Courts Begin More Liberal Grant of Attorney’s Fees in Frivolous Patent Lawsuits

June 16, 2014

Law moneyThe recent decision by U.S. federal district court judge, Denise Cole, to award attorneys fees to technology start-up company, FindTheBest, offers one of the first examples of application of the U.S. Supreme Court’s action against frivolous patent infringement lawsuits.  It is likely that grant of attorneys fees in patent infringement cases will becoming increasingly common in the wake of the Supreme Court’s decision in the Octane Fitness case.  This evolving environment may begin to help moderate the more aggressive business strategies of the various “patent trolls.”

Technology start-up company, FindTheBest was sued for patent infringement by patent aggregator, Lumen View.  Lumen View wanted to charge FindTheBest $50,000 for a patent license.  FindTheBest resisted and took the case to trial, reportedly investing more than $200,000 in its defense during the litigation.

Judge Cole determined that the lawsuit initiated by Lumen View was frivolous.  She based that determination on several factors highlighted in the Octane Fitness case.  Judge Cole noted that Lumen View had failed to conduct reasonable pre-lawsuit investigation of the specific facts of this case.  She also found that the Lumen View litigation was presented in a standardized format, not customized to reflect the specific facts of this situation and that the lawsuit seemed to be part of an overall predatory strategy.

Judge Cole’s findings led her to the conclusion that the patent claims raised by Lumen View were frivolous.  As a result, she allowed FindTheBest to recover the substantial attorney’s fees the company had incurred during its defense.

If other federal courts follow Judge Cole’s lead and award attorney’s fees more frequently in patent infringement cases, it may be possible to enhance the economic efficiency of the overall patent system.  That efficiency may also be improved as a result of two other recent Supreme Court decisions.

In Nautilus v. Biosig, the Supreme Court determined that the claims included in patents must be precise, clear, and specific.  The Supreme Court found that federal judges had become too willing to accept unclear and imprecise claims during the claim construction phase of patent litigation, and as a result, the judges were often failing to invalidate patents that should not have been enforced.

In Limelight v. Akamai, the Supreme Court moved to limit the ability of judges to find patent infringement in circumstances where the defendant may not have engaged in infringement of all steps of a method patent, but it “induced” its customers to infringe on those steps defined in the patent upon which it did not directly infringe.  The Supreme Court ruled that one party must infringe on all of the key steps of a method patent and that there is no liability in instances where the infringement is divided up among multiple parties.

Collectively, these recent decisions are likely to help reduce the number of patent infringement cases that go to trial.  By helping to limit patent litigation, these cases may make the overall patent system more efficient and effective.  That enhanced efficiency is desperately needed and can play a positive role in efforts to foster greater innovation in the U.S. economy.