Octane Fitness, LLC v. Icon Health & Fitness, Inc. No. 12-1184 (April 29, 2014)
Fed. Circuit’s test for fee-shifting in Brooks too demanding and thus not required by 35 U.S.C. §285. From the inception of the Federal Circuit in 1982 until Brooks in 2005, the Federal Circuit applied a “holistic, equitable approach” to assessing cases as exceptional for fee-shifting. However, in Brooks the Federal Circuit applied a “more rigid and mechanical formulation.” An “exceptional” case under Brooks required some material inappropriate conduct related to the litigation such as:
Fraud or inequitable conduct in procuring the patent;
Misconduct during litigation; or
Vexatious or unjustified litigation.
Under Brooks if there is no misconduct in the litigation or securing the patent, fees may only be imposed if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.
In the instant case, ICON (the larger company) sued Octane for infringement of US Patent 6019710 for an elliptical exercise machine. ICON itself never actually commercialized the ‘710 patent. District Court granted Octane’s motion for summary judgment. The court found ICON’s infringement arguments neither “frivolous” nor “objectively baseless” and refused to find the case exceptional for fee-shifting. The Federal Circuit affirmed the denial of attorney fees.
Supreme Court found no requirement to establish entitlement to fees under “clear and convincing” standard and that the Brooks formulation is overly rigid. District courts may determine whether a case is exceptional on a case-by-case basis. Takeaway: Greater likelihood for patent owners to be subject to fee-shifting liability.