Supreme Court Sides With Businesses on Patent Troll Litigation

Two recent U.S. Supreme Court decisions came down firmly on the side of businesses beleaguered by patent troll litigation, making it easier for those businesses to recoup legal fees for frivolous suits and establishing new review rules for the Federal Court of Appeals.

In its unanimous decision in Octane Fitness, LLC v. Icon Health & Fitness, Inc., the high court provided trial judges with more power to impose legal fees if it is determined that the case “stands out from others” when it comes to the conduct of the losing party.

In the court’s opinion, “A case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award,” wrote Justice Sonia Sotomayor.

Large companies like Apple and Google welcomed the ruling, but smaller businesses that usually settle with patent trolls to avoid the cost of litigation are also beneficiaries of this ruling.

The second case, Highmark Inc. v. Allcare Health Management Systems, Inc., involved an insurer (Highmark) that sought to reinstate a $5 million award it won after it prevailed in a patent lawsuit against Allcare.  A Federal Circuit Court had dismissed the award, but the Supreme Court ruled that the appeals court should defer more to the trail court on the issue.

Under the U.S. Patent Act, fees may be awarded in “exceptional cases.”  The high court found that the appeals court had applied the same standards as a federal law that provides for sanctions only if there is litigation misconduct.

“An ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated,” the court ruled.

The Highmark ruling requires the federal appellate court to examine the totality of the evidence the trial court used in making its ruling, setting a higher standard for overruling findings by lower courts.

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