Introduction

Allcare Health Management Systems (“The Respondent”) owned a patent with number 105, which covered a health management system. The purpose was to facilitate interactions among patients, physicians, and others. The patent also covered methods of determining medical review for patient treatment.

Highmark Inc. (“The Petitioner”) was a non-profit Blue Cross Blue Shield Plan insurance provider. In 2002, the Respondent notified the Petitioner that their transactions infringed its patent.

Discussion

The Petitioner instituted an action against the Respondent at the Federal District Court (“the District Court”). The Petitioner sought summary judgment for the non-infringement of the Respondent’s patent. On the other hand, the Respondent counterclaimed against the Petitioner, alleging that it infringed upon two sections of its patent.

The District Court granted the Petitioner’s summary judgment. The District Court also held that the Respondent had willfully pursued frivolous claims against the Petitioner and ordered the Respondent to pay the Petitioner attorney’s fees over 4 million dollars. Additionally, the District awarded over 200,000 Dollars in expenses against the Respondent.

Furthermore, the District Court invoked its inherent powers to impose sanctions and awarded an additional 375,400.05 Dollars in costs for the Petitioner.

Subsequently, the District Court denied all motions moved by the Respondent to reconsider the exceptional case finding and awards. Accordingly, the Respondent appealed to the United States Court of Appeals for the Federal Circuit (“the Federal Circuit”).

The Federal Circuit considered only the issue of exceptional case finding. Thus, stated the ingredients for there to be an exceptional case. The Federal Circuit held that the first ingredient was that there must be subjective bad faith. The other element was that there must be an objectively baseless claim.

Therefore, the Federal Circuit independently reviewed the District Court’s decision and affirmed same in part and reversed the other part.

On appeal to the Supreme Court, there was a unanimous decision. Justice Sotomayor read the leading opinion. The Supreme Court held that the District Court was best to determine the lawsuit as objectively baseless. Hence, entitled to deterrence on appeal.

The Supreme Court found the Federal Circuit too strict in its application standard. Particularly on its independent review, which should have been reserved for questions of law. The Supreme Court remanded the proceedings. In addition, it instructed the Federal Circuit to examine the District Court’s findings for abuse of discretion.

Conclusion

The Supreme Court determined the proper amount of deterrence that the District Court should apply regarding the exceptional case finding ability in awarding attorney’s fees under section 285 of the Patent Act.

The case has many implications for the future of patent litigation. First, from a policy standpoint, the case restricts the ability of non-practicing entities or patent trolls to demand payment of fees. Specifically, fees for patents they hold but never utilize or incorporate into their products. However, the Supreme Court’s decision remains the law.

Source: https://www.justice.gov/sites/default/files/osg/briefs/2013/01/01/2012-1163.mer.ami.pdf

Disclaimer: The views and opinions expressed throughout this blog are the views and opinions of the individual author(s) and/or contributor(s) and do not necessarily reflect the views and opinions of our firm, CIONCA IP Law. P.C. 

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Marin Cionca, Esq.

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About CIONCA® IP Law firm: We are an Irvine, Orange County, California based boutique intellectual property law firm with a focus on patent and trademark application, prosecution, opinion, licensing and IP enforcement services, including IP litigation, offering its IP services, other than IP litigation, primarily at flat fee rates. We serve local OC (Orange County) clients, as well as clients from the Los Angeles, San Diego and Riverside Counties and clients throughout the state of California, the United States and also international clients, such as EU clients.

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