US Supreme Court reverses patent judges again in 9-0 decision on lawyer fees

http://gigaom.com/2014/04/29/supreme-court-reverses-patent-judges-again-in-9-0-decision-on-lawyer-fees/

by acgourley • 12 years ago

170 45 12 years ago

ambler0• 12 years ago

I'm confused about this part: "While Tuesday’s rulings appear to be good news for patent reform advocates, they also raise the question of whether they might undercut a major patent bill that is slated to be debated in the Senate on Thursday."

Anyone with knowledge of this care to explain?

blahedo• 12 years ago

IANAL, but I think this is more a political comment: the motivation for the upcoming patent bill was (partially) that existing law is too troll-friendly and needs to be fixed; but if the SC has clarified the existing law to be less troll-friendly, then it's not as important to reform the law.

I'm reminded of an Atlantic article I recently read about the Warren Court in the 60s---by deciding one case on extremely narrow procedural grounds rather than on the merits, the court left a "this needs to be fixed" motivation that gave political room for the Civil Rights Act.

gtaylor• 12 years ago

The best way to get the Senate to make patent reform a priority is a Samsung-induced sales injunction on iPhones. The outrage would be immediate, and we'd have this resolved in weeks instead of years or decades (if we ever do "resolve" it).

Unfortunately, I don't think such an injunction is in the cards. It would hit home enough in that it'd inconvenience them personally, which would spur immediate action.

Robadob• 12 years ago

Didn't a lesser version of this already happen and Obama decided to let Apple have a free pass?

http://www.cnbc.com/id/100937213

sandstrom2• 12 years ago

It should be noted that in most countries 'loser pays' is standard, rather than an exception.

http://en.wikipedia.org/wiki/Attorney's_fee#Who_pays

I'd argue this is a sound principle, which reduces the number of abusive/frivolous cases taken to court.

bediger40002• 12 years ago

I think a lot of people argue that the "English Rule" makes sense. The only people I've seen argue against it are... lawyers. Unfortunately, the lawyers do have a small point, in that "loser pays" means that a less-wealthy plaintiff will probably be less likely to even file.

sandstrom2• 12 years ago

I have no data to back this up (would be interesting to see studies on this), but wouldn't a 'loser pays' afford less-wealthy plaintiffs to file as long as their chances of winning are good?

I agree that it would cause less filing among less-wealthy people/companies in some cases. But I'd also guess it would increase filings in other.

(assuming they can objectively and accurately determine their chance of winning, which isn't always a reasonable assumption)

anigbrowl• 12 years ago

I have mixed feeling about it, having grown up in a country where it's the norm. Yes, it does seem to reduce barratry, but it can also be used to deter legitimate plaintiffs who don't have an open-and-shut case, because a loss in court against a wealthy defendant can easily result in bankruptcy.

'Faraway hills look green,' as the proverb goes.

AlisdairO• 12 years ago

I've always thought loser pays 2* the lower of the two sets of fees would be a good system.

rayiner5• 12 years ago

The legal system cannot be considered in isolation. It's part of a broader apparatus for protecting peoples' rights. Other countries have higher bars for getting into court, but they also have other mechanisms for enforcing peoples' rights. For example, European countries generally have more elaborate and burdensome regulatory regimes, and use administrative proceedings to accomplish things that in the U.S. are handled through court proceedings.

A good example is products liability law. The EU products liability directive is implemented in Germany as the Appliances and Product Safety Act. It does not create civil liability to injured consumers, but instead is part of an administrative enforcement regime. Authorities actively monitor the products on the market, and have the power to issue recalls, fines, and even criminal penalties.

For most areas of the law that see significant litigation (products liability, employment, etc) the U.S. either lacks such administrative entities or has undersized ones compared to what is common in Europe. In the American system, more of these issues are, consciously, left to be handled in private litigation. Essentially, in Europe you have more bureaucrats, and in America we have more lawyers.

