Through two decisions issued on April 29, 2014, the Supreme Court of the United States substantially changed the legal landscape for successful patent litigants seeking to recover their attorney fees from the losing party. In Octane Fitness v. ICON Health & Fitness, 134 S. Ct. 1749 (2014), the Supreme Court overturned a prior decision of the U.S. Court of Appeals for the Federal Circuit interpreting section 285 of the Patent Statute to authorize an award of attorney fees in only very narrow circumstances, adopting instead a broad “totality of the circumstances” test for determining whether a case qualifies as “exceptional” and thus warrants an award of attorney fees to the prevailing party. The Court also rejected the Federal Circuit’s application of the “clear and convincing” evidentiary standard to “exceptional case” determinations in patent cases, holding that such a showing need only be made by a preponderance of the evidence. Similarly, in Highmark Inc. v. Allcare Health Management System, Inc., 134 S. Ct. 1744 (2014), the Supreme Court held that a district court’s determinations under section 285 will be reviewed on appeal under an “abuse of discretion” standard, reflecting the discretionary nature of the new test articulated in Octane Fitness.

These two decisions, issued in the midst of a seemingly unprecedented degree of public attention on various perceived shortcomings of the U.S. patent system, have been widely hailed as a new and potentially powerful tool for curbing litigation abuses by so-called patent trolls (also known as “patent assertion entities” or “non-practicing entities”), many of whom are viewed as unfairly taking advantage of the high cost of patent litigation to force defendants to settle dubious patent infringement claims. Early indications from the relatively few decisions that have applied the new “exceptional case” framework suggest that district court judges may indeed be more willing to award attorney fees to defendants that are the target of ill-founded infringement claims. The reach of these decisions, however, may not be so limited: The Supreme Court’s holding and rationale extend as well to prevailing plaintiffs, who have faced a stern challenge in recent years justifying recovery of attorney fees from defendants who may rely on ill-founded defenses to meritorious infringement claims.

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