Awarding Attorney Fees and Deterring 'Patent Trolls'

Abstract

A court may award attorney fees to a prevailing party in a patent trial under exceptional circumstances. Since 2005, courts had applied a rigid formula to determine whether a case was exceptional. In the summer of 2014, the Supreme Court rejected this rigid test. Instead, the Court held that an exceptional case is “simply one that stands out from others.” Finding a case exceptional, the Court said, was at the discretion of the district court and only reviewable on appeal for an abuse of discretion.

A little over a year later, one interesting question is: how do district courts now determine what cases are exceptional in the absence of a more formulaic approach? The analysis of several recent cases reveal that district courts primarily analyze a party’s (1) litigation position and (2) litigation conduct to determine whether — in its discretion — to award attorney fees. To a lesser degree, district courts have also awarded attorney fees to deter infringement and unsavory litigation practices.

However, the deterrence rationale has the potential to be problematic: its purpose is to deter litigation practices, but given the current legal climate it could be used to unfairly penalize litigants that might be classified as “patent trolls.” The existing literature on the award of attorney fees in patent cases sheds very little light on the problems district courts’ reliance on the deterrence rationale could present. This essay addresses these problems and offers practical insights as to when courts should rely on the deterrence rationale to award attorney fees. The essay points out that what makes a case exceptional should have little to do with the identity of the parties. In addition, this essay prescribes that district courts should not take into account the business model of the parties to justify deterrence as a rationale for awarding attorney fees.

Keywords: intellectual property, patent, attorney fees, patent troll, patent litigation, Highmark, Octane