Archives for April 2014

SUPREME COURT LOWERS STANDARD FOR AWARDING ATTORNEY’S FEES, PROVIDING DEFERENCE TO DISTRICT COURTS AND A WEAPON AGAINST NONPRACTICING ENTITIES

On April 29, the U.S. Supreme Court issued its decisions in Octane Fitness, LLC v. ICON Health and Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc., giving district courts more flexibility to award attorney’s fees in patent cases.  Copies of the decisions are available here:  Octane Fitness Decision, Highmark Decision.

In Octane Fitness, Octane obtained a summary judgment of noninfringement, and then moved for an exceptional case finding and an award of attorney’s fees under 35 U.S.C. §285.  The district court, applying the standard established by the Federal Circuit in Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., found that Octane had not established that ICON’s infringement arguments were frivolous or objectively baseless, or that ICON acted with subjective bad faith.  On appeal, the Federal Circuit affirmed the district court’s findings, and rejected Octane’s invitation to “revisit the settled standard for exceptionality.” 

The Supreme Court rejected the Federal Circuit’s Brooks Furniture standard as being “overly rigid,” and adopted a new test for evaluating whether a district court can find a case exceptional and award attorney’s fees.  The Supreme Court held “that an ‘exceptional case’ is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”  The Court noted that this determination is to be made by district courts on a case-by-case basis, in the exercise of the judge’s discretion.  The Supreme Court also determined that a litigant’s entitlement to attorney’s fees does not need to be proven by “clear and convincing evidence,” noting that §285 “imposes no specific evidentiary burden, much less a high one.” 

In Highmark, the district court granted summary judgment of noninfringement in favor of Highmark, found the case to be exceptional, and awarded Highmark attorney’s fees of approximately $4.7M, $209K in costs, and $375K in expert fees.  The Federal Circuit partially reversed the district court, and in so doing used a de novo standard of review.  The Supreme Court applied the analysis of its Octane Fitness decision and reversed the Federal Circuit’s judgment, concluding that “the determination of whether a case is ‘exceptional’ under §285 is a matter of discretion” for the district court, and determining that the district court’s findings in this regard are entitled to deference on appeal and reviewed for abuse of discretion. 

Although the Supreme Court’s decisions in Octane Fitness and Highmark are notable for their potential effects on patent trolls and the ability of district courts to award attorney’s fees for baseless lawsuits brought by non-practicing entities, the new standard adopted by the Court impacts all patent litigation.  District judges clearly have far greater flexibility and should be more willing to make exceptional case findings and award attorney’s fees in appropriate circumstances.  Patent owners should be especially wary of advancing or maintaining assertions that might be viewed as questionable in the event that an accused infringer obtains a judgment in its favor.  Perhaps most importantly, accused infringers now have a potentially very significant weapon — the real threat of obtaining an award of attorney’s fees — in defending baseless lawsuits brought by patent trolls, and others.   

FEDERAL CIRCUIT AFFIRMS OBVIOUSNESS OF OSTEOPOROSIS TREATMENT

In a 2-1 decision, the Federal Circuit has affirmed a summary judgment that a method of treating osteoporosis by administering a monthly oral dose of 150 mg of ibandronate would have been obvious.  The case, Hoffman-La Roche, Inc. v. Apotex Inc., was brought by Roche, a brand manufacturer, against five generic drug manufacturers who had filed Abbreviated New Drug Applications (ANDAs).  Oliff PLC represented Orchid Chemical, one of the generics.

The Federal Circuit’s majority opinion pointed out that a monthly oral ibandronate treatment was taught by several prior art references.  The dosage of 150 mg was effectively taught by scaling up prior art dosages of 5 mg daily or 35 mg weekly in light of the Riis article, which taught the total dose concept: that the effect of ibandronate on bone formation was due to the cumulative dose for a time interval, and not the size or frequency of individual doses.

The Federal Circuit rejected Roche’s contention that those of ordinary skill in the art would have had safety concerns with a 150 mg dose, relying in part on testimony provided by Dr. John Yates, an expert retained by Orchid. 

The Federal Circuit also held that Roche’s claims of unexpected results were insufficient to overcome the prima facie showing of obviousness provided by the defendants’ prior art.  While Roche provided evidence that a 150 mg dose had an unexpectedly high bioavailability in the body, bioavailability was not a direct measure of efficacy and, in any event, did not change the reasonable expectation of success that one of ordinary skill in the art would have had prior to consideration of the bioavailability data.

A New Test to Determine Standing in False Advertising Claims

The Supreme Court has articulated new guidance for evaluating standing in false advertising claims brought under the Lanham Act Section 43(a), 15 U.S.C. §1125(a).  In a March 25, 2014 unanimous decision, Lexmark Int’l, Inc. v. Static Control Components, Inc., the U.S. Supreme Court declined to adopt the multifactor balancing test of Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519 (1983) or the direct-competitor test applied by the Sixth Circuit Court of Appeals in its review of the district court decision.  Instead, the Court adopted a new test that examines (1) whether plaintiff’s interests fall into the “zone of interests” contemplated by the statute and (2) whether plaintiff’s alleged economic or reputational injury was proximately caused by the deception wrought by defendant’s advertising.