United States: Recovering Attorneys' Fees For AIA Proceedings

The U.S. Supreme Court recently confronted the ever-increasing concerns regarding frivolous patent infringement suits by clarifying the requirements of 35 U.S.C. § 285, the fee-shifting statute, which allows prevailing parties to recover attorneys' fees in "exceptional" cases. In its 2014 Octane Fitness, LLC v. ICON Health & Fitness, Inc. decision, the Supreme Court addressed the statutory term "exceptional," lowering the threshold for determining the types of patent cases in which attorneys' fees should be awarded. Parties seeking attorneys' fees in patent cases were previously required to show that a case was exceptional because "there has been some material inappropriate conduct" or because the litigation was "brought in subjective bad faith" and is "objectively baseless."

However, in Octane, 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 (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated."1 In addition, the Octane court made it easier for parties to prove "exceptional case" status by relaxing the evidentiary standard from "clear and convincing evidence" to a "preponderance of the evidence." Importantly, the Octane court also affirmed that district courts had the discretion to determine whether or not a case is "exceptional" based on the totality of the circumstances.

Amidst a litigation landscape in which an increasing number of patents were being asserted, including those owned by non-practicing entities, many criticized the pre-Octane fee recovery requirement as overly restrictive, especially since there existed few other procedural mechanisms to curb questionable patent suits. Indeed, since the U.S. Court of Appeals for the Federal Circuit first set the restrictive standard for determining which cases would qualify as "exceptional," Congress has cautiously considered several patent reform bills and changes to federal court practice rules (including the recent 2016 updates to the Federal Rules of Civil Procedure) to create more stringent requirements for filing patent suits and to make the recovery of attorneys' fees easier for prevailing parties in patent cases.2,3 However, the Supreme Court's ruling in Octane instantly changed the game, immediately making it easier for prevailing parties in patent infringement suits to recover their attorneys' fees.

Although Octane relaxed the standard for what types of cases are deemed exceptional, the case left open the question of exactly what fees associated with "exceptional" cases are recoverable—for example, are fees expended in AIA challenges recoverable?

After their creation by the America's Invents Act, post-grant proceedings—including inter partes review (IPR), covered business method review (CBM) and post-grant reviews (PGR)—are becoming increasingly common defensive responses to district court litigation. IPRs, CBMs and PGRs challenge patent validity before the Patent and Trademark Office's Patent Trial and Appeal Board (PTAB). These hybrid litigation-administrative proceedings allow parties to use traditional litigation tools, such as limited discovery, motion practice and hearings, to argue the validity of patents in a new and highly-tailored forum before administrative judges who are well-trained in patent law.

Arguing validity of patents before the PTAB provides an opportunity for the merits of a patent case to be decided by technically savvy decision makers, the proceedings are often resolved far more quickly than through district court litigation (i.e., generally within a year from institution), and a resolution can often be reached at a much lower cost relative to litigation (especially given the PTAB's strict adherence to limited discovery during its proceedings). In fact, litigation may be stayed pending the outcome of a concurrent PTO proceeding, reducing costs for both parties. Given the numerous benefits, district court defendants in patent infringement suits turn to these post-grant proceedings at an extremely high rate, with exemplary statistics showing that halfway through 2015, approximately 87 percent of IPR and CBM proceedings involved patents that were also being litigated in district court proceedings.4

As one of the motivations for creating post-grant proceedings was to drive down traditional litigation costs by giving parties an alternative avenue to resolve matters without extensive and expensive discovery, motions and trial in district court, it seems natural that those fees would be recoverable in view of the Octane decision. Indeed, Section 285 does not expressly limit fee recovery to district court litigation expenses. But not every district court judge agrees with this rationale. Just recently, two district courts have opined on this very issue—each court reaching substantially different conclusions.

In Deep Sky Software, Inc. v. Southwest Airlines Co.,5,6 parties jointly moved to stay a proceeding in which the defendant filed for inter partes reexamination of the sole asserted patent asserted, which the U.S. District Court for the Southern District of California granted. After all claims of the asserted patent were found to be invalid, and the PTAB affirmed the decision on appeal, the district court lifted the stay, and defendant Southwest Airlines moved for an "exceptional" case finding on the basis of inequitable conduct and violations of local rules. The court granted that motion, predicating the court's later decision to award Southwest Airlines its attorneys' fees, including fees associated with the PTAB proceedings, under Section 285. In granting Southwest Airlines' application for its PTAB fees, the court noted that "[r]eexamination was initiated during and in reaction to plaintiff's action here. Further, the PTO's cancellation of the asserted [] [p]atent claims on grounds of invalidity disposed of plaintiff's complaint here and made the defendant the prevailing party. Thus . . . the reexamination proceedings essentially substituted for work that would have otherwise been done before this court." For these reasons, the court ruled that fees for PTO proceedings were recoverable under Section 285.

