No. 12-1184

IN THE

Supreme Court of the United States ––––––

OCTANE FITNESS, LLC, Petitioner,

V. ICON HEALTH &FITNESS, INC.,

Respondent. ––––––

On Writ of Certiorari to the United States Court of Appeals

for the Federal Circuit _________

BRIEF OF AMICUS CURIAE, AMERICAN INTELLECTUAL PROPERTY LAW

ASSOCIATION IN SUPPORT OF NEITHER PARTY __________________

WAYNE P. SOBON, President AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION 241 18th Street, South Suite 700 Arlington, VA 22202 (703) 415-0780

BARBARA A. FIACCO Counsel of Record DONALD R. WARE MARCO J. QUINA STEPHEN T. BYCHOWSKI FOLEY HOAG LLP 155 Seaport Boulevard Boston, MA 02210 (617) 832-1000 bfiacco@foleyhoag.com

December 9, 2013

TABLE OF CONTENTS

TABLE OF AUTHORITIES ...................................... iii

STATEMENT OF INTEREST .................................... 1

SUMMARY OF ARGUMENT ..................................... 2

ARGUMENT ............................................................... 4

I. The Brooks Furniture Test Limited the “Exceptional” Case Determination to Narrowly Defined Categories of Conduct. ............................. 5

II. The “Exceptional” Case Determination Should Be a Flexible and Discretionary Inquiry into Whether the Case Is an Exception to the Ordinary Patent Case. ................. 9

A. Section 285 and its legislative history support broader discretion on the part of district judges. ................ 10

B. A flexible, totality-of-the-circumstances approach comports with this Court’s precedents. .................................... 15

C. Longstanding pre-Brooks Furniture precedent supports a flexible, multifactor analysis. ........................................ 18

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D. The Brooks Furniture test sets a higher bar than tests that other circuit courts apply to identical statutory language in the Lanham Act. ... 22

III. A Flexible Test is Consistent with the Practical Realities of Patent Litigation. ................................................. 25

A. Patent litigation is a technically complex and expensive procedure that is susceptible to abuse. ................... 26

B. AIPLA’s suggested totality-of-the-circumstances test will not undermine the intellectual property bar’s ability to advocate with appropriate zeal on behalf of their clients. ................................. 31

CONCLUSION .......................................................... 33 

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TABLE OF AUTHORITIES

CASES

Bayer Aktiengesellschaft v. Duphar Int’l Research B.V.,

738 F.2d 1237 (Fed. Cir. 1984) .......................... 19

Blanc v. Spartan Tool Co., 168 F.2d 296 (7th Cir. 1948) ............................. 14

Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005) .................. passim

Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978) ................................. 7, 13, 16

Chambers v. NASCO, Inc., 501 U.S. 32 (1991) ............................................. 12

Cooter & Gell v. Hartmax Corp., 496 U.S. 384 (1990) ....................................... 7, 12

Deyerle v. Wright Mfg. Co., 496 F.2d 45 (6th Cir. 1974) ............................... 19

eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) ........................................... 19

Eagles, Ltd. v. Am. Eagle Found., 356 F.3d 724 (6th Cir. 2004) ............................. 23

Encomp, Inc. v. L-com, Inc., 999 F. Supp. 264 (D. Conn. 1998) ..................... 22

Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) ............................................. 7

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Hartman v. Hallmark Cards, Inc., 833 F.2d 117 (8th Cir. 1987) ............................. 23

Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 701 F.3d 1351 (Fed. Cir. 2012) .................... 26, 30

Holmberg v. Armbrecht, 327 U.S. 392 (1946) ........................................... 19

Icon Health & Fitness, Inc. v. Octane Fitness, LLC, No. 09-319, 2011 U.S. Dist. LEXIS 100113 (D. Minn. Sept. 6, 2011) ...................................... 4, 17

Icon Health & Fitness, Inc. v. Octane Fitness, LLC,

496 Fed. Appx. 57 (Fed. Cir. 2012) ..................... 4 Kaehni v. Diffraction Co., 342 F. Supp. 523 (D. Md. 1972) ................ passim

Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056 (Fed. Cir. 1983) .......................... 20

Lincoln Elec. Co. v. Linde Air Prods. Co., 74 F. Supp. 293 (N.D. Ohio 1947) ..................... 14

Lipscher v. LRP Publ’ns, Inc., 266 F.3d 1305 (11th Cir. 2001) ......................... 23

Mach. Corp. of Am. v. Gullfiber AB, 774 F.2d 467 (Fed. Cir. 1985) ............................ 20

MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907 (Fed. Cir. 2012) ............................ 17

Multiform Desiccants, Inc. v. Medzam Ltd., 133 F.3d 1473 (Fed. Cir. 1998) .......................... 19

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Nat’l Ass’n of Prof’l Baseball Leagues, Inc. v. Very Minor Leagues, Inc.,

223 F.3d 1143 (10th Cir. 2000) ......................... 23

Nightingale Home Health Care, Inc. v. Anodyne Therapy, LLC,

626 F.3d 958 (7th Cir. 2010) ............................. 23

Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant,

771 F.2d 521 (D.C. Cir. 1985) ............... 11, 24, 32

Park-In-Theatres, Inc. v. Perkins, 190 F.2d 137 (9th Cir. 1951) ............................. 14

Patsy’s Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209 (2nd Cir. 2003) ............................. 23

Pierce v. Underwood, 487 U.S. 552 (1988) ............................. 6, 8, 12, 16

Procter & Gamble Co. v. Amway Corp., 280 F.3d 519 (5th Cir. 2002) ............................. 23

Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,

508 U.S. 49 (1993) ............................................... 7

Purer & Co. v. Aktiebolaget Addo, 410 F.2d 871 (9th Cir. 1969) ............................. 18

Reader’s Digest Assoc. v. Conservative Digest, Inc., 821 F.2d 800 (D.C. Cir. 1987) ........................... 23

Retail Servs. v. Freebies Publ’g., 364 F.3d 535 (4th Cir. 2004) ............................. 23

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Rohm & Haas Co. v. Crystal Chem. Co., 736 F.2d 688 (Fed. Cir. 1984) ............................ 18

Rolls-Royce, Ltd. v. GTE Valeron Corp., 800 F.2d 1101 (Fed. Cir. 1986) .......................... 22

Securacomm Consulting v. Securacom, 224 F.3d 273 (3rd Cir. 2000) ............................. 23

Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566 (Fed. Cir. 1996) ............................ 21

Stephen W. Boney, Inc. v. Boney Servs., 127 F.3d 821 (9th Cir. 1997) ............................. 23

Symbol Techs., Inc. v. Lemelson Med., 277 F.3d 1361 (Fed. Cir. 2002) ......................... 15

Tamko Roofing Prods., Inc. v. Ideal Roofing Co., Ltd.,

282 F.3d 23 (1st Cir. 2002) ................................ 23

Taurus IP, LLC v. Daimlerchrysler Crop., 726 F.3d 1306 (Fed. Cir. 2013) .......................... 17

Tenneco Chems., Inc. v. Wm. T. Burnett & Co., Nos. 73-266, 74-1250, 75-394, 77-1941, 1980 U.S.

