Recovery fee: Attorneys’ payment and enhanced damages in patent litigation

Anyone seeking to assert a patent should be interested in whether attorney fees and punitive (“enhanced”) damages can be recovered by a successful plaintiff in patent litigation. Patent law is relatively unique considering that in certain circumstances, attorney fees are recoverable and damages may be trebled.

There are a number of hoops a plaintiff must jump through and such recoveries are not automatic. However, the Supreme Court recently issued decisions that have been widely viewed as easing the standards for both attorney fees and enhanced damages. These recent decisions confirm this easing has impacted fee and enhanced damage awards.

In the U.S., all litigants typically pay their own attorney fees, known as the American Rule. There are, however, various statutory exceptions to the American Rule; patent law is first and foremost among them. 35 U.S.C. Section 285 allows that “[t]he court in exceptional cases may reward attorney fees to the prevailing party,” but that raises a number of questions, including what makes a case “exceptional,” what is a “prevailing party” and whether the court has discretion to deny fees, even when the case is exceptional.

Furthermore, 35 U.S.C. Section 284 provides that a “court may increase the damages [as found by a jury or judge] up to three times the amount found or assessed,” raising additional questions including what are the situations where damages may be enhanced in this way and what standard does the court apply?

Attorney fees in an exceptional case under Section 285: In Octane Fitness LLC v. ICON Health & Fitness Inc., 57f2 U.S. 545, 554 (2014), the U.S. Supreme Court held that an exceptional case is 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.”

Often, an exceptional case arises in the context of willful infringement. But an exceptional case can arise in the context of litigation conduct as well, by a plaintiff or a defendant, such as where a party engaged in bad faith litigation, sharp tactics or unreasonable positions.

Although a single discrete act may be enough, the focus must be on its effect on the case as a whole; i.e., “when considered as part of the totality of circumstances in the case, the case stands out as exceptional.” Intellectual Ventures I LLC v. Trend Micro Inc., F.3d (Fed. Cir. Dec. 19, 2019).

A party can be a prevailing party even if it a party prevails on only some aspect of its claims. It must, however, have “achieve[d] the desired result by bringing about a voluntary change in the defendant’s behavior” it can be deemed the prevailing party. Raniere v. Microsoft Corp., 887 F.3d 1298 (Fed. Cir. 2018).

Octane Fitness held that an award of attorney fees is firmly within the court’s discretion and must be exercised on a case-by-case basis. But even after determining that a case is exceptional, a court can only award fees in an amount that “bear[s] some relation to the extent of the misconduct.” In re Rembrandt Technologies LP Patent Litigation, 899 F.3d 1254, 1278 (Fed. Cir. 2018). Attorney fees awards can, however, exceed damages.

In one case the court awarded more than $7 million in fees and damages in the amount of $6.9 million. Imperium IP Holdings (Cayman) Ltd. v. Samsung Electronics Co., No. 14-cv-371, 2018 WL 1602460 (E.D. Tex. April 3, 2018).

Enhanced damages under Section 284: Typically, enhanced damages — up to three times the damages assessed — are awarded only when an infringer has been found to have willfully infringed a patent. E.g., Halo Electronics Inc. v. Pulse Electronics Inc., 136 S. Ct. 1923 (2016). In Halo, the U.S. Supreme Court struck the prior clear and convincing standard and objective evidence requirements, holding that a court need only find, by a preponderance of the evidence, “[t]he subjective willfulness of a patent infringer, intentional or knowing, … without regard to whether his infringement was objectively reckless.” Id. at 1932. That is, “[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant or — indeed — characteristic of a pirate.” Id.

In short, attorney fees and enhanced damages are available in patent litigation in the U.S. Further, the Supreme Court has eased restrictions for both. But, a party seeking attorney fees or enhanced damages must still overcome significant hurdles.