Appeal Must Be Exceptional to Justify Award for Patent Attorney’s Fees

On February 27, 2014, the Supreme Court heard oral arguments on two patent cases involving the award of attorney’s fees in exceptional cases under 35 U.S.C. § 285.  Octane Fitness v. Icon Health and Fitness addressed the standard for determining when a case is exceptional.  Highmark Inc. v. Allcare Health Management System addressed the standard of review an appellate court should apply when reviewing a district court’s decision to award attorney’s fees.

In the wake of these oral arguments, the Federal Circuit issued an opinion in Thereasense v. Becton affirming a district court’s decision denying an award for additional attorney’s fees.  In a split decision, the Federal Circuit held an award of appellate attorney’s fees is only warranted where the appeal itself is an exceptional case.

Attorney Fees in ‘Exceptional Cases’

In exceptional cases, the court may award reasonable attorney fees to the prevailing party.  The Federal Circuit has held that a case is exceptional when (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.  Brooks Furniture Mfg. v. Dutailier, Inc., 393 F.3d 1378 (Fed. Cir. 2005).

Therasense v Becton

In 2004, Becton sought a declaratory judgment of noninfringement of two patents owned by Abbott (previously known as Therasense).  Abbott sued Becton for infringement of its two patents as well its patent 5,820,551 (‘551).   In consolidated cases, the district court granted summary judgment of noninfringement for Becton.  In a subsequent bench trial, the district court found patent ‘551 unenforceable for inequitable conduct and the case exceptional.  The court awarded Becton costs and fees under 35 U.S.C. § 285 due following the exhaustion of all appeals if the inequitable conduct judgment was upheld.

Sitting en banc, the Federal Circuit affirmed the district court’s decision regarding noninfringement but vacated the inequitable conduct judgment and remanded for further proceedings.

Applying a new inequitable standard, the district court concluded again that the ’551 patent was procured through inequitable conduct.  Becton moved to supplement the original fee award with (1) appellate and remand fees and expenses; (2) fees spent seeking additional fees; (3) pre-judgment interest on fees; and (4) post-judgment interest calculated from August 21, 2008, the date the district court found the case to be exceptional.  On May 22, 2012, the district court reinstated the original fee award and added post-judgment interest calculated from May 22, 2012 but denied all additional fees and interest.

After the appeal and remand, the district court concluded the appeal was not exceptional and denied appellate fees.  The district court held section 285 requires a party seeking fees to establish that each stage of the litigation for which it requests fees is independently exceptional.  Becton appealed the district court’s denial of additional fees. The Federal Circuit affirmed.

Dissenting, Circuit Judge Dyk reminded the Federal Circuit that like other fee-shifting statutes the Supreme Court has held that all phases of litigation, including appellate proceedings, are to be treated as a unitary whole, not parsed into discrete parts.

Only time will tell whether the Federal Circuit applied the proper standard for determining when a case is exceptional, and whether every stage of the litigation must be exceptional.

More by | Angela Foster Angela Foster , Law.com Contributor
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