Recalculating the Risk of Intellectual Property Litigation: The U.S. Supreme Court Lowers the Threshold for Awarding Attorneys' Fees in Patent Litigation
On April 29, 2014, the U.S. Supreme Court issued two opinions that substantially relaxed the standard for awarding attorneys’ fees in patent infringement litigation. The opinions likely will relax the standard for awarding attorneys’ fees in trademark and copyright cases, too. Take note, because the benchmarks for assessing the risk of intellectual property litigation just moved.
The Cost of Intellectual Property Litigation
Intellectual property litigation is a costly endeavor. The American Intellectual Property Law Association’s 2013 Report of the Economic Survey provided the median cost of litigating a patent infringement, trademark infringement, and copyright infringement suit through trial based on the amount at risk. The findings are reflected in the chart below.1 On average, a litigant incurs between fifty and sixty percent of these fees through the end of discovery.2 The cost of litigation can be a substantial fraction of, or in some cases exceed, the potential monetary award. Consequently, the standard governing the award of attorneys’ fees is critically important to both plaintiffs and defendants. Federal law authorizes the court in intellectual property cases to grant attorneys’ fees to the prevailing party if the court finds the case “exceptional.” Prior to April 29, 2014, the U.S. Courts of Appeals had developed standards for determining when a case was “exceptional” and warranted attorneys’ fees. For patent litigation, the U.S. Court of Appeals for the Federal Circuit, which hears all patent-related appeals, held that a prevailing party could recover its attorneys’ fees if it showed by clear and convincing evidence that the losing party committed some “material inappropriate conduct” or brought the litigation “in subjective bad faith” and the litigation was “objectively baseless.”3 This was a very difficult burden of proof. Thus, awards of attorneys’ fees were the exception, not the rule.
1. American Intellectual Property Law Association, Report of the Economic Survey, pp.34-36 (July 2013)
3. Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (2005).
4. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. , 134 S.Ct. 1749, 1755-56 (2014).
5. Id., 134 S.Ct. at 1756 & n.6.
6. Highmark Inc. v. Allcare Health Management System, Inc., 572 U.S. , 134 S.Ct. 1744, 1748-49 & n.2 (2014).
7. The Third Branch News, District Courts Selected for Patent Pilot Program (June 7, 2011), available at http://www.uscourts. gov/news/newsview/11-06-07/District_Courts_Selected_for_Patent_Pilot_Program.aspx, last visited July 3, 2014.
8. Octane Fitness, 134 S.Ct. at 1755 n.5.