Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559 (2014)
The Patent Act provides: “The court in exceptional cases may award reasonable attorney fees to the prevailing party,” 35 U.S.C. 285. The Federal Circuit has interpreted section 285 as authorizing fee awards only “when there has been some material inappropriate conduct,” or when it is both “brought in subjective bad faith” and “objectively baseless.” A health insurance company obtained a declaratory judgment that a patent was invalid and not infringed. The district court found the case “exceptional” and awarded attorney fees of $4,694,727.40, $209,626.56 in expenses, and $375,400.05 in expert fees. The court found a pattern of “vexatious” and “deceitful” conduct by the defendant in attempting to force other companies to purchase licenses, even after its own experts determined that its claims lacked merit. The Federal Circuit reviewed the determination de novo and reversed in part. A unanimous Supreme Court vacated. All aspects of a district court’s exceptional-case determination should be reviewed for abuse of discretion. That determination is based on statutory text that emphasizes that the district court is better positioned to make the “multifarious and novel” determination, which is not susceptible to “useful generalization” of the sort that de novo review provides, and is “likely to profit from the experience that an abuse-of discretion rule will permit to develop.” The word “exceptional” should be given its ordinary meaning: “one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated,” considering the totality of the circumstances.
On the basis of the opinion in Octane Fitness, LLC v. ICON Health & Fitness, Inc., which was argued with this case, an appellate court should review for abuse of discretion all aspects of a district court’s determination that attorney fees were warranted under Section 285 of the Patent Act, which permits awarding such fees in "exceptional cases."
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
HIGHMARK INC. v. ALLCARE HEALTH MANAGEMENT SYSTEM, INC.
certiorari to the united states court of appeals for the federal circuit
No. 12–1163. Argued February 26, 2014 —Decided April 29, 2014
Petitioner Highmark Inc. moved for fees under the Patent Act’s fee-shifting provision, which authorizes a district court to award attorney’s fees to the prevailing party in “exceptional cases.” 35 U. S. C. §285. The District Court found the case “exceptional” and granted Highmark’s motion. The Federal Circuit, reviewing the District Court’s determination de novo, reversed in part.
Held: All aspects of a district court’s exceptional-case determination under §285 should be reviewed for abuse of discretion. Prior to Octane Fitness, LLC v. ICON Health & Fitness, Inc., ante, p. ___, this determination was governed by the framework established by the Federal Circuit in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378. Octane rejects the Brooks Furniture framework as unduly rigid and holds that district courts may make the exceptional-case determination under §285 in the exercise of their discretion. The holding in Octane settles this case. Decisions on “matters of discretion” are traditionally “reviewable for ‘abuse of discretion,’ ” Pierce v. Underwood, 487 U.S. 552, 558, and this Court previously has held that to be the proper standard of review in cases involving similar determinations, see, e.g., id., at 559; Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405. The exceptional-case determination is based on statutory text that “emphasizes the fact that the determination is for the district court,” Pierce, 487 U. S., at 559; that court “is better positioned” to make the determination, id., at 560; and the determination is “multifarious and novel,” not susceptible to “useful generalization” of the sort that de novo review provides, and “likely to profit from the experience that an abuse-of discretion rule will permit to develop,” id., at 562. Pp. 4–5.
687 F.3d 1300, vacated and remanded.
Sotomayor, J., delivered the opinion for a unanimous Court.