Argument recap: Justices hard to read in twin disputes about attorneys fees in patent litigation

The Justices spent their Tuesday morning considering when prevailing parties can recover attorneys fees in patent cases. They heard two cases on the subject, both of which turn entirely on the language of Section 285 of the Patent Act, which provides that [t]he court in exceptional cases may award reasonable attorney fees to the prevailing party. The Justices reversed the hearing order a few days before the argument, so that they first heard Octane Fitness (which involves the substantive standard for awarding fees), followed by Highmark (which involves the standard of review on appeal). About the only thing that seems clear after the argument is that the Justices are most unlikely to resolve either case without disagreement.

In the first case, Rudolph Telscher argued for Octane, who contends that the Federal Circuit erred by affirming (summarily, as it happens) the district courts determination that this case was not sufficiently exceptional to justify a fee award. The Justices spent much of his argument time bemoaning the vagueness of the challenge that Octane presents.

Octanes central criticism of the Federal Circuit opinion is that it requires a case to be objectively baseless to be eligible for a fee award based solely on the cases weakness on the merits. Trying to find a crisp formulation that was less than the case is a loser but substantially above objectively baseless was a challenge. So Justice Anthony Kennedy started off early on suggesting that the case is a search for adjectives, in part, and he asked a question repeated by various Justices throughout the argument: what is the difference between meritless (a term Telscher used) and objectively baseless? For his part, Kennedy was concerned that the District Courts already said its not objectively baseless [and] not brought in bad faith. Im not quite sure what words were going to give the District Court if youre to prevail.

In a similar vein, Justice Ruth Bader Ginsburg, drifting into the Highmark discussion (where she pretty plainly favors an abuse-of-discretion standard), could not understand your asking the Court to reverse the Federal Circuit outright, instead of remanding for further consideration by the district court. She seemed appalled at the idea that this Court is the proper court to look at the record and make that determination that the District Court got it wrong.

At that point, Justice Scalia jumped in to press Telscher on the laxity of meritless as a way to limit fees to exceptional cases: Dont you have to add something to meritless? I mean, every time you win the summary judgment motion, thats a determination that the claim is without merit, isnt it? When Telscher refused to agree, Justice Scalia retorted: Doesnt meritless just mean without merit? At that point, Telscher responded with a discourse including the phrase unreasonably weak, which set Justice Scalia off again: Thats not a standard I would want to [accept]; what was your phrase unreasonably weak? . . . Youve got to give me something tighter than that. For his part, Telscher insisted that holding him to a standard of frivolousness would make it impossible for a successful litigant ever to obtain a fee award.

Apparently tiring of the inconclusive discussion, the Chief Justice weighed in with a rare paean to the Federal Circuit:

Were dealing with a term that could be read in many different ways: exceptional. Right? Maybe that means one out of a hundred; maybe it means ten out of a hundred. And why shouldnt we give some deference to the decision of the court that was set up to develop patent law in a uniform way? They have a much better idea than we do about the consequences of these fee awards in particular cases.

Echoing that concern, Justice Alito wondered how a district judge who rarely gets patent cases is supposed to know a case is exceptional: Most district court judges do not see a lot of patent cases, and when they see one its very unusual. So youve got these patent attorneys showing up in court. They are different from other attorneys. When Telscher disagreed, suggesting that district judges are readily familiar with patent cases, Justice Alito scoffed: Is that really true? Theres nearly 700 district judges in the country. If we had a statistic about the average number of patent cases that a district judge hears and receives on, lets say, a 5-year period, what would it be? Those two Justices, at least, seemed quite ready to defer to the Federal Circuits articulation of a standard.

At that point, Justice Scalia (apparently like Justice Ginsburg looking ahead to the Highmark argument) suggested to Telscher that the problem with his case is that the proper legal standard is inherently discretionary: [I]t occurs to me that you really cannot answer the question of what adjectives should be attached to meritless. And the reason you cant is, since it is a totality of the circumstances test, that is only one factor and it doesnt have to be an absolute degree of meritlessness. I assume you would say that even in a very close case, if there has been outrageous litigation abuse by the other side, the court would be able to say: My goodness, Ive never seen lawyers behave like this. Youre going to pay the attorneys fees for the other side. Couldnt the court do that?

In a final nod to Telschers inability to clarify his position for the Justices, the Chief Justice closed his argument by asking if he agreed with the Solicitor Generals standard that fees are appropriate when necessary to prevent gross injustice. When Telscher agreed, the Chief Justice responded in puzzlement at what he plainly viewed as a major concession: Well now, I was surprised at that because I would have thought your friend on the other side would say that. I mean, gross injustice sounds like a very tiny portion of cases, lower than meritless. . . . It doesnt mean you just lose, but theres something very unjust about it.