Dist. LEXIS 17037 (D. Md. Nov. 3, 1980) ......... 22

Upjohn Co. v. United States, 449 U.S. 383 (1981) ........................................ 18 Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982) ........................................... 19

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STATUTES

15 U.S.C. § 1117(a) ................................................ 22 28 U.S.C. § 1927 .................................................... 12 35 U.S.C. § 285 .............................................. passim Pub. L. No. 587, 60 Stat. 778 ............................... 13 Pub. L. No. 82-593, 66 Stat. 792 ........................... 14

RULES

Fed. R. Civ. P. 11 ............................................... 5, 12 Sup. Ct. R. 37.3(a) ................................................... 2 Sup. Ct. R. 37.6 ........................................................ 1

LEGISLATIVE MATERIALS

Improving the Patent System to Promote American Innovation and Competitiveness: Recovery in Patent Infringement Suits: Hearing on H.R. 5231 Before the Comm. on Patents, 79th Cong.

(1946) ................................................................. 28 S. Rep. No. 79-1503 (1946), reprinted in

1946 U.S. Code Congressional Service 1386 .............................................................. 13, 30

S. Rep. No. 82-1979 (1952), reprinted in

1952 U.S.C.C.A.N. 2394 ..................................... 14

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OTHER AUTHORITIES

Alan M. Ahart, Attorneys’ Fees: the Patent Experience,

57 J. Pat. Off. Soc’y 608 (1975) ......................... 29 Am. Intellectual Prop. Law Ass’n, Report of the

Economic Survey (2001) .................................... 26

Am. Intellectual Prop. Law Ass’n, Report of the Economic Survey (2013) .................................... 26

Emery G. Lee & Thomas E. Willging, Fed. Judicial

Ctr., Litgation Costs in Civil Cases: Multivariate Analysis (2010), available at www.fjc.gov/public/pdf.nsf/lookup/costciv1.pdf/$file/costciv1.pdf .................................................... 27

Harold C. Wegner, The Disclosure Requirements of

the 1952 Patent Act: Looking Back and a New Statute for the Next Fifty Years, 37 Akron L. Rev. 243 (2004) .................................................. 15

P.J. Federico, Commentary on the New Patent Act,

75 J. Pat & Trademark Off. Soc’y 161 (1993) ... 15 PricewaterhouseCoopers, 2013 Patent Litigation

Study (2013), available at http://www.pwc.com/en_US/us/forensic-services/publications/assets/2013-patent-litigation-study.pdf ............................................ 26

Randall R. Rader et al., Make Patent Trolls Pay in

Court, N.Y. Times, June 4, 2013, at A25 ..................... 31

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Randall R. Rader, The State of Patent Litigation, 21 Fed. Cir. B.J. 331 (2011-2012) ..................... 31 Webster’s New Collegiate Dictionary 287 (1949) 11 Webster’s Third New International Dictionary 791

(2002) ................................................................. 11

STATEMENT OF INTEREST

The American Intellectual Property Law Association (“AIPLA”) is a voluntary bar association with approximately 15,000 members who are lawyers in both private and corporate practice, judges, patent agents, academics, law students, and USPTO professionals. Our members practice in a wide and diverse spectrum of intellectual property fields, including patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property. They represent both owners and users of intellectual property, as well as those who litigate and prosecute before patent and trademark offices, giving AIPLA a unique and varied perspective on patent litigation practices.1

AIPLA has no interest in any party to this litigation or stake in the outcome of this case, other than its interest in seeking a correct and consistent

1 In accordance with Supreme Court Rule 37.6, AIPLA states that this brief was not authored, in whole or in part, by counsel to a party, and that no monetary contribution to the preparation or submission of this brief was made by any person or entity other than AIPLA or its counsel. After reasonable investigation, AIPLA believes that (i) no member of its Board or Amicus Committee who voted to file this brief, or any attorney in the law firm or corporation of such a member, represents a party to this litigation in this matter, (ii) no representative of any party to this litigation participated in the authorship of this brief, and (iii) no one other than AIPLA, or its members who authored this brief and their law firms or employers, made a monetary contribution to the preparation or submission of this brief.

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interpretation of the law affecting intellectual property.2

SUMMARY OF ARGUMENT

Section 285 of the Patent Act authorizes district judges, in the exercise of their discretion, to award attorneys’ fees in patent cases: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. This brief is submitted by AIPLA as amicus curiae in support of neither party to urge the Court to overrule the unduly rigid standard for determining that a case is “exceptional” created by the Court of Appeals for the Federal Circuit in Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378 (Fed. Cir. 2005) and applied in this case. Under the Brooks Furniture test, exceptional cases only include those that involve conduct in one of a few discrete categories: material litigation misconduct, willful infringement, fraud on the Patent Office, or objectively baseless litigation brought in bad faith.

The Federal Circuit’s test is contrary to the plain meaning of Section 285, and it does not comport with Congress’s intent in enacting the statute. It is also inconsistent with this Court’s precedent, contrary to the weight of over fifty years of prior decisions, and

2 AIPLA sought consent to file this brief from the counsel of record for all parties, pursuant to Supreme Court Rule 37.3(a). Counsel for all parties consented and copies of the letters of general consent have been filed with the Clerk.

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ineffective in the face of the practical realities of patent litigation today.

In short, the Federal Circuit has set the bar far too high. As a consequence, Section 285 is rarely used. It is an ineffective tool for district courts to manage litigation conduct, because it can be invoked in only the rarest and most egregious of cases, despite rising concerns today about the impact of patent litigation abuses on innovation and the economy. As currently interpreted by the Federal Circuit, Section 285 does not meaningfully deter unreasonable, inefficient, and overzealous advocacy by patent litigants.

AIPLA urges this Court to recalibrate the exceptional case standard, returning it to where Congress rightfully placed it: within the broad, equitable discretion of the district courts. Giving a natural meaning to the statutory term “exceptional,” the inquiry should be simply whether the case as litigated is an exception to the ordinary patent case, such that the prevailing party should not be forced to bear all of its attorneys’ fees. This determination should be a flexible and equitable exercise of judicial discretion that takes account of the totality of the circumstances. While some factors may weigh more heavily than others, none should be required or necessarily control the analysis.

