In a recent opinion from the United States Court of Appeals for the Federal Circuit, the Court underscored the stringent requirements for securing an “exceptional” case finding under the Patent Act (35 U.S.C. § 285). This finding is crucial as it serves as the predicate for awarding attorneys’ fees to the prevailing party in patent litigation. Below, we break down the decision, the key issue at hand, and the takeaway for patent litigants.
The Decision
In this case, the district court initially found that the plaintiff’s case was exceptional because of numerous “red flags” that should have alerted the plaintiff to the substantive weakness of their arguments. The district court determined that continuing to litigate such a weak case warranted an exceptional case finding, leading to an award of attorneys’ fees against the plaintiff.
The Federal Circuit, however, disagreed with the lower court’s interpretation, stating that the threshold for determining a case to be “exceptional” is quite high. Specifically, the appellate court noted that factors such as receiving a notice letter with potential arguments against a patent or having conflicting expert witnesses—common occurrences in patent litigation—are not sufficient to render a case exceptional. Furthermore, merely invalidating the patent claims at issue does not automatically lead to an exceptional case determination. The Federal Circuit emphasized that the term “exceptional” must carry weight and not be applied lightly.
The Issue
The core issue in this case revolves around what qualifies as an “exceptional” case under the Patent Act. To award attorneys’ fees in a patent dispute, the case must stand out in terms of the strength (or weakness) of a party’s litigation positions or if the case was litigated in an unreasonable manner. The district court identified several “red flags” that it believed should have caused the plaintiff to stop pursuing the case. The Federal Circuit, however, made clear that these red flags did not meet the stringent criteria for exceptionality.
This ruling reinforces that litigants must carefully evaluate their case throughout the litigation process. Continuing with a weak or unreasonable case could expose a party to an exceptional case finding, but mere challenges in litigation, such as conflicting expert testimony or losing a case, do not automatically trigger such a finding.
The Takeaway
The key takeaway from this decision is that securing an exceptional case finding is not easy, and the bar for such a determination remains high. Patent litigants must continue to assess the strength of their case as it progresses, particularly in light of potential weaknesses or challenges. It’s important, however, to note that losing a patent case or facing common litigation obstacles does not necessarily lead to an award of attorneys’ fees.
As clarified by the U.S. Supreme Court in Octane Fitness, a case is considered exceptional if it “stands out” either in the substantive strength of a party’s litigation positions or in how unreasonably it was litigated. This decision serves as a reminder that attorneys’ fee awards in patent and trademark cases are far from automatic and require clear, exceptional circumstances to be granted.
https://cafc.uscourts.gov/opinions-orders/23-1035.OPINION.8-23-2024_2372558.pdf