The Justices werent much more hospitable to Assistant to the Solicitor General Roman Martinez, arguing on behalf of the federal government. The Chief Justice and Justice Kagan spent much of the government argument time exploring what they regarded as the disconnect between gross injustice (a standard that the Chief Justice at least seemed to think reasonably specific) and the long laundry list of possible bases for recovery. To the Chief Justice and Justice Kagan at least, the long list undermined any possible specificity in the gross injustice standard.

After Telschers repeated confrontations with the Justices, the argument of Carter Phillips for the patentholder (Icon) was relatively uneventful. Predictably enough, Justice Ginsburg asked him why the Patent Act provision on fees should be interpreted differently from the identically worded Lanham Act provision referring to the Noxell Corp. v. Firehouse No. 1 Bar-B-Que opinion that she wrote for a D.C. Circuit panel including then-Judge Antonin Scalia.

Phillips suggested that in his view both statutes probably should be read the same way (which entails a rejection of the view Justice Ginsburg articulated in Noxell). He also suggested that the differing history of the two statutes could justify a distinction: the Lanham Act statute doesnt bear the history (including a shift from language about discretion to language limiting fees to exceptional cases) of the Patent Act provision.

Justice Kagan also explored with Phillips the relation between his standard and Rule 11. Phillips argued that his standard was essentially identical to the Rule 11 standard; he argued that this didnt undermine his position because Section 285 was enacted long before Rule 11, and thus would have been an important source of fee awards at the time of enactment.

As his argument wound down, Philips faced some pointed questions about other aspects of the panel opinion that he declined to defend. First, he declined to defend the Federal Circuits holding that fee awards required both objective and subjective baselessness. Because the Federal Circuits holding that the case was not objectively baseless was enough to sustain the judgment, he did not need to disprove subjective baselessness to prevail.

When the Justices turned to Highmark, the general tenor of the discussion was that none of the Justices seemed willing to agree with anything either side had to say. Arguing for Highmark the defendant below, whose fee award the Federal Circuit overturned Neal Katyal argued that a unitary abuse-of-discretion standard was the only way to make sense of the statutes limitation of fees to exceptional cases. Justice Kagan, however, repeatedly insisted that objectively baselessness seems to be a pure legal question.

When Assistant to the Solicitor General Brian Fletcher appeared on behalf of the federal government, Justice Alito occupied much of his time expressing his concern about giving district courts too much leeway in cases of such financial importance. When Fletcher happened to mention that a de novo standard of review would increase the incentive for collateral litigation like fee disputes, Alito jumped in: Whats special about the attorney fees context. I mean, youve got a lot of money involved. Why should we say, this is collateral litigation, even though it involves millions of dollars more than the claim in many other types of cases?

Alito went on to suggest that it sounds to him a lot like sovereign immunity cases, in which the Court first clarifies the law and then goes on to determine whether the officials position was reasonable. He seemed particularly concerned that the governments vague standard would preclude any meaningful review of what district courts do in this situation.

Appearing for respondent Allcare (the plaintiff in the case), Donald Dunner worked hard to emphasize the purely legal aspects of the case. Although none of the Justices had seemed willing to countenance Katyals suggestion that the issues were largely discretionary and only marginally legal, they were just as hard on Dunner.

Dunners toughest criticism came from Justices Scalia, Breyer, and Sotomayor. Echoing their comments in the Octane argument, they all seemed to take it for granted that the statute confers considerable discretion on the district court. Justice Scalia emphasized the necessary lack of uniformity under any standard for exceptional: So what makes you think that this statute, which clearly confers discretion, envisions uniformity? . . . It seems to me it quite clearly doesnt.

Justice Breyer seemed willing to concede that some fee cases might turn on legal questions, but he expressed doubt whether it was worth establishing a separate standard to deal with that likelihood. And Justice Sotomayor emphasized her view that the exceptional standard can almost never be purely legal: Why should this objective reasonableness be considered a pure question of law? Because its not about right or wrong as a legal answer; its about behavior during litigation.

Surely the high point of the entire morning came when Dunner emphasized the significance of the question: The size of the fee involved in patent cases, as my daughters would say, is humongous. The Chief Justices response telling Dunner that youve got to stop charging such outrageous fees drew laughter from the gallery.

Perhaps the most interesting aspect of the Highmark argument is the Justices more-or-less complete lack of interest in any of the precedents the parties found compelling. Though Highmarks brief claimed that the case begins and ends with two prior cases setting standards for fee awards, and Allcares brief works vigorously (and effectively) to distinguish those cases, none of the Justices asked substantial questions about the earlier cases or seemed the least bit engaged with the parties discussion of them.

Coming to the end of one hundred minutes of argument (the cases did not consume nearly the two hours for which they were scheduled), it is difficult to assess where the Justices are likely to come out. Both arguments showed a few Justices staking out pretty clear positions, but neither argument suggested any existing consensus about the appropriate outcome. Theres always the possibility that the Justices will come to a settled opinion when they study the cases before their Conference on Friday, but what seems most likely is a considerable amount of splintering in the opinions. If I were betting, Id put these cases down for a decision sometime after Memorial Day.