This approach not only comports with the language of Section 285, but also best carries out Congress’s intent. It appropriately places discretion in the district courts to bring their experience, perspective, and hands-on knowledge of the case to

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bear. It discourages inappropriate conduct by patent litigants and provides the district courts a meaningful case management tool.

Section 285, under the Federal Circuit’s Brooks Furniture test, has become a “hardly ever” rule. It should not so remain. AIPLA respectfully urges this Court to reinstate the flexible exercise of discretion standard that the statute plainly mandates.

ARGUMENT

The district court’s decision below is the latest in a line of cases applying a formulaic test under which a case can be found “exceptional” within the meaning of Section 285 only in narrowly defined circumstances. Icon Health & Fitness, Inc. v. Octane Fitness, LLC, No. 09-319, 2011 U.S. Dist. LEXIS 100113, at *3 (D. Minn. Sept. 6, 2011). Constrained by Federal Circuit precedent, the district court here did not consider the totality of the circumstances nor did it weigh equitable considerations in its analysis. Instead, the district court considered only whether the patentee’s claims were both objectively baseless and brought in bad faith. Id. at *3-9. Applying this standard, the district court found that the case was not exceptional and denied fees under Section 285, a decision the Federal Circuit summarily affirmed. Icon Health & Fitness, Inc. v. Octane Fitness, LLC, 496 Fed. Appx. 57, 65 (Fed. Cir. 2012).

The analysis of the district court and Federal Circuit in this case—as well as the Federal Circuit precedent upon which it is based—narrows Section 285 far beyond the plain meaning of the statute,

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undermining its efficacy and defeating the intent of Congress in enacting it. It is time for this Court to reset the balance and restore the statute to its proper role.

I. The Brooks Furniture Test Limited the “Exceptional” Case Determination to Narrowly Defined Categories of Conduct.

The limited application of Section 285 began in 2005 with Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378 (Fed. Cir. 2005), in which the Federal Circuit articulated, for the first time, a formulaic approach to the exceptional case analysis under which a case could be found “exceptional” only in narrowly defined circumstances.

Under Brooks Furniture, a case may be deemed exceptional if there was material misconduct (i) involving the patent (either inequitable conduct in procuring the patent or willful infringement of it by the accused infringer) or (ii) involving the conduct of the litigation. Id. at 1381. To define material “misconduct in the litigation,” the Federal Circuit referred to “conduct that violates Fed. R. Civ. P. 11, or like infractions.” Id.

Absent material misconduct involving either the patent or the litigation, under Brooks Furniture a case may be deemed exceptional with regard to a prevailing defendant only if a strict two-prong test is satisfied: (1) the litigation was brought in subjective bad faith, and (2) the litigation is objectively baseless. Id. In essence, absent otherwise

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sanctionable misconduct, the prevailing defendant must prove that the plaintiff filed a baseless complaint in bad faith.

Thus, after Brooks Furniture, a prevailing party can establish exceptionality only if it can check one of the following boxes: (1) “material litigation misconduct,” (2) willful infringement, (3) inequitable conduct, or (4) objectively baseless litigation brought in bad faith.3 A district court is forbidden from finding an exceptional case for any other reasons. Nor may a court aggregate marginal conduct within multiple categories that steps right up to, but not across, the line.

Strikingly, in its articulation of the new standard, Brooks Furniture did not rely on the traditional primary sources of statutory interpretation: the statutory language and its legislative history. Cf. Pierce v. Underwood, 487 U.S. 552, 564 (1988) (“[W]e do not think it appropriate to substitute for the formula that Congress has adopted any judicially crafted revision of it ….”).

Instead, the Federal Circuit relied on this Court’s decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 60-61 (1993) (“PRE”). But PRE did not involve attorneys’ fees, much less Section 285 of the

3 It is unclear what Brooks Furniture’s bad-faith, objectively baseless litigation category adds, given that material litigation misconduct is sufficient.

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Patent Act. In PRE, this Court articulated the standard under which a lawsuit would be considered a “sham” in the antitrust context, thereby taking it outside of the Noerr-Pennington immunity doctrine. Id. But, nowhere does PRE state that this is the standard that will henceforth apply to any analysis of a claim of questionable basis, let alone a request for fee-shifting.

There is a significant difference between asserting an antitrust claim that challenge’s a party’s petitioning activity and requesting fee shifting under federal laws and court rules. Fee shifting is a tool for courts to control the conduct of the parties, to sanction litigation misconduct, or to shift the risks and burdens of particular litigation in order to encourage or discourage certain types of behavior. See, e.g., Fogerty v. Fantasy, Inc., 510 U.S. 517, 522-25 (1994); Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990). Fee shifting does not subject a party to the same liability as an antitrust claim, and it does not raise the same risk of chilling otherwise legitimate petitioning activity protected by the First Amendment. There is no reason as a matter of course to apply the heightened PRE “sham” litigation standard to statutory fee-shifting provisions. Cf. Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 419 (1978) (refusing to read subjective bad faith element into fee-shifting statute). In other words, a party’s constitutional right to petition by filing a complaint does not insulate that party from a court’s exercise of statutory authority to award fees to the prevailing party at the end of the case, based upon the totality of circumstances.

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Nor does Brooks Furniture explain why material litigation misconduct, willful infringement, fraud on the patent office, or objectively baseless litigation brought in bad faith are the only circumstances that can make a case exceptional. This Court has eschewed mechanical rules when it comes to awarding fees, explaining that “because the number of possible situations is large, we are reluctant either to fix or sanction narrow guidelines for the district courts to follow.” Pierce, 487 U.S. at 562.

The Federal Circuit’s Brooks Furniture test sets the bar too high, tying the hands of district judges in exercising the equitable power conferred upon them by Congress. Under Brooks Furniture, if a party has a claim or defense that is not “objectively baseless,” it can engage in a pattern of questionable conduct so long as its behavior does not rise to the level of a Rule 11 violation “or like infraction.” The district court cannot make an exceptional case determination even if the prevailing party shows that its adversary’s pattern of questionable conduct was in bad faith. Nor can the district court make an exceptional case determination even if the patentee’s conduct was designed to extract a settlement by pursuing a palpably weak, but not utterly baseless, nuisance claim in a vexatious or unreasonable manner. Conversely, the district court is precluded from making an exceptional case determination in favor of a patent holder even where a defendant asserts weak invalidity or inequitable conduct defenses to increase costs or protract the litigation from enforcing a valid patent, thereby dissuading the patent holder, by sheer attrition. The district court’s discretion should not be so shackled.

