When Can You Get Extra Fee Awards for an 'Exceptional Case'?

When it comes to litigation, parties have got to pay their own way. It's just the way we do things here -- it's called the American Rule for a reason. But all rules come with exceptions. The American Rule can be broken and attorney's fees awarded, in order to protect the public interest, to punish parties who refuse to settle, or simply to increase a law's effectiveness.

Take the Patent Act. The Act's fee-shifting provisions allow an award of attorney's fees to the prevailing party in exceptional cases. Thanks to a Supreme Court ruling last year, "exceptional" has become a bit more common.

Attorney's Fees on High Octane

In April of last year, the Supreme Court lowered the standard for finding an exceptional case under the Patent Act. In Octane Fitness v. Icon Health & Fitness, a unanimous Court rejected "unduly rigid" frameworks for finding exceptional cases. The rule in question, established by the Federal Circuit, required an exceptional case to meet three criteria. It had to involve material inappropriate conduct, be objectively baseless, and be brought in bad faith. That framework, the Supreme Court found, impermissibly encumbered courts' discretion.

Under Octane, to be exceptional a case does not have to be some singular unicorn. Rather, it must simply meet the ordinary meaning of exceptional: uncommon, rare, not ordinary. An exceptional case under Octane, is "simply one that stands out from others with respect to the strength of a party's litigation position or the unreasonable manner in which the case was litigated." That's a much easier standard to meet.

Octane in Practice

While that may sound good on the Supreme Court Reporter's pages, how does the permissive Octane standard play out in real life? Thankfully, Inside Counsel has performed a survey of district court decisions following Octane. Here are some highlights:

• Pre-litigation investigations matter. Pre-suit due diligence has been used to shield losing plaintiffs from being stuck covering the other party's attorney's fees.

• Attorney's should lead pre-suit investigations. The shield of due diligence often requires an attorney lead investigation, pre-suit legal opinions tailored to the facts of the issue and applied to the allegedly patent infringing product or process. The opinion of your of a client's engineers, and not their lawyers, isn't going to cut it.

• Record flaws as they occur. If you're defending against a patent case, keep the possibility of attorney's fees in mind and record flaws as they occur, from the moment the issue arises. A strong record of errors can help show that a case was meritless or in bad faith.

• Litigation conduct counts. If a party tries to submit Daubert-excluded expert testimony or repeatedly presents arguments the court has shot down, this can make the case "exceptional."

• Be prepared to justify costs. We're sure you're already tracking your every minute of work, but make sure those records are immaculate when you move for attorney's fees. Courts can reject rates that are unreasonable and exclude time spent "inefficiently."

Related Resources:

• Microsoft, Google Agree to Dismiss All Pending Patent Infringement Lawsuits (The Wall Street Journal)
• Supreme Court to Hear Case on Merit-Based Attorneys' Fees (FindLaw's Strategist)
• Report: 75% of Attorneys Increased Fees During Bad Economy (FindLaw's Strategist)
• Guy Gets $550 for Sexual Harassment. Lawyers Get $350k. (FindLaw's Strategist)