Also, note that "loser pays" countries aren't usually literally "loser pays." In France, for example, losers pay court fees, but attorney's fees are awarded by a judge in an amount that usually doesn't cover actual amounts spent.

bediger40002• 12 years ago

I think a little disclosure should go along with your opinion. Are you, or have you been, a practicing attorney?

rodgerd• 12 years ago

If you're a small innovator facing off against IP theft by a large company, it might not look like such good news. Now you have to worry about their lawyers racking up huge bills and convincing the judge you should pay them.

Kliment2• 12 years ago

In that situation, you're already fucked beyond all hope, and you cannot win. Typical strategy is to countersue you for infringement of something else. Patents afford exactly zero benefits to a low-resource party in all cases except acquisition (of patent or patent-holder) in which case they become weapons wielded by the bad people again.

DanBC• 12 years ago

Loser doesn't pay all expenses - they have to be reasonable and proportionate. People have to show good faith attempt to reduce costs.

dredmorbius• 12 years ago

Depends. There are cases in which small inventors have prevailed, others in which they haven't. Filo Farnsworth comes to mind among the latter.

necubi• 12 years ago

You get a sense of increasing exasperation from the Supreme Court with the incredibly pro-patent antics of the Federal Circuit. See the good discussion at SCOTUSblog here: http://www.scotusblog.com/2014/04/opinion-recap-justices-wan....

One hopes that this series of unanimous reversals will chasten the court, but the past two decades has demonstrated that the federal circuit feels that patent protections can never be strong enough or overly broad.

eurleif• 12 years ago

Why do the two courts have such different opinions? It seems surprising to me, especially since Supreme Court justices and Federal Circuit judges are both appointed by the President.

jaredhansen• 12 years ago

This is a landmark decision.

The patent statute has always allowed courts to compel losers to pay winners' attorneys' fees, but only in fairly rare circumstances. The specific term used is that the case must be "exceptional" - which until yesterday, meant something very, very narrow, and fee awards were consequently very rare.

Yesterday's decision in Octane Fitness (along with the companion case Highmark v. Allcare, also decided yesterday), did three useful things for patent defendants:

1) Ended the requirement that fees can only be awarded when the case is BOTH "so unreasonable that no reasonable litigant could believe it could succeed" AND is actually known by the plaintiff to be baseless.

2) Ended the requirement that defendants prove by "clear and convincing evidence" that the case is "exceptional" (saying instead that there's "no specific evidentiary standard" defendants must meet).

3) Clarified the standard for appellate review of fee awards, finding that district court awards can be overturned only for "abuse of discretion"

As a result, district court judges have substantially more latitude to grant fee awards in patent cases, combined with significantly reduced fear of reversal. The outcome should be immediate, and will have a chilling effect on new frivolous litigation -- while simultaneously providing an incentive to current frivolous plaintiffs to drop their cases sooner or on better terms.

BTW, one other thing to note: most of the chatter is about non-practicing entities, aka patent trolls -- but the decision isn't limited to cases brought by NPEs. Frivolous patent plaintiffs, even if they're active competitors in the market, are in a much weaker position thanks to this decision.

This is a great step toward a more sane patent system, and many startup founders should be delighted.

colechristensen• 12 years ago

In addition it should motivate more defendants to go to trial instead of settling which should (hopefully) speed the judicial changes to the patent system and gain more legislative attention to the issue.

WildUtah2• 12 years ago

Trolls still always have the option of filing in East Texas.

As long as they can rely on a nest of less than objective judges eager to serve troll interests, they don't have to worry about fee awards. The decision left a lot of power to the discretion of district judges so a single predictably biased district can corrupt the whole national system.

The Rep. Goodlatte bill that was passed by the house would make fee awards routine and then East Texas judges would have to justify not awarding fees. That would be a much better reform.

The Leahy senate bill will probably be a very tiny change in the existing language because Leahy's trial lawyer supporters don't want to loser pays principle to gain a foothold. Leahy -- and most trial lawyers -- have said that patent cases are an exception the the general principle, but they aren't ready to let any wholesale reform happen on this point. Usually trial lawyers argue that loser pays disadvantages vulnerable victims; most federal civil plaintiffs are much poorer and smaller than defendants. In patent cases, the opposite is true; patents are the tools of trolls and big companies to extort and destroy innovative small businesses. Most patent cases are brought by established wealthy troll agglomerators against companies that could not conceivably afford a full trial.