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II. The “Exceptional” Case Determination Should Be a Flexible and Discretionary Inquiry into Whether the Case Is an Exception to the Ordinary Patent Case.

AIPLA recommends that this Court adopt a flexible approach to fee awards in patent cases, allowing district courts to make an exceptional case determination when, under the totality of the circumstances, equity and fairness dictate that the entirety of fees should not be borne by the prevailing party. The touchstone should be the statute’s mandate of exceptionality: is the case at hand an exception to the ordinary one? In reaching this determination, a court should consider and weigh all the facts and circumstances. While some factors may weigh more heavily than others, no one factor should be required or control.

This approach will properly reset the balance. A party who unnecessarily increases the costs of litigation or otherwise acts in a manner outside the norm should risk some (or all) of the consequences of such choices. The rigidity of the Brooks Furniture test has placed the fulcrum point at “exceedingly rare” circumstances, well beyond ordinary, reaching only those instances of extreme abuse or bad faith. The exceptional case standard should not be interpreted as a “hardly ever” rule, cabining district courts with a narrow checklist of compartmentalized criteria.

The intent of Congress in enacting Section 285 was to displace the absolute application of the American Rule and encourage the award of

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attorneys’ fees in exceptional cases. The Federal Circuit’s narrow interpretation of Section 285, however, has resulted in fee shifting in only the rarest and most unusual cases: those where the losing party has engaged in highly culpable conduct such as objectively baseless litigation brought in bad faith, willful infringement, fraud on the patent office, or Rule 11 or like misconduct. While the granting of fees should be the exception to the ordinary case, it should not be so rare that Section 285 becomes, as it is now, a paper tiger. Section 285 should not be reduced to a mechanical and impotent tool that courts are unable to employ effectively in managing the conduct of patent litigation. AIPLA’s suggested approach to the exceptional case standard—unlike the Brooks Furniture test—is consistent with the statute, its legislative history, and the weight of authority.

A. Section 285 and its legislative history support broader discretion on the part of district judges.

The language and legislative history of Section 285 support allowing district courts flexibility and discretion in determining whether a case litigated before them should be treated as an exception to the ordinary patent case.

The text of Section 285 confirms Congress’s intent to confer broad discretion on district courts. It provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285 (emphasis added). The plain meaning of “exceptional” is uncommon or unusual.

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Webster’s Third New International Dictionary 791 (2002); Webster’s New Collegiate Dictionary 287 (1949) (defining “exceptional” as “uncommon”). The word “exceptional” “is most reasonably read to mean what the word is generally understood to indicate—uncommon, not run-of-the-mine.” Noxell Corp. v. Firehouse No. 1 Bar-B-Que Rest., 771 F.2d 521, 526 (D.C. Cir. 1985) (Ginsburg & Scalia, JJ.) (construing “exceptional” in the identically worded fee-shifting provision of the Lanham Act).

The Congressional mandate limiting fee awards to “exceptional” cases in Section 285 entrusts district judges with discretion to draw upon their years of experience and hands-on involvement in determining, after a case ends, whether under all the circumstances it should be viewed as an exception to the ordinary patent case. “Exceptional” is a flexible and relativistic term that demands comparison to that which is ordinary or common. The plain meaning of the term is betrayed by an exacting and rigid hurdle divorced from the practical realities of patent litigation. Indeed, Section 285’s provision that the court “may award reasonable attorney fees” further confirms that Congress intended a flexible and discretionary inquiry. 35 U.S.C. § 285 (emphasis added).

There is no reason to replace, as did the Federal Circuit in Brooks Furniture, the statutory language with judicially-crafted requirements of “misconduct in conduct of litigation or in securing the patent” or “objective baselessness” necessarily combined with “subjective bad faith.” Those words are nowhere found in the statute and unduly constrain its

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broader text. As this Court explained in Pierce v. Underwood,

[W]e do not think it appropriate to substitute for the formula that Congress has adopted any judicially crafted revision of it …. “Substantially justified” is the test the statute prescribes, and the issue should be framed in those terms.

487 U.S. 552, 564 (1988).

In fact, the Federal Circuit’s requirement of otherwise sanctionable litigation misconduct or subjective bad faith renders Section 285 entirely superfluous. District courts already had discretion to award fees for bad faith and vexatious litigation. See Cooter & Gell v. Hartmax Corp., 496 U.S. 384, 392-93 (1990); see also Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) (“[A] court may assess attorney’s fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” (internal quotation marks omitted)); 28 U.S.C. § 1927 (any attorney who multiplies proceedings unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees); Fed. R. Civ. P. 11. That is the very reason this Court refused to read a subjective bad faith requirement into the fee-shifting provision of Title VII of the Civil Rights Act of 1964:

It seems clear … that in enacting [the statute] Congress did not intend to permit the award of attorney’s fees to a prevailing defendant only in a situation where the plaintiff was

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motivated by bad faith in bringing the action.… [I]f that had been the intent of Congress, no statutory provision would have been necessary, for it has long been established that even under the American common-law rule attorney’s fees may be awarded against a party who has proceeded in bad faith.

Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 419 (1978).

The legislative history of Section 285 reinforces the statute’s prescription of a flexible and discretionary standard. Section 285 originated in the 1946 Patent Act, which, for the first time, codified attorneys’ fees in patent cases. Pub. L. No. 587, 60 Stat. 778. The 1946 Act expressly conferred upon district courts the discretion to award fees, providing that “[t]he court may in its discretion award reasonable attorney’s fees.” Id. (emphasis added). The Senate Report states that the statute encompassed prevailing accused infringers “so as to enable the court to prevent a gross injustice.” S. Rep. No. 79-1503 (1946), reprinted in 1946 U.S. Code Congressional Service 1386, 1387.

Court decisions rendered soon after enactment of the 1946 Act further illuminate its intended meaning. In Lincoln Electric Co. v. Linde Air Products Co., decided only a year after enactment of the 1946 Act, a court recognized that its decision was bound not by a prescribed test, but by the legislative directive to award fees in cases that were the exception to the ordinary case under principles of

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justice. 74 F. Supp. 293, 294 (N.D. Ohio 1947), aff’d, 171 F.2d 223 (6th Cir. 1948):

It is apparent from the wording of the statute and its history that an award of attorneys’ fees should not be made in an ordinary case. The court is invested with discretionary power where it is necessary to prevent gross injustice.

