Getting Defensive Before Starting a Patent War

CHICAGOLAWBULLETIN.COM WEDNESDAY, JULY 2, 2014

Volume 160, No. 130 Getting defensive before starting a patent war

atent infringement 1982 until 2005 and adopting a hedge this risk, patent owners battles have always “rigid, mechanical” approach in BY JOSEPH A. F UCHS should consider obtaining a resulted in their share Brooks Furniture Manufacturing AND RICHARD C. clearance-to-litigate opinion in of casualties. Accused Inc. v. Dutailer International Inc., HIMELHOCH an effort to protect themselves infringers — when 393 F.3d 1378 (Fed. Cir. 2005). from a finding of exceptional Pfound to have willfully infringed a Under Brooks, a case was Joseph A. Fuchs is counsel in the case. intellectual property group at patent — have faced the exceptional if it met one of two Ungaretti & Harris LLP. He focuses These opinions would be one prospect of the court finding arguably onerous standards, and his practice on patent prosecution and way for the patent owner to show their case “exceptional” under the proofs of misconduct had to patent litigation. He can be reached at the court it took reasonable Section 285 of the Patent Act satisfy the clear-and-convincing (312) 977-4884. steps before filing charges of and awarding the patent owner standard. Richard C. Himelhoch is a partner in infringement and bolster any three times its damages as well Under Octane, the court held the intellectual property group at Rule 11 obligations on the party’s as its attorney fees — which that an exceptional case “is Ungaretti & Harris. He focuses his attorneys. alone typically run into the simply one that stands out from practice on U.S. and foreign patent Several procedural questions millions of dollars. others with respect to the prosecution, intellectual property exist on how such opinions would counseling and patent litigation. Patent owners have also been substantive strength of a party’s He can be reached at (312) 977-4380. fit in a patent infringement held liable for cases being found litigating position (considering lawsuit. Would the existence of exceptional. However, such both the governing law and facts the opinion be revealed in a instances are rare, in part of the case) or the unreasonable it is to the patent owner, accused pleading, during discovery or at because of the legal hurdles the manner in which the case was infringers have dealt with the another time? When would the accused infringers had to jump litigated.” Octane, 134 S.Ct. at possibility of an exceptional case opinion be produced, and what to prove the case was excep - 1756. finding for a significant length of would be the consequences of its tional due to the patent owner’s The court also replaced the time and have developed strate - production? Would production conduct. This difficulty has clear-and-convincing standard gies for shielding themselves require a waiver of the attorney- allowed patent owners to assert with a preponderance-of-the- from the brunt of its effects. client privilege, and if so, to what their patents with little concern evidence standard. These Although it is no longer extent? of any consequences. changes have given section 285 mandatory, the most significant While potentially affecting any That lack of concern is about some real teeth, and potentially weapon in a defendant’s arsenal patent litigant, the Supreme to change for patent owners. sharp ones. is an attorney-authored freedom- Court opinions may be intended The U.S. Supreme Court In the second Supreme Court to-operate opinion (called a to temper the enthusiasm of non- recently lowered the hurdles for opinion, Highmark Inc. v. Allcare clearance opinion). If the opinion practicing entities — pejoratively finding a case exceptional, thus Health Management System Inc., is reasonable and relied upon, it referred to as patent trolls — making it riskier for patent 134 S.Ct. 1744 (2014), the court shields the defendant from a from asserting their patents owners to assert their rights. It rejected the Federal Circuit’s de charge of willful infringement, against everybody under the simultaneously issued two novo review of exceptional case which is typically required for a sun. opinions that dramatically findings. Since it is within the finding of an exceptional case. Trolls have been criticized for changed the rules for finding a district court’s discretion to find Ironically, these opinions only bringing arguably weak cases case exceptional. a case exceptional, the court come into play after a judge or seeking royalty payments that In Octane Fitness LLC v. Icon reasoned, an abuse-of-discretion jury has ruled the patent is are well below the cost of litiga - Health & Fitness Inc., 134 S.Ct. standard should be used by the infringed and valid or enforce - tion. In these situations, the lack 1749 (2014), the court criticized reviewing court. This change in able. of any real consequences for a the Court of Appeals for the review puts the power into the In the wake of Octane and patent owner charging infringe - Federal Circuit for abandoning a hands of the district court. Highmark, it is clear that patent ment places the majority of the “holistic, equitable” approach to While the lowered exceptional owners face greater risk if they risk of proceeding squarely on find a case exceptional, which it case standard is equally appli - do not prevail and may need to the accused infringer. This is followed from its founding in cable to the accused infringer as take defensive measures. To now going to change.