What’s the difference between “meritless,” “baseless,” and “objectively unreasonable”?
If you can answer that, you might be able help the Supreme Court decide how to rule on a pair of patent cases it heard Wednesday.
As attorneys attempted to sway the judges during back-to-back oral arguments on suits over arcane, decades-old patent law, the dispute hinged largely on semantics, with the justices attempting to parse through a complicated fight over legal fees.
Specifically, the disagreement is focused on when it is appropriate to make losers pay the winner’s fees in a patent infringement case. Traditionally, both parties in a legal dispute — win or lose — pony up their own legal fees. But a wide swath of businesses and entrepreneurs want to make it easier for a federal judge to order that a plaintiff pay a winning defender’s fees if a determination can be made that the infringement suit qualifies as “exceptional.”
What does “exceptional” really mean? There has never been a clear, uniform standard since the language was adopted in the 1952 Patent Act.
But the statute has earned renewed interest in recent years due to the enormous growth of “patent trolling,” a term used to describe companies that purchase cheap patents with the sole intention of using them to threaten questionable infringement suits against others in hopes of leveraging their claims into lucrative settlements. Trolling costs the economy tens of billions of dollars annually, according to an oft-cited study from Boston University researchers.
Those suits can sometimes cost millions of dollars to fight off, but under current law, fees are rarely shifted — a reality that critics argue makes trolling a cheap and enticing business mode.
So what are the justices saying?
In the first case heard on Wednesday, Octane Fitness v. ICON Health & Fitness, several justices immediately began questioning what “exceptional” meant and whether synonyms offered in the case literature could clear away some of the fog.
Chief Justice John Roberts quickly attempted to poke holes in the concept that his Court can interpret the statute with any sort of definitiveness.
“We’re dealing with a term that could be read in many different ways: exceptional,” Roberts said. “Maybe that means one out of a hundred, maybe it means 10 out of a hundred.”
Roberts used the word debate to offer guidance on the interweaving second case, Highmark Inc. v. Allcare Health Management Systems, argued before the Court, which deals principally with what amount of deference the federal Appeals Court should give to a lower court’s fee-shifting ruling.
“Since we’re just “¦ dealing with adjectives — meritless, frivolous, exceptional — why not give some deference to their judgment?” he added.
And Justices Antonin Scalia, Anthony Kennedy, and Sonia Sotomayor echoed Roberts’s adjectival concerns. But they also acknowledged the real financial dangers of unpunished patent trolling as something that the current jurisprudence does not properly guard against.
“I would give the same advice [to patent-holding companies]: Bring the suit,” Scalia admitted. “This guy is a possible competitor? Sue him.”
Advocates of patent reform may draw optimism from Justice Stephen Breyer’s comments on the problems of overly broad patents being granted, especially in the software world. He noted that while patent owners may represent a “small slice of litigation” that District Courts see, it is nevertheless a slice that “costs a lot of people a lot of money.
On the issue of how to determine when an infringement case rises to the level of “exception,” Breyer opined:
Why does it always have to be objectively based? I’ve read enough cases in this area to be able to approach it as a District Court judge who’s not expert. I patent the following: For a computer, enter somebody’s name. Ask phone number. And they’ll give you the phone number if you put in the right city. That puts a list in the computer. They can patent that? Well, you add a couple of things and they apparently you can have an argument that they can patent it. Okay? Because it’ll be very abstract language. It will be able to patent almost anything.”¦ Patent attorneys are very brilliant at figuring out just how to do this. So we’re never going to have attorneys’ fees in a suit if that’s your standard.
Major tech firms, including Apple, Google, IBM, and Microsoft, are following the intonations of the Court closely, as all have large financial interests in how the judiciary and Congress may redraw the lines in patent disputes.
And then there was Congress
As the Supreme Court weighs the true meaning of several synonyms, Congress is considering whether, and to what extent, it wants to address fee-shifting. Last year, the House passed the Innovation Act with a large bipartisan majority. The omnibus measure’s fee-shifting provision would require fees to be awarded to the victor unless it could be proven that the party claiming infringement was “reasonably justified in law and fact.”
If the Senate chooses to adopt similar language, the Supreme Court’s decisions on Octane Fitness and Highmark could be moot — a wrinkle the justices made it clear on Wednesday that they are aware of. But a quartet of disparate patent-reform bills are currently languishing in the Senate Judiciary Committee, leaving reform advocates to wonder when, or if, the upper chamber plans to strike.
A Judiciary aide confirmed that a number of staffers were present during Wednesday’s oral arguments.
The Supreme Court has other patent cases on its docket this term, including on March 31 the much-anticipated Alice Corp v. CLS Bank International, which will deal directly with software patents.
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