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October 3, 2013Client Alert

Supreme Court to Review Rule for Patent Suits

On October 1, 2013, the United States Supreme Court decided to review whether a district court’s decision ordering sanctions for “objectively baseless” patent suits is entitled to deference on appeal. The Supreme Court agreed to hear the petitioner, Highmark Inc.’s (Highmark), challenge to the Federal Circuit’s decision that negated part of a sanctions order against the respondent, Allcare Health Management Systems, Inc (Allcare).

 

The Patent Act provides that a “court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. A case is “exceptional” if it is objectively baseless and brought in bad faith.

 

The district court in the case originally ordered Allcare, which it described as a “patent troll,” to pay nearly $5 million in sanctions for bringing a baseless suit against Highmark. The Federal Circuit partially reversed the district court’s ruling, holding that a district court’s objective baselessness determination is reviewed without deference, rather than reviewing only for clear error. Upon review, the Federal Circuit found that some of Allcare’s claims were not objectively baseless.

 

The United States Supreme Court granted Highmark’s request for review, thus agreeing to determine whether sanctions for “objectively baseless” patent suits are entitled to deference. Highmark argues that an “objectively baseless” decision by the district court is not a matter of law, and therefore should be entitled to deference, and thus only be reviewed for clear error.

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