Id.; see also Blanc v. Spartan Tool Co., 168 F.2d 296, 300 (7th Cir. 1948) (stating that it is “clear that under the statute the question is one of discretion” and “[t]he court exercised its discretion and that ends the matter”); Park-In-Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (9th Cir. 1951) (“The exercise of discretion … should be bottomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force ….”).

The fee-shifting provision of the 1946 Act was amended and recodified as Section 285 of the 1952 Patent Act, Pub. L. No. 82-593, 66 Stat. 792, 813. The 1952 amendment added the phrase “in exceptional cases,” and replaced “in its discretion” with “may.” Neither of these changes was intended to alter the statute’s meaning. These amendments were intended to “express[] the intention of the [1946 Act] … as interpreted by the courts.” S. Rep. No. 82-1979 (1952), reprinted in 1952 U.S.C.C.A.N. 2394, 2423. As one of the original drafters of the 1952 Act explained, “Section 285, providing for the recovery of attorney fees by the prevailing party, is substantially the same as the corresponding sentence of the old

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statute.” P.J. Federico, Commentary on the New Patent Act, 75 J. Pat & Trademark Off. Soc’y 161, 216 (1993).4

More than a half century later, in its Brooks Furniture decision, the Federal Circuit deviated from the plain language and legislative history of Section 285. In doing so, the Federal Circuit transformed a discretionary case management tool into an inflexible, formulaic requirement under which relief is very rarely granted, even in cases that are outside the ordinary. AIPLA’s proposed interpretation will restore the intended scope of the statute.

B. A flexible, totality-of-the-circumstances approach comports with this Court’s precedents.

AIPLA’s suggested approach also comports with this Court’s precedent, which has rejected the

4 P. J. Federico was one of the 1952 Act’s original drafters. His commentary was included in the annotated version of volume 35 of the U.S. Code for many years, and when the West Publishing Company ended this practice it was reprinted in the Journal of the Patent and Trademark Office Society. See generally Harold C. Wegner, The Disclosure Requirements of the 1952 Patent Act: Looking Back and a New Statute for the Next Fifty Years, 37 Akron L. Rev. 243, 243 n.1 (2004). Federico’s commentary was reviewed by the other drafters of the 1952 Act prior to its publication and the Federal Circuit has referred to Federico’s commentary as “an invaluable insight into the intentions of the drafters of the Act.” Symbol Techs., Inc. v. Lemelson Med., 277 F.3d 1361, 1366 (Fed. Cir. 2002).

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imposition of a subjective bad faith gloss or other rigid tests on fee shifting statutes. In Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 413 (1978), this Court considered the standard for discretionary fee-shifting in favor of prevailing defendants under Title VII of the Civil Rights Act of 1964. The Court rejected arguments that fees should be available either as a matter of course or only upon a showing of bad faith litigation. Id. at 417-18. Instead, to effectuate Congress’s intent to “protect defendants from burdensome litigation having no legal or factual basis,” id. at 420, the Court took an intermediate approach, holding that “a district court may in its discretion award attorney’s fees to a prevailing defendant … upon a finding that the plaintiff’s action was frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.” Id. at 421. The Court also emphasized that it would not interpret a fee-shifting statute in a way that renders it superfluous to existing remedies for bad faith conduct. Id. at 419.

In Pierce v. Underwood, 487 U.S. 552, 562 (1988), this Court explained that determining whether fees should be shifted under the Equal Access to Justice Act as a result of the government’s litigating position “is precisely such a multifarious and novel question” that is “little susceptible, for the time being at least, of useful generalization.” As the Court further explained, “because the number of possible situations is large, we are reluctant either to fix or sanction narrow guidelines for the district courts to follow.” Id.

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AIPLA’s practical, totality-of-the-circumstances approach is wholly consistent with these cases, while Brooks Furniture runs afoul of both. Departing from Pierce’s guidance, the Federal Circuit has provided ill-advised, narrow strictures on district courts’ consideration of the differing circumstances that may render a case exceptional. Contrary to this Court’s rationale in Christiansburg, Brooks Furniture imposes a subjective bad faith requirement onto the analytic framework of Section 285. The Federal Circuit requires, absent material litigation or patent-related misconduct, that the prevailing party show, by clear and convincing evidence, that its adversary knew its allegations were baseless but pursued them anyway. See Taurus IP, LLC v. Daimlerchrysler Crop., 726 F.3d 1306, 1328-29 (Fed. Cir. 2013); MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 916 (Fed. Cir. 2012).

Faced with the requirement of establishing knowledge of the baselessness of the other party’s claim, a prevailing party seeking fees must provide evidence of the state of mind of its adversary’s key decision-makers and litigation counsel. See, e.g., Icon Health & Fitness, Inc. v. Octane Fitness, LLC, No. 09-319, 2011 U.S. Dist. LEXIS 100113, at *11-12 (D. Minn. Sept. 6, 2011). Applying a bad-faith standard in this context is nearly impossible, and there are strong, well-established policy reasons why discovery into the mental state of a party’s litigation counsel and party representatives overseeing the litigation should be limited. See Upjohn Co. v. United States, 449 U.S. 383, 398 (1981) (discovery of “attorney’s thoughts” would result in “[i]nefficiency,

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unfairness and sharp practices,” “[t]he effect on the legal profession would be demoralizing,” “[a]nd the interests of the clients and the causes of justice would be poorly served” (quoting Hickman v. Taylor, 329 U.S. 495, 511 (1947)). For these reasons, a subjective bad-faith inquiry should not be a threshold for defining what constitutes an “exceptional case” for attorneys’ fee awards.

C. Longstanding pre-Brooks Furniture precedent supports a flexible, multifactor analysis.

Prior to Brooks Furniture, the Federal Circuit (and before its creation, its sister circuits) drew on the legislative history of Section 285 and recognized that the exceptional case determination is an exercise of equitable discretion. E.g., Rohm & Haas Co. v. Crystal Chem. Co., 736 F.2d 688, 690 (Fed. Cir. 1984) (Section 285 intended to “further equitable considerations”); Purer & Co. v. Aktiebolaget Addo, 410 F.2d 871, 880 (9th Cir. 1969) (“The exercise of discretion in favor of an allowance of attorneys’ fees should be based upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of equal force ….”); Kaehni v. Diffraction Co., 342 F. Supp. 523, 534 (D. Md. 1972) (the judicial approach is “one of equity”), aff’d, 473 F.2d 908 (4th Cir. 1973).

