Posts Tagged: "Octane Fitness v. ICON Health Fitness"

The Supreme Court recently decided to review a pair of cases that challenge the Federal Circuit’s willful infringement test. The two cases, Halo Electronics, Inc. v. Pulse Electronics, Inc, (14-1513) and Stryker Corporation v. Zimmer, Inc. (14-1520), are drawing comparisons from commentators to the Court’s Octane Fitness, LLC v. ICON Health and Fitness, Inc. ruling last term based on the similar structure of the tests and statutory language reviewed in both cases. However, another recent SCOTUS case dealing with induced infringement, Commil USA, LLC v. Cisco Systems, Inc., may also shed some light on how the Court will think about willful infringement, since both doctrines center around the defendant’s intent.

What may be less well known is that Octane was not itself a “patent troll” case. Rather, Octane involved another kind of abusive patent litigation; namely, a large company asserting a patent it pulled “off the shelf” against a small start-up competitor. While patent trolls gain economic advantage through economies of scale, large companies have economic advantages over smaller competitors by virtue of their size and resources, and can similarly abuse the system. They can use the high cost to defend patent litigation as a competitive weapon, either to force the smaller competitor to exit the market, discontinue a product line, or pay an unwarranted royalty (thereby hindering the competitor in the marketplace). On remand, the District Court in the Octane case recognized just this sort of economic coercion, and found the case exceptional warranting a fee award. And last week, the District Court awarded almost $2 million in fees and costs to Octane, the prevailing accused infringer.

Everybody has to be careful because you’re right if we undermine our patent system that is the only thing that allows America to remain strong competitively because China they just have labor rates that are a fraction of ours. We couldn’t possibly make products as cheaply as China. We need to make sure that Congress isn’t hearing so much about how bad the patent system is that they without intention undermine it in significant part and then hurt our competitive advantage against China. I mean that’s all possible. I agree. I share that concern. Are we going too far?

I think there was certainly a level of abuse prior to patent trolls from larger companies that weren’t scrupulous trying to sue smaller companies and using the high cost of patent litigation to get things they weren’t entitled to. The only difference was these smaller companies that were being abused didn’t have any lobbying efforts before Congress. So when the whole patent troll issue came to a fever pitch the biggest companies in America were being held hostage to it. Apple, Microsoft, Facebook, LinkedIn, all of the most notorious companies that are just great technologies were being sued by smaller entities. And how do these smaller entities get economic leverage over these big companies? They did it because they could file 40 lawsuits at a time so the incremental cost beyond case number one didn’t cost anything. And they would just hold out for these nuisance value settlements and that’s why even the largest companies in America were being held hostage. How Octane changed that is now that you have a realistic chance of getting attorneys’ fees, now you have that chance now the bigger companies can stand up to a troll.