Courts Award Attorneys’ Fees on 50% of Motions Post Octane

Yesterday the Federal Circuit Bar Association sent a letter to Congressman Bob Goodlatte (R-VA) and Congressman John Conyers (D-MI), the Chair and Ranking Member of the House Judiciary Committee, respectively. In the letter, signed by Federal Circuit Bar Association President-Elect Edgar Haug, the Association explains that since the Supreme Court’s decisions last term in Octane and Highmark motions for attorneys fees are being granted at three times the rate they were in the year preceding the decisions.

The letter reads, in part, as follows:

We pointed out in our letter of February 20, 2015, that the recent Supreme Court rulings in Octane and Highmark (collectively, “Octane“) relaxed the standard for recovering attorney’s fees under section 285, and thus rendered the fee-shifting provisions of H.R. 9 unnecessary. Testimony presented to this Committee on February 12, 2015, incorrectly reported, “in the most recent three months, the rate of full denials of attorneys’ fees motions is about the same as it was before the Supreme Court decided Highmark and Octane.” Testimony of Krish Gupta at 12-13.

We have reviewed each district court decision between the date of the Octane decision and March 31, 2015, which substantially ruled on a motion for fees under section 285. The results are summarized in the attached paper, “A Comparison of pre-Octane and post-Octane District Court Decisions on Motions for Attorneys’ Fees Under Section 285.” The data establishes that motions for attorney’s fees under section 285 after Octane were granted at a rate almost three times as high as in the year preceding Octane. In addition, the data establishes — contrary to the witness’s testimony — that 50% of motions for fees under section 285 filed by accused infringers were granted between January 1, 2015, and March 31, 2015. In contrast, in the 12 months preceding Octane, only 13% of such motions were granted.

The mandatory fee-shifting proposed by H.R. 9 materially changes the law and will substantially impair the ability of certain patent holders to enforce their rights.

It is interesting that the Federal Circuit Bar Association is calling out the testimony of Krish Gupta. During Gupta’s testimony before the Senate Judiciary Committee on March 18, 2015, Gupta cited the bogus and thoroughly debunked Bessen-Meurer “study” that erroneously claims that patent trolls cost American businesses $29 billion annually. That estimate erroneously and egregiously reached by the hopeless flawed Bessen-Meurer study that conflates “costs” with “transfers,” and further lumps together practicing corporations with non-practicing entities. Sadly, continued reliance on this near fraudulent study is commonplace despite the fact that the authors themselves have retreated from their own conclusions. At the time of his testimony I wrote: “Gupta’s reliance on the debunked Bessen-Meurer study suggests that he is either completely unknowledgeable or that he is pushing flawed data in an effort to mislead.” Given the fact that his testimony regarding fee-shifting was completely false it seems that Gupta is either willfully ignorant as to the real facts, or he is intentionally trying to mislead Congress.

In any event, the fee-shifting provisions in the Innovation Act would create a presumption that the loser in a patent infringement lawsuit must pay the attorneys fees of the winner. There is no doubt that such open ended potential liability will cause individual inventors, universities and start-ups to think twice about filing even meritorious patent infringement lawsuits. If they will not consider suing then why would they consider spending the time and money to obtain a patent in the first place? Unfortunately, the presumptive fee-shifting provisions of the Innovation Act would create a disincentive to obtain a patent, which would be tragic given that it would disproportionally influence a most innovative group.

Ironically, fee-shifting will not likely change anything with respect to the bad actors the legislation is ostensibly aimed at. We know that corporations settle bad cases brought by bad actors, which means that there will be no prevailing party and hence no attorneys fees. Even if corporations change their ways (which seems unlikely) and they fight patent trolls, the nefarious actors will simply declare bankruptcy and never pay a dime. See Fee-shifting won’t do anything to stop Patent Trolls.