Correction: In a previous version of this story, we stated that plaintiff Allcare Health Management Systems asked the Federal Circuit to rehear its appeal. In fact, it was the defendant, Highmark Inc., that moved for en banc review of the court’s August opinion. Highmark made that motion because the earlier Federal Circuit ruling had rejected many of the grounds for Allmark’s $5 million fee award. We regret the error.
A patent infringement suit that Allcare Health Management Systems brought against Highmark Inc. almost a decade ago has fared poorly by pretty much any measure. Highmark’s lawyers at Reed Smith knocked out Allcare’s patent claims, nearly secured sanctions against Allcare’s lawyers at McKool Smith and Sidley Austin, and scored a $5 million attorney fee award for their client. In August, the U.S. Court of Appeals for the Federal Circuit reiterated that Allcare has to pay attorneys fees in the case, although it rejected some of the trial judge’s grounds for the $5 million award and remanded the case.
On Thursday, Highmark narrowly lost a bid to get the full Federal Circuit to rehear the fee fight. But its bid for an en banc rehearing exposed a clear divide at the Federal Circuit over the deference that should be afforded to trial court judges weighing attorney fee requests. Five out of 12 judges dissented from the denial of en banc review, and accused their colleagues of improperly grabbing power from lower courts. (Read the decision here.)
Allcare sued Highmark in U.S. district court in Forth Worth, Tx., way back in 2003, alleging infringement of a patent covering “managed health care systems” for connecting doctors, insurers, and patients. Four different law firms represented Allcare: Hill Kertscher & Williams; McKool Smith; Sidley Austin; and Bracket & Ellis.
Highmark’s lawyers at Reed Smith convinced Judge Terry Means to dismiss the case on summary judgment in 2008. Two years later he awarded Highmark roughly $5 million in attorneys fees and costs. Allmark had engaged in litigation misconduct, he ruled, by pressing frivolous claims and constantly changing its claim construction arguments. (The judge also imposed sanctions against all four firms representing Allcare, but he vacated that decision in August 2010.)
Allmark appealed to the Federal Circuit, with the help of Donald Dunner of Finnegan Henderson Farabow Garrett & Dunner. In a 2-1 decision issued in August, the court affirmed that Allcare would have to pay Highmark’s fees, but remanded the case back to Means for him to recalculate the amount. The majority opinion overruled some of Means’ findings. While Allmark did make some frivolous arguments, it didn’t engage in litigation misconduct, the appeals court ruled. As we reported, that decision drew a sharp dissent from judge Haldane Robert Mayer, who maintained that the appeals court shouldn’t second-guess a trial judge’s fee award unless it’s clearly erroneous.
By a close 7-5 vote, the court decided Thursday not to revisit the August decision. Whether infringement claims are objectively baseless is a question of law, not fact, and therefore should be reviewed de novo, the majority ruled. “Our court sees far more patent cases than any district court, and is well positioned to recognize those ‘exceptional’ cases in which a litigant could not, under the law, have had a reasonable expectation of success,” court found.
The majority’s opinion didn’t sit well with judge Kimberly Moore, who joined four of her colleagues in dissenting from the decision to not grant en banc review. “Highmark deviates from precedent, invades the province of the fact finder, and establishes a review standard for exceptional case findings in patent cases that is squarely at odds with the highly deferential review adopted by every regional circuit and the Supreme Court in other areas of law,” she wrote.