As this Court has explained, “[t]he essence of equity jurisdiction has been the power … to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it.” Weinberger v. Romero-Barcelo, 456 U.S. 305, 312

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(1982) (quoting Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944)); see also Holmberg v. Armbrecht, 327 U.S. 392, 396 (1946) (“Equity eschews mechanical rules; it depends on flexibility.”). Thus, in the patent context, this Court has firmly rejected categorical rules for making equitable determinations. See eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393 (2006).

Consistent with these principles, prior to Brooks Furniture, courts employed a flexible array of considerations under Section 285. Courts, including the Federal Circuit, looked for indications of fraud, malice, and bad faith, and considered whether conduct was inequitable, unconscionable, vexatious, harassing, frivolous, or unjustified. See, e.g., Bayer Aktiengesellschaft v. Duphar Int’l Research B.V., 738 F.2d 1237, 1242 (Fed. Cir. 1984) (collecting cases); Deyerle v. Wright Mfg. Co., 496 F.2d 45, 54-55 (6th Cir. 1974).

Appellate courts did not impose a definitive or exclusive list; instead, they left open the possibility of additional considerations based on general principles of equity. E.g., Multiform Desiccants, Inc. v. Medzam Ltd., 133 F.3d 1473, 1481-82 (Fed. Cir. 1998) (“Findings of exceptional case have been based on a variety of factors; for example, willful or intentional infringement, inequitable conduct before the Patent and Trademark Office, vexatious or unjustified litigation, or other misfeasant behavior.”); Mach. Corp. of Am. v. Gullfiber AB, 774 F.2d 467, 471 (Fed. Cir. 1985) (fees warranted upon a “finding of unfairness or bad faith in the conduct of the losing party, or some other equitable

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consideration of similar force, which makes it grossly unjust that the winner of the particular law suit be left to bear the burden of his counsel fees which prevailing litigants normally bear” (quoting Park-In-Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (9th Cir. 1951)).

One well-reasoned early case employing this open-ended, multi-factor approach is Kaehni v. Diffraction Co., 342 F. Supp. 523 (D. Md. 1972), a case affirmed per curium by the Fourth Circuit, 473 F.2d 908 (4th Cir. 1973), and twice cited with approval by the Federal Circuit. Mach. Corp., 774 F.2d at 474; Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1069 (Fed. Cir. 1983). In Kaehni, the district court considered whether a case can be “‘exceptional’ within the meaning of Section 285 where the allegation of infringement is frivolous and/or asserted without reasonable care and sufficient justification.” 342 F. Supp. at 535. The district court did not limit itself to a fixed list; rather it considered the facts and circumstances of the case. In doing so, the court held that the case was exceptional and awarded fees based on its consideration of a multitude of interrelated factors, including:

The lack of closeness of the question of infringement,

Plaintiffs’ failure to use “reasonable care in assessing their infringement allegation prior to bringing suit,”

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Plaintiffs’ “lack of candor” responding to discovery,

“Plaintiffs’ delay in bringing suit,”

“The prolonged discovery and pretrial proceedings,”

Plaintiffs’ failure “to produce at trial a scientific expert to testify in support of their theory of infringement,”

“Plaintiffs’ conduct throughout the entire history of [the] case,” and

Defendant’s contrasting conduct “do[ing] everything in its power to end the litigation and avoid its enormous cost.”

Id.

As exemplified by Kaehni, courts did not evaluate relevant factors in isolation, compartmentalized into separate and discrete categories, as Brooks Furniture now mandates. Instead, courts considered the totality of the circumstances. See Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1574-75 (Fed. Cir. 1996) (“Bad faith and willful infringement are not the only criteria whereby a case may be deemed to be ‘exceptional,’ although when either is present the requirement is more readily met…. Indeed, the court may consider the litigation actions of both sides in connection with § 285.”); Rolls-Royce, Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1111 (Fed. Cir. 1986) (“[B]ad faith, fraud, and malice are not

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required, and misconduct (e.g., frivolity; harassing tactics) may suffice ….”); Encomp, Inc. v. L-com, Inc., 999 F. Supp. 264, 265 (D. Conn. 1998) (“The movant must demonstrate the exceptional nature of the case by clear and convincing evidence viewed in light of the totality of the circumstances.”). This approach allowed courts to consider conduct in the aggregate—even if conduct in individualized categories might not cross the line. See, e.g., Tenneco Chems., Inc. v. Wm. T. Burnett & Co., Nos. 73-266, 74-1250, 75-394, 77-1941, 1980 U.S. Dist. LEXIS 17037, at *45-46 (D. Md. Nov. 3, 1980) (considering aggregated conduct).

In Brooks Furniture, the Federal Circuit deviated from the steady course of over half a century of precedent. This Court should reverse the Federal Circuit’s attempt to impose rigid, categorical rules on a determination that should be made by the district courts as an exercise of equitable discretion.

D. The Brooks Furniture test sets a higher bar than tests that other circuit courts apply to identical statutory language in the Lanham Act.

Section 35(a) of the Lanham Act states, in language identical to Section 285 of the Patent Act, that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). The meaning of the exceptional case provision of the Lanham Act is not before the Court. But the approaches taken by other circuit courts of appeals in applying the Lanham Act provide a useful lens through which to view Brooks

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Furniture. While there is variation among the circuits concerning the Lanham Act’s “exceptional case” fee-shifting provision, not a single circuit court of appeals requires that a prevailing party prove both: (1) bad faith; and (2) that the litigation was objectively baseless to establish an exceptional case under the Lanham Act.5 The Federal Circuit’s interpretation of the identical provision in the Patent Act is an outlier and its restrictive standard should be rejected.

As then-Circuit Judge Ginsberg, joined by then- Circuit Judge Scalia, analyzed the term “exceptional case” under the Lanham Act:

While the legislative history, thin as it is, supplies no clearly right answer to the

5 The Seventh Circuit sets forth the various tests employed by its sister circuits in Nightingale Home Health Care, Inc. v. Anodyne Therapy, LLC, 626 F.3d 958, 960-61 (7th Cir. 2010). See also Tamko Roofing Prods., Inc. v. Ideal Roofing Co., Ltd., 282 F.3d 23, 32 (1st Cir. 2002); Patsy’s Brand, Inc. v. I.O.B. Realty, Inc., 317 F.3d 209, 221-22 (2d Cir. 2003); Securacomm Consulting v. Securacom, 224 F.3d 273, 280 (3d Cir. 2000); Retail Servs. v. Freebies Publ’g, 364 F.3d 535, 550 (4th Cir. 2004); Procter & Gamble Co. v. Amway Corp., 280 F.3d 519, 527-28 (5th Cir. 2002); Eagles, Ltd. v. Am. Eagle Found., 356 F.3d 724, 728 (6th Cir. 2004); Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 123 (8th Cir. 1987); Stephen W. Boney, Inc. v. Boney Servs., 127 F.3d 821, 827 (9th Cir. 1997); Nat’l Ass’n of Prof’l Baseball Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143, 1147 (10th Cir. 2000); Lipscher v. LRP Publ’ns, Inc., 266 F.3d 1305, 1320 (11th Cir. 2001); Reader’s Digest Assoc. v. Conservative Digest, Inc., 821 F.2d 800, 808 (D.C. Cir. 1987).

