Continuing from last time...

Fee Shifting

The phrase “fee shifting” refers to the practice in which a court will make an unsuccessful litigant pay the attorney’s fees for the successful litigant. Traditionally, unsuccessful litigants in English courts would have to pay the attorney’s fees that were incurred by successful litigants. In other words, the loser would routinely pay the fees to the winner, which was referred to as “The English Rule.”

American courts adopted a different rule (i.e., “The American Rule”) in which each party pays its own attorney’s fees, except when one party takes a frivolous or vexatious position in litigation. The federal courts generally follow The American Rule, except in certain types of cases. These cases include antitrust cases, civil-rights cases, class actions, Freedom of Information Act cases and copyright cases.

The statutes that govern the awarding of attorney’s fees can favor one side or can be even-handed. For example, in civil-rights cases, the statute favors the awarding of attorney’s fees to a successful plaintiff, but not to a successful defendant. The copyright attorney’s fees statute is more even-handed so that a successful litigant is likely to receive its attorney’s fees whether he or she is a plaintiff or a defendant.

Patent cases generally follow The American Rule. However, the governing statute for attorney’s fee awards in patent cases provides for the awarding of attorney’s fees in “exceptional cases.”  In practice, successful plaintiffs in patent cases usually have an easier time obtaining an award of attorney’s fees than successful defendants.

Two decisions that were issued by the Supreme Court in 2014, Octane Fitness v. Icon Health & Fitness and Highmark, Inc. v. Allcare Health Management System, Inc., changed the environment, somewhat, by making it easier for successful defendants to obtain an award of attorney’s fees. However, certain advocates do not believe that these decisions have gone far enough in making the playing field more even. These advocates are also interested in making the award of attorney’s fees to the prevailing party in patent cases more routine. 

It is likely that the next patent-reform bill will change the governing statute for the awarding of attorney’s fees in patent cases to bring U.S. federal courts closer to following The English Rule. However, the extent to which Congress is likely to tinker with the statute is unclear at this time. 


Limitations on Pre-Claim Construction Discovery

The next round of patent reform is likely to address the conduct of discovery in a way that could be more favorable to defendants by limiting the type of discovery that can be taken in patent cases. Discovery is the process by which the parties obtain facts that can be used at trial. The discovery period in most American civil lawsuits and, in particular, patent infringement lawsuits can be long and costly.

Once the discovery period begins in any type of federal lawsuit, litigants have considerable discretion as to what information they can seek from the other party. Generally, discovery may be obtained in any order. This allows patent owners to seek information about a defendant’s products or services before a court determines the scope of protection that is provided by the patent owner’s patent. As a result, a patent owner can shape its claim construction arguments based upon what it learns in discovery.

Some patent-reform advocates believe that this creates an unfair advantage for patent owners. They have proposed limiting pre-claim construction discovery so that a patent owner can only obtain certain information before a court has construed the patent claims.


Enhanced Standards for Pre-Suit Demand Letters

Another proposed change to patent law that is likely to appear in future patent reform is an enhanced standard for pre-suit demand letters before they can provide a basis for a claim of willful infringement. A finding of willful infringement can result in the finding of exceptional case, which can result in the defendant having to pay the patent owner’s attorney’s fees. The new standard will require patent owners to provide details regarding the patent-at-issue. Patent owners will also be required to lay out specific details of the alleged infringement, which is consistent with the heightened pleading standards described previously.


Miscellaneous Issues

Future patent-reform legislation will likely address two additional issues. First, it is likely to include requirements to disclose ownership interests in litigation and in administrative proceedings. Second, it is likely to limit the ability of a patent owner to sue end users of allegedly infringing products at the same time the patent owner is suing the manufacturer of the products.