Patent fee shifting risk is growing in light of patent reform
efforts and changes to fee-shifting mechanisms.

Patent fee shifting risk is growing. All three branches of government have taken strong, uncharacteristically bipartisan aim at curtailing patent litigation, particularly by inventors and other “NPEs.”

Recent court rulings and legislative proposals increase fee shifting under 35 U.S.C. § 285, which provides that courts in “exceptional cases” may award reasonable attorney fees to the prevailing party. With the average patent litigation cost of $2.8 million, the impact of an adverse ruling is material for plaintiffs. Athena’s innovative fee shifting protection provides the solution.

Supreme Court. The Supreme Court materially expanded the standard for an “exceptional” case under § 285 and vested lower courts with vast discretion to shift fees:

  • Under Octane Fitness, an “exceptional” case now is “simply one that stands out…with respect to the substantive strength of a party’s litigating position” or the “unreasonable manner in which the case was litigated.”
  • A party seeking a fee award may now satisfy the standard by a preponderance of the evidence as opposed to the burdensome, clear-and-convincing-evidence test.
  • The Court’s Highmark decision vests additional discretion in district courts to shift fees by raising the standard of appellate review to abuse of discretion from de novo.

Congress. Proposed legislative reforms would further increase fee shifting, including by requiring party certification of ability to pay fee shifting awards.

  • Recent proposals require fee shifting upon motion of the prevailing party unless the court determines that the losing party’s position and conduct were objectively reasonable.
  • Some proposals would require patent owners to certify that they can satisfy a fee shifting award. Otherwise, courts would join third parties with a “substantial financial interest” in the case or indefinitely stay the case until the party provided adequate security in the event of a § 285 award.
  • The House overwhelmingly passed the “Innovation Act” in 2013; among other reforms, it would require fee shifting unless certain criteria are met.

President Obama.  President Obama has explicitly called for patent reform to address “costly, needless litigation.” The Obama Administration has supported congressional reform efforts, including increased fee shifting. And it has taken aggressive positions against patent owners in the Supreme Court.