Patent Troll Sanctions Surface in High Court
(CN) - The high court on Tuesday agreed to take up a case questioning when courts can award attorneys' fees to deter patent trolls.
The Supreme Court said it would hear Highmark Inc. v. Allcare Health Management Systems Inc., a patent infringement case in which a federal judge ordered patent owner Allcare to pay more than $5 million in attorneys' fees and expenses for pursuing meritless claims and engaging in litigation misconduct.
Allcare's main business is licensing patents, according to court documents.
In 2002, Allcare sent Highmark a letter claiming Highmark's data systems infringed on Allcare's patent for computerized information-management systems. Allcare indicated it might sue if Highmark failed to buy a license.
Highmark refused and then preemptively sued Allcare in Pittsburgh Federal Court, challenging Allcare's patent and seeking a declaration of non-infringement. The case was later transferred to a federal judge in Fort Worth, Texas, where Allcare is based.
U.S. District Judge Terry Means found the patent enforceable in March 2008, but ruled that Highmark's system did not infringe it.
Means then went a step further and sanctioned Allcare for its "overzealous pursuit of Highmark" by ordering it to pay $4.7 million in attorneys' fees and about $585,00 in expenses.
The judge said Allcare "maintained its allegations after they were shown to be meritless, advanced meritless defenses, and needlessly complicated claim construction."
"Allcare was not some naive or passive participant in this litigation," he added. He said it pursued the lawsuit "as part of a bigger plan to identify companies potentially infringing the '105 patent under the guise of an informational survey, and then to force those companies to purchase a license ... under threat of litigation."
Means based the sanctions on a section of patent law that allows "a court in exceptional cases" to award reasonable attorney fees to the prevailing party.
But the Federal Circuit reversed in August 2012, finding that Allcare's infringement claims "were not objectively baseless." The federal appeals court then declined to rehear the case before the original three-judge panel or before the full court, despite a dissent signed by five judges who argued that Means' exceptional-case determination "was a question of fact, subject to review only for clear error."
On Tuesday, the Supreme Court said it will decide "whether a district court's exceptional-case finding ... based on its judgment that a suit is objectively baseless, is entitled to deference."