Fee-Shifting Is Coming to Patents, One Way or Another - Intellectual Property Law - Federal Circuit
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Fee-Shifting Is Coming to Patents, One Way or Another

It's an issue that frustrates all three constitutionally recognized branches of government. The president has called for patent troll reform. Congress is considering it.

And so is the all-important judiciary, as the Federal Circuit continues to consider fee-shifting cases while waiting for the Supreme Court to step in, possibly saving themselves from their own arguably ill-advised precedent set in 2005.

Today's case? A memory maker sued a fellow Silicon Valley company, despite knowing that there was no literal infringement and that a "doctrine of equivalents" theory was tenuous, at best.

The Kilopass Case

Kilopass had a patent related to memory cells, and initially, it seemed that Sidsense had infringed on that patent. After Sidsense redesigned its product, the case was less clear, and it now seemed that there was no literal infringement, but there may have been infringement on the basis of the doctrine of equivalents.

In any case, Kilopass lost on summary judgment, after the judge admonished the company for "gamesmanship" by making contradictory statements about prior art in a concurrent inter partes re-examination. The judge also pointed out that Kilopass knew that there was no literal infringement for years before filing suit, and waited too long to assert the new equivalents theories.

Sidsense moved for attorney's fees, but was denied, as it could not show by clear and convincing evidence that Kilopass had acted in bad faith. (Kilopass did have opinions from two law firms and its Chief Technological Officer that there was some basis for a claim.)

The Federal Circuit reversed on multiple grounds. For one, the district court may have required proof of Kilopass's actual knowledge that their claims were meritless. The proper standard for awards in exceptional cases where a party asserts an objectively baseless claim is "'either known or so obvious that it should have been known' by the party asserting the claim." (emphasis added).

In addition, the district court focused narrowly on Kilopass's subjective knowledge, rather than the totality of the circumstances. Subjective knowledge can be hard to prove, while an objective view of the merits of the case can suffice. Here, there was no smoking gun subjectively, but the district court still needs to evaluate whether "Kilopass's doctrine of equivalents theory was objectively baseless and whether that fact or other circumstantial evidence would support an inference of bad faith."

From the trial judge's statements, about "gamesmanship" and asserting a theory well past the deadline, Kilopass's behavior very well may meet the objective baseless standard.

Meantime, in a concurrence, Chief Judge Rader continues to lament the current, controlling "objectively baseless" standard, adopted in 2005. He argued that, "This court should return to the rule that a district court may shift fees when, based on the totality of the circumstances, it is necessary to prevent a gross injustice."

Meanwhile, in SCOTUS...

Rader may get his wish. As the court noted in its opinion, two cases involving fee-shifting have been granted certiorari by the U.S. Supreme Court, Highmark v. Allcare and Octane Fitness v. Icon Health & Fitness. The former questions the Federal Circuit's unique deference-free review of lower courts' fee awards. The latter questions the rigid standard applied here (and lamented by Judge Rader).

And in Congress...

If we reviewed every proposed attempt by Congress to "fix" patent trolling, this post would be longer than the Federal Reporters series. Nonetheless, there are bills with bipartisan support floating around in Congress. If they pass, Rader may just get a late Christmas wish.

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