See here for how biased cases are to E Texas already: http://patentlyo.com/patent/2014/04/district-courts-patent.h...

brownbat2• 12 years ago

Judges in Texas are elected. (Which is pretty ridiculous considering prosecutors, defenders, and litigants can contribute to judicial campaigns... during the course of a trial.)

I'm surprised no one has run as a Judge in East Texas while soliciting campaign contributions from tech companies.

uuid_to_string• 12 years ago

Aren't a couple of those "less than objective" judges coming up on retirement?

What then?

ghshephard• 12 years ago

Regarding East Texas - doesn't it make sense to have patent lawsuits judged by those with a lost of experience in that field?

I'm genuinely curious - is there any evidence to suggest, that other than efficiency, East Texas is more likely to find in favor of the Plaintiff?

rayiner5• 12 years ago

This is an excellent summary of the Octane Fitness decision. I'll quote two bits of relevant language that lay out the standards the Supreme court has established.

"Under the standard announced today, a district court may award fees in the rare case in which a party's unreasonable conduct-while not necessarily independently sanctionable-is nonetheless so 'exceptional' as to justify an award of fees." (Slip. Op. at 5).

"Something less than 'bad faith,' we believe, suffices to mark a case as 'exceptional.'" (Slip. Op. at 6).

In other words, the court interpreted section 285 to allow fee-shifting in cases that are not so weak that the court would be justified in sanctioning the plaintiffs under Rule 11 for pursuing a frivolous claim, or in cases where plaintiffs use tactics that do not quite rise to the level that would be sanctionable for bad faith.

However, the Court did not give as much guidance to lower courts as one might have hoped. The Court stated that a case that is weak to a degree short of "sanctionable" may be the subject of fee shifting. It has not said how much stronger than "sanctionable" a case can be before awarding fees is an abuse of discretion on the part of the District Court. This is a question that will probably be raised to and resolved by the Federal Circuit in the coming years.

acgourley• 12 years ago

I just want to point out that the party who lost (Icon) is not a NPE. Although they litigate extremely aggressively against other fitness players.

wil421• 12 years ago

This is great but I still feel like the elephant is still in the room. The elephant being the patents themselves.

chenster• 12 years ago

The key is this sentence if you don't want to read the whole article:

..."For practical purposes, the two cases mean that lower courts will have more latitude to use legal fee shifting as a way to punish and deter companies that abuse the patent system."

higherpurpose• 12 years ago

I wonder if this is actually the minor decision about patents that the Supreme Court will take this year. It seems they are quite aggressive against companies who abuse patents, which could mean they may not favor patents in that other trial that's supposed to decide the fate of software patents, too.

johnvschmitt• 12 years ago

Great results.

If only we could somehow rephrase other critical issues into something the SCOTUS could 9-0 agree with.

This one got 9-0 because it phrased it as:

1) Trolls lose

2) Whoever wins, wins bigger.

Some of the Supremes are known for liking the morality of "Might is Right". (If God let this person attain power, by whatever means, then God must favor this winner.)

Can we phrase Net Neutrality this way? Perhaps we need to phrase it as "Winner/Billionaire's next startup needs to get online without paying fees?" We're not getting as far with the "scrappy startup needs to get online without fees" bit.

netcan• 12 years ago

Fee-shifting seems to me like weird and unpredictable solution to a general problem in law, it's so expensive. It's a big part of what makes legal blackmail work, and hence the worst cases of patent trolling.

It's a big part of the reason so many criminal cases are settled out of court with defendants and prosecutors haggling over which crime a defendant will plead guilty to instead of a prosecutor charging a defendant with a crime who defends his innocence in court.

So much of what's wrong with law is a function of the incredible cost.

How is it possible that the system is such that it requires millions to hundreds of millions to defend a case.

US Supreme Court reverses patent judges again in 9-0 decision on lawyer fees

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