Last week was
the busiest week for patent-related action at the Supreme Court
that many will have been able to recall. On April 28, it heard
in Nautilus v Biosig, on April 29
it issued two decisions in Octane v Icon and
Highmark v Allcare, and on April 30 it heard oral
in Limelight v Akamai.
The two related decisions on fee shifting issued on April 29
could prove to have the biggest long-term ramifications. Some
believe they clear the way for patent reform to be passed.
Todd Dickinson, executive director of the AIPLA (below
left), told me that the decision reminded him of the situation
during discussions around the America Invents Act when damages
were discussed for three years before a Supreme Court decision
made the issue moot. Suddenly, the negotiations were no longer
held up and the act passed.
In scrapping the two-step test established in Brooks
Furniture in 2005, Dickinson says the Supreme Court has
again done something similar. Fee shifting has proved a thorny
issue for the Senate Judiciary Committee, with the mark up of
Senator Patrick Leahy’s patent reform pushed back
multiple times as a result.
"The bottom line is the Supreme Court has taken the fee
shifting issue off the table," said Dickinson. "Those entities
that wanted a more aggressive approach to fee shifting all
filed briefs in the Supreme Court saying if you decide this our
way you’ll solve the problem. Well, the Supreme
Court solved the problem for them. Fee shifting can come out of
the legislation. They got what they wanted. I’m
not sure they are going to take it but they should take it in
He adds that legislation is not the best way to tackle the
fee shifting issue anyway.
"More to the point, the Supreme Court has said: 'Look folks
we know the problem here, we understand it. The CAFC was wrong
to create rigid rules. Congress should not be trying to craft a
rigid rule either. Rigid rules don’t work. You
need flexibility here. We the Supreme Court are on the
job.’ It was 9-0. I believe the Supreme Court is
trying to say don’t try to create another problem
by making it so rigid," said Dickinson.
The Supreme Court
said an exceptional case that qualifies for fees to be shifted
is "simply one that stands out from others with respect to the
substantive strength of a party’s litigating
position (considering both the governing law and the facts of
the case) or the unreasonable manner in which the case was
Scott McKeown, partner at Oblon
Spivak, commented that the Octane decision may have
mooted the Senate’s struggle around fee shifting
to balance the needs of innovators to enforce patents and the
need to rein in patent litigation abuse.
"With the Octane decision making clear that the district
courts may be more flexible in awarding sanctions for frivolous
patent suits, and the companion case of Highmark Inc v
Allcare…clarifying that sanction decisions are to
be reviewed under an abuse of discretion standard, it would
seem that the highest court has delivered a ready-made solution
to the current legislative gridlock,"
McKeown wrote in a blog post. "Stay tuned, the bottleneck
may have been broken."
Or maybe not...
So fee shifting can now be taken off the table in
negotiations and patent reform can move forward, right? Not so
One reaction to the news out of the Supreme Court could be
that reform is no longer so pressing.
"These decisions also come as the Senate is working out a
compromise on a new fee-shifting provision to the patent
statute," said Andrew Williams from McDonnell Boehnen Hulbert
on the Patent Docs blog. "It might be prudent, therefore,
to put legislative reform efforts on hold (especially with
regard to § 285), until the impact of these decisions can
On the other hand, supporters of reform say the Supreme
Court has done nothing to stop the need for legislation to curb
patent abuse. The Electronic Frontier Foundation’s
in a blog post declared the Supreme Court decisions "bad
news for patent trolls who bring weak cases and use the high
cost of defence to extort settlements". But he added it was
only a "step in the right direction" and said broader
legislative reform curbing patent troll abuse was still needed,
including fee-shifting provisions.
"We can expect opponents of patent reform to argue that
today’s decisions mean that we should delay, or
even abandon, efforts to pass new patent legislation," said
Nazer. "But this ignores the fact that current proposals
include many additional reforms – like heightened
pleading and end-user protections. And the fee shifting
proposals before Congress would be stronger than current law.
We need patent reform on multiple fronts – the courts,
the Patent Office, and Congress – to deliver real
The day after the news out of the Supreme Court the
Coalition for Patent Fairness
wrote a letter to Senator Leahy (right) and Senator
Grassley reiterating their call for patent reform including
demanding any draft reform include a provision "requiring more
litigants to the prevailing party’s legal fees and
costs when a lawsuit alleging infringement is not objectively
reasonable in law and fact".
his part, far from concluding that fee shifting was no longer
part of the debate and a patent bill could move forward,
Senator Leahy responded by cancelling mark up of his bill for a
fifth time on May 1. Mark up of the bill is not
looking likely before May 22 now, with time quickly running
Deep political divisions still remain that are making
previous claims that patent reform would be a bipartisan issue
look optimistic and premature. Trial lawyers, for instance,
hold a lot of influence over Democrats and
would resist any moves towards fee shifting.
The AIPLA’s Dickinson said people need to be
careful about what they are trying to achieve in discussions
around fee shifting, and patent reform in general. He said
legislation should be crafted to behaviour and not to certain
types of actors.
"The standard I apply in this whole process, and I wish they
would apply a similar standard, is: will the sole inventor, the
small company, the start-up who has a patent and a good idea
that they are just bringing to the market and they are finding
out they have a good case for infringement, is that little guy
going to be able to find that good but mid- to small-size law
firm to take his case?"
Dickinson said malpractice insurance rates could go up for
mid-sized law firms that are taking these kinds of cases
"That is what I am concerned about and I have plenty of
members that fit that category. Are their malpractice rates
going to go up is a function of all this? I know there is a
problem. I know there is bad behaviour out there. But the
question I have is: is the legitimate little guy and the small
to medium law firm that takes those guys’ cases
going to be able to get justice and survive?"
At this rate, however, Dickinson needn’t worry
about what effect reform will have on AIPLA members.