Fees Possible After Patent Troll's High Court Loss
WASHINGTON (CN) - A finding that a patent troll's lawsuit was meritless deserved deference, the Supreme Court ruled Tuesday, reviving a claim for attorneys' fees.
The decision is one of two Federal Circuit reversals Tuesday that makes it easier to award patent fees. It stems from a 2002 letter in which Allcare Health Management Systems Inc. claimed that Highmark's data systems infringed on Allcare's patent for computerized information-management systems.
Allcare, whose main business is licensing patents, indicated it might sue if Highmark failed to buy a license.
Highmark refused and then pre-emptively challenged Allcare's patent in a federal complaint.
U.S. District Judge Terry Means ultimately found the patent enforceable but ruled that Highmark's system did not infringe it.
The Fort Worth, Texas, judge 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.
Means based the sanctions on Section 285 of the Patent Act, which allows "a court in exceptional cases" to award reasonable attorneys' fees to the prevailing party.
But the Federal Circuit reversed in August 2012, finding that it did not owe deference to the determination of baselessness and reviewing the issue de novo.
When the court declined to rehear the case, a dissent signed by five judges argued that Means' exceptional-case determination "was a question of fact, subject to review only for clear error."
The Supreme Court vacated the appellate ruling Tuesday, finding that the District Court's ruling should have been reviewed only for abuse of discretion.
Its analysis turned on the 1988 decision Pierce v. Underwood.
"The District Court 'is better positioned' to decide whether a case is exceptional because it lives with the case over a prolonged period of time," Justice Sonia Sotomayor wrote for the unanimous court. "And as in Pierce, the question is 'multifarious and novel,' not susceptible to 'useful generalization' of the sort that de novo review provides, and 'likely to profit from the experience that an abuse-ofdiscretion rule will permit to develop.'
"We therefore hold that an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court's §285 determination. Although questions of law may in some cases be relevant to the §285 inquiry, that inquiry generally is, at heart, 'rooted in factual determinations.'"
In its other decision Tuesday on attorneys' fees in patent cases, the mostly unanimous court said that the Federal Circuit had been too rigid in setting a standard for ascertaining whether a case is "exceptional."