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question at hand, we do not find in its brief compass warrant for the severe constraint the dissent would impose. In our judgment, when Congress “limit[ed] attorney fees to ‘exceptional case’ and [placed] the award of attorney fees … within the discretion of the court,” S. Rep. No. 1400, 93d Cong., 2d Sess. 5 (1974), the legislature did not intend to harness judges to a “hardly ever” rule. Instead of the niggardly reading the dissent proffers (only “overt bad faith,” possibly a smidgen less), we think “exceptional,” as Congress used the word in Section 35 of the Lanham Act, is most reasonably read to mean what the word is generally understood to indicate—uncommon, not run-of-the-mine.

Noxell Corp. v. Firehouse No. 1 Bar-B-Que Rest., 771 F.2d 521, 526 (D.C. Cir. 1985).

Ultimately, defining “exceptional” as “uncommon” or “not run-of-the-mine”—or, as AIPLA proposes, “the exception to the ordinary patent case”—avoids needlessly limiting judges to the virtually unattainable bar that Brooks Furniture sets. Indeed, Justices Ginsberg and Scalia correctly foresaw the risk that an overly strict standard would convert fee shifting to a “hardly ever rule.” That has been the fate of the Patent Act. Just as a strict requirement of “overt bad faith” in Section 35 of the Lanham Act was rejected by the Noxell court, so too should the strict Brooks Furniture test be rejected.

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III. A Flexible Test is Consistent with the Practical Realities of Patent Litigation.

Pragmatic considerations also support a flexible exceptional case standard. The need for fee shifting as a case management tool is particularly high in patent cases, where technical complexity and the sometimes staggering expense of pre-trial discovery can drive litigation costs for both sides into the many millions of dollars. Without doubt, the stakes can be very high in patent cases, such as those involving life-saving medicines or other breakthrough technology that has achieved great commercial success, and a correspondingly great expenditure of time and money can be expected.

However, the increasing cost of patent litigation generally, and instances of litigation abuse, have received considerable attention in recent years. While “scorched earth” tactics are sometimes employed in patent litigation between competitor companies, a relatively new phenomenon has emerged where certain patent owners assert specious claims of infringement and engage in tactics that are only intended to drive up the costs of the process. In doing so, these patent owners are able to extract a settlement payment from a defendant, who seeks a way out of the debilitating expenses of prolonged litigation.

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A. Patent litigation is a technically complex and expensive procedure that is susceptible to abuse.

AIPLA’s recently updated “Report of the Economic Survey,” a bi-annual analysis of the economics of intellectual property prosecution and litigation, shows that today the median litigation costs for a patent infringement suit with at least $1 million at risk ranges from $2 million to $5.5 million through trial, depending on the amount at risk. Am. Intellectual Prop. Law Ass’n, Report of the Economic Survey 34 (2013) (“AIPLA Economic Survey 2013”).6 In many cases, the litigation costs are a multiple of these figures. See Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 701 F.3d 1351, 1355 (Fed. Cir. 2012) (“[E]xceptional case findings frequently involve extraordinarily large awards, often amounting to millions of dollars.”); PricewaterhouseCoopers, 2013 Patent Litigation Study 21 (2013), available at http://www.pwc.com/en_US/us/forensic-services/publications/assets/2013-patent-litigation-study.pdf (median time to trial in patent litigation is 2.5 years). Because of its complexity and time to

6 These costs have risen steadily over the past twelve years. In 2001, the median cost of a patent infringement suit involving $1 million to $25 million at risk was about $800,000 through the end of discovery and $1.5 million in total. Am. Intellectual Prop. Law Ass’n, Report of the Economic Survey 84 (2001). In 2013, the median cost of such patent infringement suit was $1.4 million through the end of discovery and $2.6 million in total. AIPLA Economic Survey 2013 at 34.

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trial, patent litigation is almost inevitably among the most costly of civil litigation cases. See Emery G. Lee & Thomas E. Willging, Fed. Judicial Ctr., Litigation Costs in Civil Cases: Multivariate Analysis 8 (2010), available at www.fjc.gov/public/pdf.nsf/lookup/costciv1.pdf/$file/costciv1.pdf (costs for intellectual property cases almost 62% higher than baseline).

Even when the patentee’s infringement claims or the defendant’s invalidity or unenforceability defenses are weak, aggressive litigation tactics can prolong litigation for years. Unlike other types of claims, the issues of infringement, validity, or enforceability often cannot be determined to be frivolous without prolonged effort by the parties and the district court. See Kaehni v. Diffraction Co., 342 F. Supp. 523, 536 (D. Md. 1972). Other than the rare defects in personal jurisdiction, justiciability, or standing, it is unusual for a patent infringement claim to be dismissed at the pleading stage. Likewise, the assertion of invalidity defenses requires little in the way of pleading detail.

Faced with weak claims or defenses, a patent litigant still can be forced to engage in extensive discovery into highly factual and technical issues such as the prosecution of the patent, the history and development of the technology, the background of the prior art, the development and operation of the allegedly infringing product, as well as the accused infringer’s sales and marketing of the accused product and the patentee’s sales and marketing of embodiments of the patented invention. Given the technical complexity, parties

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almost invariably engage expert witnesses and undertake far-reaching expert discovery into the underlying technology and any available damages theories. It may take a year—or more—of discovery, briefing, and hearings just to reach a ruling on construction of the claims. While local patent rules may help manage a case by requiring disclosure of infringement and invalidity contentions and streamlining discovery, the intrinsic complexity of patent cases may still require considerable expense to resolve even questionable claims.

Only after months, if not years, of discovery are parties typically given their first real opportunity to resolve the litigation at summary judgment. In practice, summary judgment motions in patent cases require extensive briefing and impose significant burdens on already overburdened district judges to analyze the legal issues and evaluate the presence of triable issues of fact. These circumstances can often result in parties proceeding to trial on weak claims or defenses. Section 285, as currently interpreted, does little to deter abusive or questionable tactics or unreasonably maintaining weak and unduly expensive claims or defenses.

