James Blank Discusses How Supreme Court Decisions May Raise Cost of Patent Litigation in Inc.

Inc. reports that the Supreme Court recently heard two appeals that have the potential to affect the cost of patent litigation in the future, in a way that could dissuade patent trolls from bringing unmeritorious cases. Both Octane Fitness, llc v. Icon Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Management Systems, Inc. concern the provision of the Patent Act regarding payment of reasonable attorney fees to the “prevailing party” in a litigation. Under this statute, Title 35 USC Section 285, reasonable attorney fees may only be awarded in an “exceptional” case. This applies to both prevailing patent owners and prevailing accused infringers.

According to Kaye Scholer Intellectual Property Partner James Blank, there is currently a two-pronged standard that a patent case must meet in order to be determined “exceptional” enough to merit the awarding of legal fees: the case must be both objectively baseless and brought in subjective bad faith. Because this standard is very hard to prove, there are very few instances of attorney fees being awarded in patent litigation. "In Octane, the Supreme Court will resolve whether that two-prong standard will remain intact, or will it be lowered to a kinder, gentler standard," Blank continued.

If the standard is lowered, patent litigation will become a substantially riskier proposition financially—and not just for patent trolls that target other companies. “Small businesses that have obtained patents and might think about suing a larger or small competitor, will need to think twice and deeply before bringing a case,” Blank said, adding “The cost of losing will be enormous and could bankrupt a small company.”