The Central District of California came to a different outcome in Credit Acceptance Corp. v. Westlake Services, LLC.7 Defendant Westlake Services filed a CBM petition shortly after being accused of patent infringement in district court, and the court stayed the case. The PTAB ultimately issued a final written decision in the CBM proceeding invalidating certain claims of the asserted patent, leading patent owner/plaintiff Credit Acceptance to file a voluntary motion to dismiss its district court complaint with prejudice. Westlake Services subsequently moved to recover its CBM fees under Section 285, but the court denied this motion after finding that the case was not "exceptional." The court's clerk determined that no costs would be taxed, so Westlake Services moved to retax costs, again arguing that its CBM fees should be recoverable. Noting that Westlake Services failed to provide specific arguments as to why its CBM fees should be recoverable, the court held that despite being the prevailing party, making it eligible for costs under Federal Rule of Civil Procedure 54(d) and the court's corresponding local rules for the taxing of costs, Westlake Service's CBM fees were still not recoverable. In reaching this decision, the court reasoned that the local rules expressly provide for recovery of fees that were paid to the court's clerk, which prevented recovery of CBM fees paid to the PTO, particularly given that the court had already determined that this was not an exceptional case under Section 285.

Despite the different outcomes of these cases, the analysis of both courts makes it clear that a case deemed exceptional under Section 285 could reasonably lead to an award for PTO fees. As the Southwest Airlines court explained, the reality is that PTO proceedings substitute for work that would have otherwise been done in the litigation, and this fact alone makes the incurred fees apt for recovery. This analysis, although easily applicable to district court defendants prevailing in PTO proceedings, is also arguably applied to district court plaintiffs who prevail in PTAB attacks on their patents.

In the end, the Supreme Court's Octane ruling has created a lower threshold for determining which cases are exceptional and, consequently, whether attorneys' fees will be granted to a prevailing party. Because fees associated with post-grant proceedings in the PTAB substitute for work that would have otherwise been performed during the district court litigation, and in some cases create work in addition to that which is done before the district court, prevailing parties are arguably entitled to recover these fees. Thus, prevailing parties seeking PTAB fees should consider taking advantage of the more relaxed post-Octane Section 285 standard to convince the district court that the case should be considered "exceptional."

Once a case is deemed exceptional, parties should take great care to show the court how the PTAB fees substituted for, or added to, work that would have otherwise been performed during the litigation in order to put forth a strong case for recovering PTAB fees.

Footnotes

1 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756, 2014 BL 118431, 110 U.S.P.Q.2d 1337 (2014) (88 PTCJ 28, 5/2/14).

2 Lionel Lavenue, R. Benjamin Cassady, and Michael Su, A Review of Patent Bills in the 114th Congress, http://www.finnegan.com/resources/articles/articlesdetail.aspx?news=c211bd3f-6ab9-4ab4-9489-4717c937fb60.

3 Lionel Lavenue, Michael Su, and R. Benjamin Cassady, 2015 Is Almost Over—What Happened to Patent Reform?, http://www.finnegan.com/resources/articles/articlesdetail.aspx?news=c211bd3f-6ab9-4ab4-9489-4717c937fb60.

4 Saurabh Vishnubhakat, Arti K. Rai, and Jay P. Kesan, Strategic Decision Making in Dual PTAB and District Court Proceedings, http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=6267&context=faculty_scholarship.

5 No. 10-cv-1234-CAB (S.D. Cal. June 1, 2015) (order granting motion to find case "exceptional" under Section 285).

6 No. 10-cv-1234-CAB (S.D. Cal. Aug. 19, 2015) (order granting fees).

7 No. 13-cv-1523-SJO (MRWx) (C.D. Cal. Jan. 5, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
15 Nov 2017, Conference, California, United States

Finnegan is a Gold sponsor of the second annual Digital Media & IP Forum, hosted by World Congress.

15 Nov 2017, Conference, London, UK

Finnegan partner Leythem Wall will consider European claim drafting strategy and will lead the Chemical Workshop during a two-day course, hosted by Management Forum.

15 Nov 2017, Seminar, Amsterdam, Netherlands

Finnegan partner Anthony Tridico will lead Forum Institute for Management’s course comparing patent law in the United States and Europe.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.