By Brandon Baum ( Partner at Mayer Brown LLP and Practice Center Contributor) and Jonathan Helfgott[i]
Under 35 U.S.C. § 285 (“§ 285”), “[t]he court in exceptional cases may award attorney fees to the prevailing party.” Although the statutory language does not differentiate between prevailing plaintiffs and defendants, the Federal Circuit has developed substantially different standards for determining whether a case is “exceptional” depending on which party prevails.
In the context of a prevailing plaintiff, a court may find a case “exceptional” by showing that the defendant engaged in “willful infringement.” Minks v. Polaris Indus., 546 F.3d 1364, 1375 (Fed. Cir. 2008) (upholding exceptional case determination and award of attorneys’ fees based on jury finding of willful infringement). “An express finding of willful infringement is a sufficient basis for classifying a case as ‘exceptional,’ and indeed, when a trial court denies attorney fees in spite of a finding of willful infringement, the court must explain why the case is not ‘exceptional’ within the meaning of the statute.” Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990); Tate Access Floors, Inc. v. Maxcess Techs., Inc., 222 F.3d 958, 972 (Fed. Cir. 2000) (same). To demonstrate willful infringement, the patentee must show “that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). As the Federal Circuit made clear in Seagate, this is an objective test under which an infringer may be found to have acted willfully when it knew or should have known of the risk. Id.
By contrast, to warrant an award of attorneys’ fees under § 285, the Federal Circuit requires a prevailing defendant to prove both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless. ICU Medical, Inc. v. Alaris Medical Systems, Inc., 558 F.3d 1368, 1379-80 (Fed. Cir. 2009); Wedgetail, Ltd. v. Huddleston Deluxe, Inc., 576 F.3d 1302, 1304-05 (Fed. Cir. 2009). Absent evidence of the patentee’s subjective bad faith, a prevailing defendant is not entitled to recover attorneys’ fees. Id.; Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005) (reversing exceptional case finding against plaintiff based on lack of proof of subjective bad faith). Thus, the Federal Circuit places an additional burden – proof of subjective bad faith – only on accused infringers.
Attorneys for Netflix are challenging the Federal Circuit’s dual standard under § 285 in an appeal from the Northern District of California. In Media Queue, LLC v. Netflix, Inc., No. C 09-1027 SI (2010 WL 1293379 (N.D. Cal. Mar. 31, 2010), the district court denied prevailing defendant Netflix’s request for attorneys’ fees under § 285. Netflix has appealed that denial to the Federal Circuit and has petitioned for an initial hearing en banc, inviting the court to reconsider the unequal manner in which it has applied § 285.
Netflix’s petition argues that the Federal Circuit’s interpretation of § 285 violates Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994), wherein the Supreme Court held that “[p]revailing plaintiffs and prevailing defendants are to be treated alike” under the fee-shifting provision of the Copyright Act. Although Fogerty dealt with copyrights and not patents, it did note that “the federal fee-shifting statutes in the patent and trademark fields, which are … closely related to that of copyright, support a party-neutral approach.” Id. at 525, n12. Netflix’s challenge could have profound implications for the field of patent litigation. Should Netflix prevail, defendants in patent cases will have an easier time recovering fees under § 285, thus raising the stakes for patent plaintiffs.
Do you agree with Netflix, that the Court has created an unequal standard for the recovery of attorneys’ fees for patent defendants than for plaintiffs?
[i] Jonathan Helfgott is a second-year law student at the University of California at Berkeley, and a summer associate at Mayer Brown LLP.
Tags: accused infringers, Attorneys Fees, Brandon Baum, en banc rehearing, Federal Circuit, Fogerty v. Fantasy, In re Seagate Tech, Mayer Brown LLP, Netflix, objective bad faith, Patent Litigation, patentee, Section 285, subjective bad faith, willful infringement
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