Federal Circuit Denies En Banc Review in Fee-Shifting Case

Federal Circuit Denies En Banc Review in Fee-Shifting Case

SAN FRANCISCO — The Federal Circuit has denied a rehearing in Kilopass Technology v. Sidense, setting in place a new test for fee-shifting in patent cases—at least temporarily.

The U.S. Supreme Court heard arguments last month on the same issue—the grounds for determining whether a case is “exceptional” under Section 285 of the Patent Act—and is expected to rule by June.

But for now the Federal Circuit has partly dialed back its rigid two-part test that requires a position be both objectively baseless and brought in subjective bad faith. In Kilopass, a three-judge panel led by Kathleen O’Malley ruled in December that litigants need not present “smoking gun” evidence of bad faith. Instead, mere reckless conduct will suffice.

Chief Judge Randall Rader wrote separately, calling for the court to do away with the bad-faith requirement altogether by overruling Brooks Furniture Manufacturing v. Dutailier International, the 2005 case that established the test.

Sidense attorney Roger Cook of Kilpatrick Townsend & Stockton ran with the suggestion, filing a petition for a rehearing despite having prevailed on appeal. “Objective baselessness alone should be enough to demonstrate exceptionality under Section 285,” he wrote.

Kilopass’ counsel, Durie Tangri partner Daralyn Durie, called the petition “at best premature and potentially moot.”

“By the time the parties would have briefed this case for en banc review, the Supreme Court will have spoken on the issue, potentially mooting the fees motion altogether and almost certainly requiring completely new briefing,” Durie wrote in opposition papers filed three weeks ago.

Numerous technology and manufacturing companies have urged the Supreme Court to reformulate the standard, saying more frequent fee awards could discourage abusive litigation, including from so-called patent trolls. The Supreme Court appeared to be leaning toward a totality-of-the-circumstances type of test urged by some of those companies and the U.S. government, as it considered the issue in Octane Fitness v. Icon Health and Fitness on Feb. 26. The justices mentioned Kilopass only once, when Justice Sonia Sotomayor made a passing reference.

Contact the reporter at sgraham@alm.com.

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