In the 2014 case of Octane Fitness, LLC v. Icon Health & Fitness, Inc. (and a companion case), the Supreme Court articulated a standard for courts to use when deciding whether to award attorneys’ fees in patent cases. As we reported here, Section 285 of the Patent Act authorizes an award of attorneys’ fees to the prevailing party in “exceptional” cases. Many courts had interpreted this provision as limited to cases in which the prevailing party was able to prove bad faith by the losing party. As a result, fee awards were fairly rare.
Octane Fitness relaxed this standard, making fee awards both more likely and less predictable, by holding 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.” A decision on whether to grant attorneys’ fees, therefore, is a matter of discretion based on the “totality of the circumstances.”
We predicted that Octane Fitness would likely extend to trademark cases as well. We weren’t going out on too long of a limb in making this prediction, because Section 35 of the Lanham Act contains identical fee shifting language and because the Octane Fitness court relied in part on a Lanham Act decision authored by Justice Ginsberg and joined by the late Justice Scalia when they served together on the D.C. Circuit Court of Appeals. Since 2014, the Third, Fourth, Fifth and Sixth Circuits, as well as District Courts within the Eighth, Tenth and Eleventh Circuits, have expressly applied the Octane Fitness holding to Lanham Act cases. The Second and Seventh Circuits, when presented with trademark cases involving attorneys’ fee issues, have not cited Octane Fitness and appear to continue to apply an earlier standard.
On October 24, 2016, in an en banc decision in Sun Earth, Inc. v. Sun Earth Solar Power Co., the Ninth Circuit joined the majority and applied Octane Fitness to the Lanham Act context. Previously, the Court had viewed a case as “exceptional” only if it involved “malicious, fraudulent, deliberate or willful” infringement. The Ninth Circuit held that, in light of Octane Fitness, a court considering a Lanham Act fee request now should consider a variety of nonexclusive factors, including “frivolousness, motivation, objective reasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.”
Our prior reports included a list of practice tips for managing risks and preserving opportunities related to motions for attorneys’ fees under Octane Fitness. These include being familiar with local practices, periodic reevaluation of the strength of your case, task coding, and the avoidance of “bad” documents.
It is also worth noting that, earlier this year, the Supreme Court adopted an analogous regime for attorneys’ fees in copyright matters. You can find our report of that case here.