Attorney's Fees

Key Elements

• (a) 'exceptional cases' — not all cases
• Only cases that stand out from others
• (b) 'may award' — discretionary
• The court can decline to award fees even in an exceptional case
• (c) 'prevailing party' — the party who wins the case (defendant or plaintiff may be the prevailing party)
• OCTANE FITNESS v. ICON HEALTH & FITNESS (S.Ct. 2014): fundamentally changed the § 285 standard

Before Octane

• Under the Brooks Furniture test, an exceptional case required either: (1) litigation brought in subjective bad faith
• OR (2) the litigation was objectively baseless
• And the determination was reviewed de novo on appeal

Octane Fitness Holding

• The Brooks Furniture test was too rigid
• An exceptional case is one that stands out from others with respect to: (a) the substantive strength of a party's litigation position (considering both the governing law and the facts)
• OR (b) the unreasonable manner in which the case was litigated
• The district court has discretion to consider the totality of the circumstances

No Requirement for Objective Baselessness

• Octane Fitness eliminated the need to prove the case was objectively baseless
• A case can be exceptional based on the weakness of the position or on litigation conduct alone
• HIGHMARK v. ALLCARE HEALTH MANAGEMENT (S.Ct. 2014): § 285 awards are reviewed for ABUSE OF DISCRETION (not de novo)
• This made fee awards more durable on appeal
• Combined with Octane, fee awards became significantly more available.

Weak Patent Assertion

• Filing suit on a patent with known invalidity
• Asserting infringement without adequate pre-suit investigation
• Pursuing claims clearly barred by exhaustion or prior license
• Ignoring obvious claim construction

Weak Defenses

• Asserting invalidity defenses without evidentiary support
• Raising defenses solely for delay
• Ignoring strong evidence of infringement

Abusive Litigation Tactics

• Vexatious discovery (excessive depositions; burdensome document requests without proportionality)
• Misrepresentations to the court
• Hiding information during claim construction
• Filing motions solely for delay

Demand Letter Practice

• Demanding settlement for amounts below litigation cost (nuisance value)
• Mass sending form letters
• Threatening frivolous litigation

Specific Exceptional Conduct

• Failing to perform adequate pre-suit investigation
• Continuing to litigate after learning of fatal claim construction issue
• Asserting the same patent against hundreds of defendants with boilerplate complaints
• Pursuing claims in bad faith after clear non-infringement is established

Factors Courts Consider

• The objective strength of the legal position
• The subjective good faith of the litigant
• The reasonableness of conducting investigation before filing
• Consistency with prior positions

Defendant's Exceptional Conduct

• Patent owners can also seek fees for exceptional defendant conduct: defending with frivolous invalidity arguments
• Abusive discovery tactics by defendant
• Relying on baseless claim construction

Amount of Fee Award

• The prevailing party recovers 'reasonable' attorney's fees
• The court may limit fees to the exceptional aspects of the case
• Fees may not cover the entire litigation if only part was exceptional.

Pre-octane NPE Landscape

• Before Octane Fitness (2014), it was difficult to obtain fee awards against NPEs
• NPEs (non-practicing entities, colloquially 'patent trolls') filed infringement suits knowing defendants would settle rather than spend $1M+ litigating
• Defendants often settled even weak cases to avoid litigation costs

Post-octane Impact

• After Octane Fitness, district courts awarded fees more frequently against NPEs with weak positions
• This created a deterrent against mass-mailing demand letters
• Courts awarded fees for: inadequate pre-suit investigation
• Using form complaints without analyzing each defendant's products
• Pursuing claims after obvious non-infringement was demonstrated

Fee Awards in Practice

• Apple v. Uniloc USA (NDCA 2021): court awarded $3.5M fees against Uniloc after finding exceptional conduct
• Courts in WDTX and NDCA have been active in fee awards post-Octane

Defensive Strategies Against NPE Assertions

• Respond to demand letters by pointing out deficiencies in the infringement analysis
• Early motion for summary judgment of non-infringement
• If successful, move for fees under § 285
• File IPR to invalidate asserted patents

Demand Letter Response Strategy

• If you receive a demand letter: request all claim charts
• Analyze the infringement theory
• Determine whether the patent is even arguably infringed
• If clearly not infringed, respond in writing to create a record for fees

Pro Se and Small-entity Plaintiffs

• Courts have discretion to consider the financial circumstances of the losing party when awarding fees
• A fee award against an individual inventor who loses may be reduced or waived
• Against a funded NPE, courts are less likely to reduce.

Rule 11 Obligations (Frcp 11)

• Before filing any patent infringement complaint, counsel must: conduct reasonable investigation of the factual basis for each allegation
• Confirm that each asserted claim is plausibly infringed by the accused product
• Not file for an improper purpose (delay, harassment)
• § 285 INVESTIGATION STANDARD: courts use evidence of pre-suit investigation (or lack thereof) in § 285 analysis
• What did counsel do before filing? was a claim chart prepared? was the accused product analyzed against the claims? was prior art considered? was the prosecution history reviewed? INADEQUATE INVESTIGATION PATTERNS: (a) using form complaints that don't analyze each defendant's specific products
• (b) asserting patent claims without understanding how the accused product works
• (c) claiming infringement of method claims without determining who performs each step
• (d) failing to obtain the accused product for analysis
• (e) relying on website descriptions without technical analysis

Documentation of Pre-suit Investigation

• Plaintiff's counsel should document: date and nature of pre-suit investigation
• Who performed the analysis (claim charts; product acquisition)
• What information was available

Defendant's Right to Discovery on Investigation

• Defendants may seek discovery on whether pre-suit investigation was adequate
• Depose plaintiff's counsel (within limits)
• Request claim charts

Timing of Exceptional Case Motion

• Typically filed after final judgment
• But early resolution is possible: motion for fees after case is dismissed
• Motion after summary judgment of non-infringement
• Courts may also award fees if plaintiff dismissed voluntarily after defendant raised substantive defenses.

Rule 11 (Frcp 11)

• § 285 applies after the case is over (exceptional case standard)
• Rule 11 applies to specific frivolous filings (complaint; brief; motion)
• Rule 11 requires a 21-day safe harbor period (the objecting party must notify the filer to correct before seeking sanctions)
• § 285 has no safe harbor
• § 285 vs.

28 U.s.c. § 1927 (Unreasonable Multiplication)

• § 1927: counsel personally liable for fees caused by unreasonably and vexatiously multiplying proceedings
• Requires bad faith
• Applies to attorney conduct specifically (not the party's substantive position)
• § 285 applies to the party's case
• § 285 vs.

Inherent Power

• Courts can award fees under inherent power for bad faith litigation
• High standard
• Rarely used when § 285 is available

Fee Award Amount

• The prevailing party is entitled to REASONABLE attorney's fees
• Courts use a lodestar analysis: reasonable hours × reasonable hourly rate
• If only part of the case was exceptional, fees limited to that part
• ENHANCED DAMAGES vs.

Fees

• § 284 enhanced damages: up to 3× compensatory damages for willful infringement (Halo Electronics, S.Ct. 2016)
• § 285 fees: reimbursement of attorney's fees
• Both can be awarded in the same case for the same conduct

Interest

• § 284 also allows pre-judgment and post-judgment interest
• Interest on damages separate from fees

Insurance Implications

• Many defendants have patent infringement insurance
• Insurance typically covers compensatory damages but may not cover § 285 fees
• § 285 exposure is personal to the entity, not necessarily insured.