal Circuit’s rules and Lumen View has given the legal world an idea of what behaviors will put those hands into motion. Given the broad grant of judicial discretion and case-by-case basis of application, different profiles of an “exceptional case” will emerge over the coming years and it will take a measured, focused, and sometimes brave approach to prove victorious in and help minimize vexatious patent litigation.

 [1] See 35 U.S.C. § 285.

[2] Brooks Furniture Mfg. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381-2 (Fed. Cir. 2005).

[3] Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749, 1755-6 (2014).

[4] Lumen View Tech. v. Findthebest.com, 1:13-CV-03599, 2014 U.S.Dist. LEXIS 75209, at *5-*6 (S.D.N.Y. May 30, 2014).

[5] See Precision Links Inc. v. USA Prods. Grp., 3:08-CV-00576, 2014 U.S. Dist. LEXIS 85694 (W.D.N.C. Jun. 24, 2014).

Authors: Kyle Dugan* and Robert Shaddox

*BENJAMIN N. CARDOZO SCHOOL OF LAW, Candidate for Juris Doctor, June, 2015