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Supreme Court Declares: Exceptional Cases "Stand Out From Others"

April 30, 2014

By ROBERT M. MASTERS, KEITH R. SYVERSON & LISA Y. LEUNG

On April 29, 2014, the Supreme Court issued a pair of unanimous rulings that have the potential to change dramatically the patent litigation landscape and perhaps present the largest attack on non-practicing entities seen to date. In Octane Fitness, LLC v. Icon Health & Fitness, No. 12-1184, the Supreme Court significantly reduced the burden that a prevailing party needs to prove an “exceptional case” warranting the award of attorney’s fees under 35 U.S.C. § 285. The Court made two key rulings. First, the Court reversed the Federal Circuit’s rigid two-part test that required a finding of both subjective bad faith and objective baselessness. Instead, the Court explained that an “exceptional” case “is simply one that stands out from others with respect to the substantive strength of a party’s litigating position … or the unreasonable manner in which the case was litigated.” Slip op. at 7-8 (U.S. Apr. 29, 2014). Second, and equally important, the Court rejected the Federal Circuit’s finding that such a determination must be found by clear and convincing evidence. Instead, the Court emphasized that the exceptional case inquiry is a “simple discretionary inquiry” with “no specific evidentiary burden.”  Id. at 11. In a brief companion case, Highmark, Inc. v. Allcare Health Management System, Inc., No. 12-1163, the Court held that exceptional case determinations should be reviewed on appeal under an abuse-of-discretion standard because, in part, the district court is better positioned to make such a determination.