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Before We Begin…

December 30, 2013

As noted this fall, the issue of fee shifting (i.e. the discretion of a trial court to award attorneys’ fees to the prevailing party in an “exceptional” case) is before the Supreme Court, which has agreed to hear two upcoming cases on that point: Highmark v. Allcare Health Management Systems and Octane Fitness v. Icon Health & Fitness.

Not to be outdone, the Federal Circuit recently vacated and remanded a district court opinion denying an exceptional case fee award on the grounds that clear and convincing evidence was not provided to demonstrate that the action was brought or prosecuted in bad faith.

Writing for the Court, Judge O’Malley noted that actual knowledge that claims are baseless was not required, as such a standard would “set too high a bar for establishing that a case is exceptional.” Explicitly relying on the concerns expressed in the petition of certiorari in Octane Fitness, the Federal Circuit noted that subjective bad faith required only that a lack of objective foundation for the claims be “known or so obvious that it should have been known.” Moreover, it could be proved through circumstantial evidence and the “totality of the circumstances.”

The overall effect of Kilopass may be to make it easier to prove an exceptional case. It may also be worth speculating that the Federal Circuit chose this opportunity to clarify the relevant standards prior to the Supreme Court taking up these questions.

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