Section 285 was enacted precisely to prevent such conduct, but as currently applied, it provides little disincentive for litigants who engage in abusive or questionable tactics. The larger purpose of the 1946 Act was to reduce the length, and thereby the costs, of patent litigation. See Recovery in Patent Infringement Suits: Hearing on H.R. 5231 Before the Comm. on Patents, 79th Cong. 12-14 (1946) (statements of Edwin B. H. Towner, Legislative

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Comm. of the Milwaukee Patent Bar Ass’n and Casper W. Ooms, Patent Comm’r); Alan M. Ahart, Attorneys’ Fees: the Patent Experience, 57 J. Pat. Off. Soc’y 608, 615 (1975). As discussed above, Congress granted district courts the broad power to address instances of unfairness. Using weak claims and defenses to force a party to incur burdensome costs through a prolonged litigation is a prime example of the unfair conduct Section 285 was intended to prevent. The appellate courts should not, through imposition of a narrow and rigid test of exceptionality, take away this broad power conferred upon the district courts to “check” such conduct.

With properly interpreted and calibrated fee shifting under Section 285, parties will have appropriate incentives to “stop and think” about imposing potentially unreasonable, unwarranted, or overly burdensome costs on their adversary. The prospect of fee shifting creates some risk that these negative externalities may be imposed on the party causing them. It incentivizes the parties to exercise care in assessing their contentions, to limit the scope of the case appropriately, and generally to act in a prudent, efficient, and responsible manner consistent with the circumstances of the case. Where a party’s decisions and actions make the case an exception to the ordinary patent case, a district judge should have discretion to find injustice were the prevailing party forced to bear the entire burden of its often substantial attorneys’ fees.

Section 285 was enacted, in part, to “discourage infringement of a patent by anyone thinking that all he would be required to pay if he loses the suit would

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be a royalty.” S. Rep. No. 79-1503 (1946), reprinted in 1946 U.S. Code Congressional Service 1386, 1387. But just as the statute was meant to deter alleged infringers with weak defenses from thinking that their only damages would be limited to royalties, it also was meant to deter patent holders from pursuing weak claims, thinking that they would have nothing to lose other than the amount of their own attorneys’ fees. This reciprocity is demonstrated by the very next sentence of the Senate Report: “The provision is also made general so as to enable the court to prevent a gross injustice to an alleged infringer.” Id. A flexible standard carries out this intent, and equally binds both sides of the litigation.

Focusing on costs that may have been imposed unreasonably by the non-prevailing party is also in accord with the compensatory goal of Section 285. See Highmark, 701 F.3d at 1355 (“[S]ection 285 … is a primarily compensatory provision…. Early on, it was recognized that attorneys’ fee awards were not to be regarded as a penalty ….”). The Brooks Furniture test deviates from this purpose by requiring courts to focus on punishing culpable, bad faith intent. The pertinent issue should be whether the losing party unjustly imposed costs on its adversary in excess of those warranted by the strength of its claims or defenses, in light of all of the relevant circumstances.

Recognizing the potential for abusive litigation behavior, Chief Judge Rader of the Federal Circuit has encouraged district courts to make greater use of Section 285 to shift the burden of litigation costs.

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See Randall R. Rader, The State of Patent Litigation, 21 Fed. Cir. B.J. 331, 344 (2011-2012); Randall R. Rader et al., Make Patent Trolls Pay in Court, N.Y. Times, June 4, 2013, at A25. AIPLA agrees that greater flexibility in the awarding of fees will help deter overly aggressive litigation tactics by both plaintiffs and defendants.

Unfortunately, the restrictive two-prong test set by the Federal Circuit in Brooks Furniture has impeded the district courts’ use of Section 285 to deter patent litigation abuse. Requiring a showing of material litigation misconduct or both objective baselessness and subjective bad faith makes it nearly impossible for a prevailing party to recover fees, no matter the circumstances. The data show that, in 2011, fees were shifted under Section 285 in only 20 cases annually out of nearly 3,000 patent cases filed. Id.

B. AIPLA’s suggested totality-of-the-circumstances test will not undermine the intellectual property bar’s ability to advocate with appropriate zeal on behalf of their clients.

The high hurdle set by the Brooks Furniture decision has the effect of protecting patent litigants and their attorneys from the risk of fee shifting. AIPLA believes that the intellectual property bar is not in need of such protection, protection that other members of the profession do not enjoy under this Court’s precedents. A more flexible test gives the intellectual property bar sufficient room to make

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creative, zealous arguments on behalf of their clients.

To be sure, patent law disputes can be complex and nuanced, both substantively and procedurally. But a specialized bar made up of highly trained and experienced outside and in-house counsel exists to advise clients through these challenges. It is the professional responsibility of attorneys in this area, thousands of whom AIPLA counts among its members, to assess and weigh the breadth and strength of patent claims. Intellectual property attorneys perform this task every day when they prosecute patent applications, provide freedom-to-operate opinions, and evaluate patents and patent applications in licensing negotiations.

When a dispute over patent rights arises, the doctrines of patent law, and the procedures available in federal courts, give counsel and their clients many powerful tools to vindicate their rights. But with those tools comes significant responsibility. In complicated and expensive patent cases, the law should provide appropriate incentives for parties to balance their litigation strategies with the substantial external costs they may impose.

In adopting the discretionary language of Section 285, Congress envisioned that fee awards would occur as exceptions to the ordinary case. “Exceptional” means out of the ordinary, not the norm. It does not mean “hardly ever.” Noxell Corp. v. Firehouse No. 1 Bar-B-Que Rest., 771 F.2d 521, 526 (D.C. Cir. 1985). This Court is in a position to make Section 285 more available as a tool for district

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courts by recalibrating the balance to conform to the plain language of the statute and Congress’s intent. It should take the opportunity in this case to do so.

CONCLUSION

For the foregoing reasons, AIPLA respectfully requests that the Court overrule the Brooks Furniture test and hold that Section 285 creates a flexible standard for making an “exceptional case” determination, in the exercise of the district court’s sound discretion based upon the totality of circumstances.

Respectfully submitted,

WAYNE P. SOBON, President AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION 241 18th Street, South Suite 700 Arlington, VA 22202 (703) 415-0780

BARBARA A. FIACCO Counsel of Record DONALD R. WARE MARCO J. QUINA STEPHEN T. BYCHOWSKI FOLEY HOAG LLP 155 Seaport Boulevard Boston, MA 02210 (617) 832-1000 bfiacco@foleyhoag.com

December 9, 2013