New developments regarding attorney fee-shifting in patent litigation

By: Brian Lefort Monday April 27, 2015 0 comments Tags: Brian Lefort, patent litigation

 

In my last article, I wrote that House Judicial Committee Chairman Bob Goodlatte (R-VA.) introduced a “new” Innovation Act, (H.R. 9), and how one of the main provisions in H.R. 9 could mark a major turning point for patent litigation.Brian_Lefort_Blog_USE

In particular, the H.R. 9 includes a provision that would change the default position regarding attorney fees from one in which both parties pay their own fees to one in which the non-prevailing party must pay the prevailing party’s attorney fees. Since the introduction of H.R. 9, Senator Chris Coons (D-DE) has introduced the Senate’s own version of patent reform, which is entitled Support Technology and Research for Our Nation’s Growth (“STRONG”) Patent Act, (S. 632).  Furthermore, the House and the Senate have held hearings regarding their respective bills.

In this article, I discuss some of these recent developments in relation to fee-shifting.

When introducing S. 632, Senator Coons and his cosponsors, Senator Richard Durbin (D-IL.) and Senator Mazie Hirono (D-HI), stated that their bill aims to crack down on abusive litigation by so-called patent trolls. Congressman Goodlatte offered the same purpose when he introduced H.R. 9 back in February of 2015.

While the two bills have the same purpose, they take different positions in regards to fee-shifting. Specifically, the H.R. 9 makes fee-shifting mandatory, while S. 632 does not include a provision for fee-shifting.

In introducing S. 632, the Senators insinuated that H.R. 9 would weaken all patents and make it too difficult to bring even legitimate patent suits, which may be a reason for omitting a fee-shifting provision. During the House and Senate hearings, representatives from universities, small businesses and biotech firms echoed the Senators’ sentiments.

For example, Dr. Michael R. Crum, representing Iowa State University, stated, “[u]niversities are particularly concerned about proposals for presumptive fee-shifting[.] . . . [J]udges already have discretion to make a sensitive, case-specific determination to shift fees to punish parties for bringing frivolous or nuisance patent lawsuits. A codified presumption in favor of fee-shifting would diminish such judicial discretion and result in increased uncertainty and financial risk that would discourage universities and other patent holders lacking extensive litigation resources from legitimately asserting their patents.”

As another example, Mr. Hans Sauer, Deputy General Counsel for Intellectual Property of the Biotechnology Industry Organization, stated that “expanding liability for fee awards, as presently drafted [in H.R. 9], go[es] too far in restricting the ability of all patent owners to enforce their patents against infringers in a timely and efficient manner, and would have a dramatically negative chilling effect on the biotech ecosystem.”

Mr. Brad Powers representing Kinze Manufacturing, Inc., a business that provides innovative products to farmers, and Mr. Robert N. Schmidt, Co-chair of Small Business Technology Council, offered similar opinions, by stating, respectively, fee-shifting provisions “could create significant hurdles for legitimate inventors seeking to enforce their patent rights,” and by imposing fee shifting, “only large corporations will be able to commercialize inventions.”

As alluded to by Mr. Schmidt, some larger corporations are in favor of mandatory fee-shifting. For example, the Senior Vice President and Deputy General Counsel for EMC Corporation, Mr. Krish Gupta, stated that “[w]e believe that this [fee-shifting] provision embodies the most effective way to discourage the filing of frivolous and abusive suits by imposing financial accountability in the patent system.”

Mr. Kevin Kramer, Vice President, Deputy General Counsel for Intellectual Property for Yahoo!, Mr. Robert A. Armitage, Former Senior Vice President and General Counsel of Eli Lilly & Co., and Mr. David, M. Simon, Senior Vice President, Intellectual Property of Salesforce.com expressed similar sentiments.

The Director of the United Stated Patent and Trademark Office, Ms. Michelle Lee, also stated she generally supports the concept of fee-shifting. But she would not want to make fee-shifting automatic, as H.R. 9 now requires.

Specifically, she stated that she supports a provision for fee-shifting that “would not be automatic [but] an award would be made only if the court finds that the non-prevailing party’s litigation position was one that no reasonable litigant would have believed would succeed, or that the non-prevailing party’s conduct was otherwise unreasonable.”

The fee-shifting position favored by Ms. Lee, however, may already be in effect, as indicated by a recent study by the Federal Circuit Bar Association (FCBA).

The FCBA conducted a study of fee-shifting in district court cases decided since the Supreme Court’s 2014 decisions in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Management Systems Inc., 134 S.Ct. 1744 (2014) (collectively, Octane), which provided district courts greater latitude in awarding attorney’s fees.

On April 13, 2015, the FCBA sent a letter to Senate Judiciary Committee together with the results of the study of such district court cases. The study concludes that “[t]he data establishes that motions for attorney’s fees under section 285 were granted at a rate of almost three times as high as in the year preceding Octane. . . . [and] that 50% of motions for fees under section 285 filed by accused infringers were granted between January 1, 2015, and March 31, 2015 [compared to] the 12 months preceding Octane, [in which] only 13% of such motions were granted.” 

The results of the FCBA study, along with some of the congressional testimony discussed above, may give some legislators pause, so that more information may be gathered before additional legislation on fee-shifting is deemed necessary to crack down on abusive litigation by so-called patent trolls.

As indicated in my previous post, time will tell. 

(This article was co-written with Ryan Duebner)

Brian Lefort

About the Author: Brian Lefort

Brian Lefort is a Boulder-based intellectual property attorney who specializes in helping innovative startup and emerging businesses identify and protect their valuable technology assets. Brian has more than 15 years of legal experience building and enforcing strategic patent and trademark portfolios for innovative products in the medical device, telecommunications, software and other high technology industries. He can be reached at [email protected] or 303-447-7723.