The Federal Circuit sends a message about attorneys’ fees in Spineology v. Wright Medical
A recent precedential decision from the Federal Circuit sheds important light on how the Court views attorneys fees in patent cases.
The common refrain within the patent community over the past decade is that patents are a lot harder to enforce than they used to be. A number of factors are typically cited to support that. The Supreme Court’s Alice case in 2014 opened the floodgates of district courts eliminating patent cases at the pleading stage. The emergence of IPRs in 2013 derailed scores of patent cases that would have likely made it to summary judgment ten years ago.
But another factor was the Court’s lowering the bar for a prevailing party to win its attorneys’ fees. Section 285 of the Patent Statute provides that in “exceptional cases,” a prevailing party may recover its attorneys’ fees. For years, however, the standard was high enough that it was not a material consideration to the parties to a patent suit.
That changed in 2014, when the Supreme Court issued a pair of decisions regarding attorneys’ fees for patent cases: Octane Fitness and Highmark. Octane Fitness lowered the standard for a case to be deemed “exceptional” so that fees may be recovered. Meanwhile, Highmark increased the deference that appellate review should afford to a lower court’s decision on whether a case is truly “exceptional.”
The consequence was that any party suddenly faced increased risk of losing of patent case. Not surprisingly, that risk fell disproportionately upon plaintiffs, since patent-holders typically need to take a case further in order to “prevail.” Thus, together with IPRs and Alice, the new standard set by Octane Fitness swung the pendulum substantially towards accused infringers.
Octane Fitness has encouraged more fee-shifting motions. Yet, in a recent decision, Spineology v. Wright Medical, the Federal Circuit appears to be telegraphing that litigants should be not view a fee-motion as a no-risk proposition. The Court reminded litigants that winning a patent case is not enough to seek attorneys’ fees. The case has been designated precedential, which suggests that the Court intended to send a message.
After the plaintiff, Spineology, lost summary judgment, the defendant, Wright Medical, moved for attorneys’ fees. The district court denied the motion, finding that although the court ultimately rejected Spineology’s arguments, those arguments were not so meritless to deem the case exceptional. Wright also argued that Spineology’s damages theory was frivolous. Yet, the Court never reached the issue of damages, and thus denied Wright’s fee motion on that basis as well.
On appeal, Wright argued that the district court got it wrong. Wright argued that the Court should either award Wright its fees, or remand the case so the district court can consider a host of other issues that Wright believed were relevant to its fees motion.
The Federal Circuit disagreed. It admonished Wright that it will not conduct a review of a damages analysis that was mooted by the district court’s decision on summary judgment. The Court also rejected Wright’s suggestion that a district court must examine every peripheral issue to conclusion—even issues deemed otherwise moot by the outcome of the case—simply to decide an attorney’s fees motion. The Court stated, “[w]e need not, as Wright requests, get into the weeds on issues the district court never reached.”
Going a step further, the Court spoke more broadly to the wider patent community. This is potentially one reason this case was deemed precedential. The Court cautioned those seeking attorneys’ fees to consider more restraint: “[W]e caution future litigants to tread carefully in their complaints about district courts not doing enough.”
This is an important statement from the Federal Circuit. The Court is not mincing words. Since Octane Fitness, prevailing parties have at times viewed a fee motion as a no-risk proposition that can exact greater leverage in a case. Call the plaintiff every name in the book. Throw the whole kitchen sink into the motion. Dump every potential transgression into the brief and hope the district court comes up with something.
The tactics for doing so are clear. The fees motion can be horse-traded for dismissing the appeal. Or the prevailing party can send the signal that they are out for blood, lest another patent-holder have the audacity to accuse them of infringement.
Yet, the Federal Circuit’s decision in Spineology indicates that litigants should be mindful that fee motions themselves cannot be frivolous. The Court rejected Wright’s suggestion that the Federal Circuit remand the case, and order the district court to determine additional issues to peripheral to the outcome of the case. The Court stated, “[t]he district court had no obligation to write an opinion that reveals [its] assessment of every consideration, and remand is unnecessary to obtain one.”
Finally, the Court concluded with a further admonishment to the patent community: “We remind that fee awards are not to be used as a penalty for failure to win a patent infringement suit.”
The implication is clear. Although the caselaw around Sec. 285 generally holds that winning a patent case on the merits is typically not enough to warrant a fee award, many parties have acted that way in the wake of Octane Fitness. The Federal Circuit’s decision in Spineology, which the Court chose to designate as precedential, indicates that litigants should exercise more restraint in filing fee motions.
The Supreme Court most likely has very little appetite to revisit the standard for awarding fees in a patent case anytime soon. Thus, any message telegraphed on this issue by the Federal Circuit is worth paying attention to. In Spineology, the Court just sent one of those messages.