United States: Expanding Attorney Fees In IP Cases

Starting in 2014, and continuing through recent months, both the courts and Congress have redefined the standard for awarding attorney fees in IP cases—wholly returning the discretionary nature to district courts for patent and trademark disputes, largely doing so for copyright actions, and providing, as part of the recently-enacted Defend Trade Secrets Act, attorney fees in trade secret cases limited by statute to bad faith or willful and malicious trade secret assertions or misappropriation. Patents Section 285 of the Patent Act authorizes attorney fees in patent cases. It broadly provides district courts with discretionary power: "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party."25

Despite this broadly-worded statute, the Federal Circuit had until recently greatly restricted district court discretion, holding in its 2005 Brooks Furniture decision that a case was exceptional "only if (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless," proven by clear and convincing evidence.26

In 2014, in the Octane Fitness case, the Supreme Court unanimously rejected the Brooks Furniture test as "unduly rigid" and returned to district courts broad discretion to consider, on a "case-by-case basis," the "totality of the circumstances:" We hold, then, 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. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances.27

In doing this, the Supreme Court also overruled the Federal Circuit's requirement that there be "clear and convincing evidence" before an award of fees, adopting instead a preponderance of the evidence standard. And, in the tandem Highmark case—decided on the same day as Octane Fitness—the Supreme Court significantly heightened the appellate review standard, shifting it from de novo review for abuse of discretion for "all aspects of a district court's § 285 determination...."28

Trademarks

Section 35(a) of the Lanham Act authorizes trademark attorney fees. Just like Section 285 of the Patent Act, Section 35(a) empowers the district court with broad discretion: "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party."29

Since Octane Fitness, the Third, Fourth, Fifth, Sixth and Ninth Circuits—as well as many district courts in other circuits— have followed the reasoning of Octane Fitness, and held that the totality-of-the-circumstances test should be used when determining attorney fees awards in trademark cases. For example, in extending Octane Fitness to trademark cases and returning discretion to district courts, the Third Circuit reasoned that not only is the language of Section 285 of the Patent Act "identical" to Section 35(a) of the Lanham Act, but also that Congress explicitly referenced Section 285 in passing Section 35(a).30

The Fourth, Fifth, and Sixth Circuits have applied similar reasoning and relaxed their prior, more stringent standards.31

Most recently, in SunEarth, the Ninth Circuit—one of the most significant circuits for trademark infringement actions— followed suit.32

Prior to SunEarth, the Ninth Circuit—much like the Federal Circuit in Brooks Furniture—placed significant restrictions on district court discretion. It required that a plaintiff show that a defendant engaged in "malicious, fraudulent, deliberate or willful" infringement in order to receive attorney fees.33

However, with the relevant statutory language being identical to that governing patent cases and in light of the ruling in Octane Fitness, the Ninth Circuit reheard and reversed a May panel ruling and held that the Octane Fitness analysis equally applies to the Lanham Act.34

Copyrights

Section 505 of the Copyright Act governs attorney fees in copyright cases and provides that a district court "may... award a reasonable attorney's fee to the prevailing party...."35

Continuing the discretionary trend, in June 2016, the Supreme Court vacated the Second Circuit's Kirstaeng v. John Wiley & Sons decision, which had denied attorney fees by placing substantial (nearly "dispositive") weight on objective reasonableness.36

Rejecting the Second Circuit, the Supreme Court found that "objective reasonableness can be only an important factor in assessing fee applications—not the controlling one."37

While a district court should take into account the objective reasonableness of the losing party's position, it should also consider all other relevant factors.38

For example, the Court stated that other factors—such as litigation misconduct and the importance of deterring repeated copyright infringement—must be factored into the analysis, regardless of whether the party's claims are objectively reasonable.39

Trade Secrets On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act ("DTSA"), creating a federal civil cause of action for the misappropriation of trade secrets. The DTSA provides that "a court may... if a claim of the misappropriation is made in bad faith, which may be established by circumstantial evidence, a motion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously misappropriated award reasonable attorney's fees to the prevailing party."40

This language (e.g., "bad faith," "willfully and maliciously") appears much more stringent than the language of the statutes discussed above, and thus will likely be used less frequently. Summary With increased district court discretion and a less stringent standard of review—particularly in patent and trademark cases, and, to a lesser extent, copyright disputes—it is likely that both fee requests and fee awards will increase. As for trade secrets, while it is too early to tell how courts will treat fee requests, given the explicit bad faith or willful and malicious requirements, we expect that trade secret fee awards will be more difficult to come by.

Footnotes

25 35 U.S.C. § 285.

26 Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).

27 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014).

28 Highmark Inc. v. Allcare Health Mgmt. Sys., 134 S. Ct. 1744, 1747 (2014).

29 15 U.S.C. § 1117(a).

30 Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014).

31 Georgia-Pacific Consumer Prods. LP v. von Drehle Corp., 781 F.3d 710 (4th Cir. 2015); Baker v. Deshong, 821 F.3d 620 (5th Cir. 2016); Slep-Tone Entm't Corp. v. Karoake Kany Store, Inc., 782 F.3d 313 (6th Cir. 2015). Other circuits—including the Second Circuit—have not yet decided the issue. See, e.g., Penshurst Trading Inc. v. Zodax L.P., 652 F. App'x 10 (2d Cir. 2016) ("We have not yet decided whether [the Octane Fitness] rule applies in the context of the Lanham Act, but we need not do so here.").

32 SunEarth, Inc. v. Sun Each Solar Power Co., Ltd., No. 13-17622, – F.3d –, 2016 WL 6156039 (9th Cir. Oct. 24, 2016).

33 Secalt S.A. v. Wuxi Shenxi Constr. Mach. Co., 668 F.3d 677, 687 (9th Cir. 2012).

34 SunEarth, 2016 WL 6156039, at *5.

35 17 U.S.C. § 505.

36 136 S.Ct. 1979 (2016).

37 Id. at 1988.

38 Id.

39 Id. at 1988–89.

40 Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 130 Stat. 385.

41 81 Fed. Reg. 71653, 71653–54 (Oct. 18, 2016) (to be codified at 37 C.F.R. pt. 42).

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
Similar Articles
Relevancy Powered by MondaqAI
Smith Gambrell & Russell LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Smith Gambrell & Russell LLP
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions