`
`IN THE
`
`$upreme Ginurt of the flflniteh étatesz
`
`HIGHMARK INC.,
`
`Pet1't1'011e1',
`
`V.
`
`ALLCARE HEALTH MANAGEMENT SYSTEMS, INC.,
`
`Respondent.
`
`On Petition for a Writ of Certiorari to the
`United States Court of Appeals
`for the Federal Circuit
`
`PETITION FOR A WRIT OF CERTIORARI
`
`CYNTHIA E. KERNICK
`JAMES C. MARTIN
`KIM M. WATTERSON
`
`KEVIN S. KATONA
`THOMAS M. POHL
`REED SMITH LLP
`225 Fifth Avenue
`
`Pittsburgh, PA 15222
`(412) 288-3131
`
`NEAL KUMAR KATYALI
`DOMINIC F. PERELLA
`HOGAN LOVELLS US LLP
`
`555 13th Street, N.W.
`Washington, D.C. 20004
`(202) 637-5528
`neal.katya1@hogan1ove11s.com
`
`Counsel for P9t1't1'011e1'
`"Counsel ofRecord
`
`WILSON-EPES PRINTING Co., INC. — (202)789-0096 — WASHINGTON, D. 0.20002
`
`
`
`
`
`i
`
`
`
`
`
`QUESTION PRESENTEDQUESTION PRESENTEDQUESTION PRESENTED QUESTION PRESENTED
`
`The Patent Act provides that a “court in exception-
`al cases may award reasonable attorney fees to the
`prevailing party.” 35 U.S.C. § 285. A case is “excep-
`tional” if it is objectively baseless and brought in bad
`faith. After living with this case for more than six
`years, the District Court found that it was objectively
`baseless and brought in bad faith, and it awarded
`fees. Over a strong dissent, a Federal Circuit panel
`reversed, holding that a district court’s objective
`baselessness determination is reviewed “without
`deference.” Pet. App. 9a. The Federal Circuit denied
`rehearing en banc by a vote of six to five. One of the
`two pointed dissents from that denial accurately
`observed that the decision below “deviates from
`precedent * * * and establishes a review standard for
`exceptional case findings in patent cases that is
`squarely at odds with the highly deferential review
`adopted by every regional circuit and the Supreme
`Court in other areas of law.” Pet. App. 191a.
`
`The question presented is: Whether a district
`court’s exceptional-case finding under 35 U.S.C.
`§ 285, based on its judgment that a suit is objectively
`baseless, is entitled to deference.
`
`
`
`
`
`
`
`ii
`
`
`
`
`PARTIES TO THE PROCEEDINGSPARTIES TO THE PROCEEDINGS
`
`PARTIES TO THE PROCEEDINGSPARTIES TO THE PROCEEDINGS
`
`The following were parties to the proceedings in
`the U.S. Court of Appeals for the Federal Circuit:
`
`1. Highmark Inc., the petitioner on review, was
`plaintiff-appellee below.
`
`2. Allcare Health Management Systems, Inc., re-
`spondent on review, was defendant-appellant below.
`
`
`
`
`
`iii
`
`
`
`
`
`
`
`RULE 29.6 DISCLOSURE STATEMENTRULE 29.6 DISCLOSURE STATEMENTRULE 29.6 DISCLOSURE STATEMENT RULE 29.6 DISCLOSURE STATEMENT
`
`Petitioner Highmark Inc. has no parent corpora-
`tion, and no publicly held company owns ten percent
`or more of its stock.
`
`
`
`
`
`iv
`
`
`
`TABLE OF CONTENTS
`
`
`
`QUESTION PRESENTED........................................... i
`
`PARTIES TO THE PROCEEDINGS .......................... ii
`
`RULE 29.6 DISCLOSURE STATEMENT ............... iii
`
`TABLE OF AUTHORITIES ....................................... vi
`
`OPINIONS BELOW .................................................... 1
`
`JURISDICTION .......................................................... 1
`
`STATUTE INVOLVED ............................................... 2
`
`INTRODUCTION ........................................................ 2
`
`STATEMENT .............................................................. 5
`
`A. Background .................................................. 5
`
`B. The Exceptional-Case Finding.................... 7
`
`C. The Federal Circuit’s Decision ................... 9
`
`D. The En Banc Dissent................................. 11
`
`REASONS FOR GRANTING THE PETITION ....... 13
`
`I. THE DECISION BELOW CANNOT
`BE RECONCILED WITH THIS
`COURT’S PRECEDENTS ............................... 14
`
`II. THE DECISION BELOW CREATES
`BOTH AN
`INTRA-CIRCUIT AND
`INTER-CIRCUIT SPLIT ................................. 22
`
`IS
`III. THE QUESTION PRESENTED
`IMPORTANT TO PATENT LAW AND
`THE
`PRESERVATION OF
`THE
`PROPER ROLES OF TRIAL AND
`APPELLATE COURTS ................................... 26
`
`CONCLUSION .......................................................... 31
`
`
`
`
`
`
`
`
`v
`
`
`
`TABLE OF CONTENTS—Continued
`
`
`
`APPENDICES
`
` APPENDIX A: Opinion of the U.S. Court
`of Appeals for the Federal Circuit,
`dated August 7, 2012 .................................... 1a
`
` APPENDIX B: Opinion and Order of the
`District Court Granting Motion for
`Exceptional-Case Finding and At-
`torneys’ Fees, dated April 1, 2010 .............. 44a
`
` APPENDIX C: Order of the District
`Court Granting Motions to Reconsid-
`er, dated May 6, 2010 .................................. 97a
`
` APPENDIX D: Opinion and Order of the
`District Court Reconsidering and
`Vacating Sanctions, dated Aug. 9,
`2010 ............................................................ 103a
`
` APPENDIX E: Order of the District
`Court Awarding Attorneys’ Fees,
`dated Nov. 5, 2010 ..................................... 153a
`
` APPENDIX F: Order of the District
`Court Denying Motion To Alter or
`Amend the Judgment or for a New
`Trial, dated Jan. 18, 2011 ......................... 171a
`
` APPENDIX G: Order of the U.S. Court
`of Appeals for the Federal Circuit
`Denying Panel Rehearing and Re-
`hearing En Banc, dated Dec. 6, 2012 ....... 179a
`
`
`
`
`
`
`
`vi
`
`
`
`TABLE OF AUTHORITIES
`
`Page
`
`CCCCASESASESASESASES::::
`
`ALPO Petfoods, Inc. v. Ralston Purina Co.,
`913 F.2d 958 (D.C. Cir. 1990) ........................... 24
`
`American Safety Table Co. v. Schreiber,
`415 F.2d 373 (2d Cir. 1969) ............................... 25
`
`Anderson v. City of Bessemer City,
`470 U.S. 564 (1985) ..................................... 10, 30
`
`Badalamenti v. Dunham’s, Inc.,
`896 F.2d 1359 (Fed. Cir. 1990) ......................... 19
`
`Bard Peripheral Vascular, Inc. v.
`W.L. Gore & Assocs., Inc.,
`682 F.3d 1003 (Fed. Cir. 2012) ......................... 30
`
`Bilski v. Kappos,
`130 S. Ct. 3218 (2010) ......................................... 5
`
`Blue Dane Simmental Corp. v. American
`Simmental Ass’n,
`178 F.3d 1035 (8th Cir. 1999) ........................... 24
`
`Bolt, Beranek & Newman, Inc. v.
`McDonnell Douglas Corp.,
`521 F.2d 338 (8th Cir. 1975) ............................. 25
`
`Brooks Furniture Mfg., Inc. v.
`Dutailier Int’l, Inc.,
`393 F.3d 1378 (Fed. Cir. 2005) ........................... 7
`
`Codex Corp. v. Milgo Elec. Corp.,
`717 F.2d 622 (1st Cir. 1983) .............................. 25
`
`Columbia Pictures Indus., Inc. v.
`Prof’l Real Estate Investors, Inc.,
`944 F.2d 1525 (9th Cir. 1991) ........................... 21
`
`
`
`
`
`
`vii
`
`
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`
`
`Computer Docking Station Corp. v.
`Dell, Inc.,
`519 F.3d 1366 (Fed. Cir. 2008) ......................... 22
`
`Cooter & Gell v. Hartmax Corp.,
`496 U.S. 384 (1990) ................................... passim
`
`Cybor Corp. v. FAS Techs., Inc.,
`138 F.3d 1448 (Fed. Cir. 1998) ......... 3, 22, 28, 30
`
`eBay Inc. v. MercExchange, LLC,
`547 U.S. 388 (2006) ....................................... 4, 26
`
`Employers Council On Flexible Comp. v.
`Feltman,
`384 F. App’x 201 (4th Cir. 2010) ....................... 24
`
`Eon-Net LP v. Flagstar Bancorp,
`653 F.3d 1314 (Fed. Cir. 2011),
`cert. denied, 132 S. Ct. 2391 (2012) .................. 22
`
`Farberware Licensing Co. v.
`Meyer Mktg. Co.,
`428 F. App’x 97 (2d Cir. 2011) .......................... 24
`
`Festo Corp. v. Shoketsu Kinzoku Kogyo
`Kabushiki Co., Ltd.,
`535 U.S. 722 (2002) ..................................... 13, 23
`
`FilmeTec Corp. v. Hydranautics,
`67 F.3d 931 (Fed. Cir. 1995) ....................... 19, 28
`
`Frank’s Casing Crew & Rental Tools, Inc. v.
`Weatherford Int’l, Inc.,
`389 F.3d 1370 (Fed. Cir. 2004) ......................... 19
`
`
`
`
`
`
`viii
`
`
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`
`
`Garrett Corp. v. American Safety
`Flight Sys., Inc.,
`502 F.2d 9 (5th Cir. 1974) ................................. 25
`
`Highmark, Inc. v. Allcare Health
`Mgmt. Sys., Inc.,
`329 F. App’x 280 (Fed. Cir. 2009) ....................... 7
`
`Johnson v. Jones,
`149 F.3d 494 (6th Cir. 1998) ............................. 24
`
`Kale v. Combined Ins. Co.,
`861 F.2d 746 (1st Cir. 1988) .............................. 29
`
`Kearney & Trecker Corp. v. Cincinnati
`Milacron Inc.,
`562 F.2d 365 (6th Cir. 1977) ............................. 25
`
`KSR Int’l Co. v. Teleflex Inc.,
`550 U.S. 398 (2007) ........................................... 14
`
`Lam, Inc. v. Johns-Manville Corp.,
`668 F.2d 462 (10th Cir. 1982) ........................... 25
`
`Loctite Corp. v. Fel-Pro, Inc.,
`667 F.2d 577 (7th Cir. 1981) ............................. 25
`
`Lucent Techs., Inc. v. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009) ........................... 6
`
`Maurice A. Garbell, Inc. v. Boeing Co.,
`546 F.2d 297 (9th Cir. 1976) ............................. 25
`
`Mayo Collaborative Servs. v. Prometheus
`Labs., Inc., 132 S. Ct. 1289 (2012) ...................... 5
`
`
`
`
`
`
`ix
`
`
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`
`
`Medtronic Navigation, Inc. v. BrainLAB
`Medizinische Computersysteme GmbH,
`603 F.3d 943 (Fed. Cir. 2010) ........................... 27
`
`Merck & Co. v. Teva
`Pharmaceuticals USA, Inc.,
`395 F.3d 1364 (Fed. Cir. 2005) ......................... 30
`
`Microsoft Corp. v. i4i Ltd. P’ship,
`131 S. Ct. 2238 (2011) ....................................... 19
`
`Miller v. Fenton,
`474 U.S. 104 (1985) ........................................... 15
`
`Nat’l Ass’n of Prof’l Baseball Leagues, Inc. v.
`Very Minor Leagues, Inc.,
`223 F.3d 1143 (10th Cir. 2000) ......................... 24
`
`Nat’l Bus. Forms & Printing, Inc. v.
`Ford Motor Co.,
`671 F.3d 526 (5th Cir. 2012) ............................. 24
`
`Nilssen v. Osram Sylvania, Inc.,
`528 F.3d 1352 (Fed. Cir. 2008) ......................... 22
`
`Old Reliable Wholesale, Inc. v. Cornell Corp.,
`635 F.3d 539 (Fed. Cir. 2011) ....................... 7, 15
`
`Omark Indus., Inc. v. Colonial Tool Co.,
`672 F.2d 362 (3d Cir. 1982) ............................... 25
`
`Pierce v. Underwood,
`487 U.S. 552 (1987) ................................... passim
`
`Professional Real Estate Investors, Inc. v.
`Columbia Pictures Indus., Inc.,
`508 U.S. 49 (1993) ................................. 20, 21, 29
`
`
`
`
`
`
`x
`
`
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`
`
`Pullman-Standard v. Swint,
`456 U.S. 273 (1982) ........................................... 20
`
`Salve Regina College v. Russell,
`499 U.S. 225 (1991) ........................................... 13
`
`Secalt S.A. v. Wuxi Shenxi
`Constr. Mach. Co.,
`668 F.3d 677 (9th Cir. 2012) ............................. 24
`
`Securacomm Consulting, Inc. v.
`Securacom Inc.,
`224 F.3d 273 (3d Cir. 2000) ............................... 24
`
`Sitrick v. Dreamworks, LLC,
`516 F.3d 993 (Fed. Cir. 2008) ........................... 30
`
`Slip Track Sys., Inc. v. Metal-Lite, Inc.,
`304 F.3d 1256 (Fed. Cir. 2002) ......................... 30
`
`Stewart v. Sonneborn,
`98 U.S. 187 (1878) ............................................. 21
`
`Stone v. Crocker,
`41 Mass. 81 (1832) ............................................. 21
`
`Tamko Roofing Prods., Inc. v.
`Ideal Roofing Co.,
`282 F.3d 23 (1st Cir. 2002) ................................ 24
`
`TE-TA-MA Truth Found.-Family of URI, Inc.
`v. World Church of the Creator,
`392 F.3d 248 (7th Cir. 2004) ............................. 24
`
`Tire Kingdom, Inc. v. Morgan
`Tire & Auto, Inc.,
`253 F.3d 1332 (11th Cir. 2001) ......................... 24
`
`
`
`
`
`
`xi
`
`
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`
`
`Warner-Jenkinson Co. v. Hilton
`Davis Chem. Co.,
`520 U.S. 17 (1997) ....................................... 13, 23
`
`Western Elec. Co. v. Stewart-Warner Corp.,
`631 F.2d 333 (4th Cir. 1980) ............................. 25
`
`Wolverine World Wide, Inc. v. Nike, Inc.,
`38 F.3d 1192 (Fed. Cir. 1994) ............................. 6
`
`Young v. Lumenis, Inc.,
`492 F.3d 1336 (Fed. Cir. 2007) ......................... 30
`
`
`SSSSTATUTESTATUTES::::
`
`TATUTESTATUTES
`
`15 U.S.C. § 1117(a)(3) ............................................. 24
`
`28 U.S.C. § 1254(1) ................................................... 1
`
`28 U.S.C. § 1927...................................................... 23
`
`28 U.S.C. § 2412(d) ................................................. 14
`
`35 U.S.C. § 285 ............................................... passim
`
`RRRRULESULESULESULES::::
`
`Fed. R. Civ. P. 11 ............................................ passim
`
`Fed. R. Civ. P. 11(b) ................................................ 17
`
`Fed. R. Civ. P. 52(a)(6) ..................................... 19, 20
`
`OOOOTHER
`
`THER AAAAUTHORITIESUTHORITIES::::
`
`THER THER
`
`UTHORITIESUTHORITIES
`
`J. Allison et al., Patent Quality and
`Settlement Among Repeat Patent
`Litigants, 99 Geo. L. J. 677 (2011).................... 26
`
`Am. Intellectual Property Law Ass’n,
`Report of the Economic Survey 2011 ................ 27
`
`
`
`
`
`
`xii
`
`
`
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`
`
`J. Bessen & M. Meurer, The Direct Costs
`from NPE Disputes (Boston Univ. Sch. of
`Law Working Paper No. 12-34, 2012) .............. 27
`
`C. Chien, Patent Trolls by the Numbers,
`Patently-O, Mar. 14, 2013 ................................. 26
`
`E. Gressman et al., Supreme Court Practice
`(9th ed. 2007) ..................................................... 23
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`IN THE
`Supreme Court of the United States
`_________
`
`No. 12-
`________
`
`HIGHMARK INC.,
`
`
`
`
`
`
`
`Petitioner,
`
`
`
`v.
`
`ALLCARE HEALTH MANAGEMENT SYSTEMS, INC.,
`
`
`
`
`
`
`
`
`_________
`
`Respondent.
`
`On Petition for a Writ of Certiorari to the On Petition for a Writ of Certiorari to the On Petition for a Writ of Certiorari to the On Petition for a Writ of Certiorari to the
`
`
`
`
`
`
`United States Court of Appeals United States Court of Appeals United States Court of Appeals United States Court of Appeals
`
`
`
`for the Federal Circuitfor the Federal Circuitfor the Federal Circuit for the Federal Circuit
`_________
`
`PETITION FOR A WRIT PETITION FOR A WRIT PETITION FOR A WRIT OF CERTIORARIOF CERTIORARI PETITION FOR A WRIT OF CERTIORARIOF CERTIORARI
`
`
`
`
`
`
`_________
`
`Highmark Inc. respectfully petitions for a writ of
`certiorari to review the judgment of the United
`States Court of Appeals for the Federal Circuit.
`
`
`
`
`
`OPINIONS BELOWOPINIONS BELOWOPINIONS BELOW OPINIONS BELOW
`
`The District Court’s opinion is reported at 706 F.
`Supp. 2d 713 (Pet. App. 44a). The Federal Circuit’s
`decision is reported at 687 F.3d 1300 (Pet. App. 1a).
`The Federal Circuit’s order denying rehearing en
`banc is reported at 701 F.3d 1351 (Pet. App. 179a).
`
` JURISDICTION
`
`
`JURISDICTIONJURISDICTIONJURISDICTION
`
`The Federal Circuit entered judgment on August 7,
`2012, and denied rehearing on December 6, 2012.
`Pet. App. 1a, 181a. On February 4, 2013, the Chief
`Justice extended the time to file this petition to April
`5, 2013. This Court’s jurisdiction rests on 28 U.S.C.
`§ 1254(1).
`
`
`
`
`
`
`2
`
`
`
`
`
`STATUTE INVOLVEDSTATUTE INVOLVEDSTATUTE INVOLVED STATUTE INVOLVED
`
`Section 285 of the Patent Act, 35 U.S.C. § 285, pro-
`vides: “The court in exceptional cases may award
`reasonable attorney fees to the prevailing party.”
`
`
`
`
`
`INTRODUCTIONINTRODUCTIONINTRODUCTION INTRODUCTION
`
`This petition arises from a patent-infringement
`case of the sort—in the District Court’s own words—
`“that gives the term ‘patent troll’ its negative conno-
`tation.” Pet. App. 69a. Respondent Allcare Health
`Management Systems, Inc., has one business and
`one business only: licensing a vague health-care
`patent through the threat of litigation. In 2002,
`Allcare accused Petitioner Highmark Inc. of infring-
`ing various claims of that patent. Allcare demanded
`exorbitant licensing fees and threatened suit if
`Highmark would not pay. Highmark refused and
`sought a declaratory judgment of non-infringement.
`Allcare counterclaimed for infringement. Highmark
`prevailed on summary judgment, but only after a
`litigation that needlessly dragged on for years and
`cost millions of dollars.
`
`Highmark then sought attorneys’ fees pursuant to
`35 U.S.C. § 285, which grants district courts discre-
`tion to award fees in “exceptional” patent cases,
`including those in which infringement allegations
`are objectively baseless. The District Court, after
`carefully reviewing six years of litigation, agreed and
`found that a fee award was warranted. It was “firm-
`ly convince[d]” that this case was exceptional be-
`cause, among other things, Allcare pursued “merit-
`less allegations well after the lack of merit became
`apparent,” advanced infringement theories that were
`contradicted by its own experts, and engaged in
`“deceitful conduct.” Pet. App. 92a, 77a, 90a.
`
`
`
`
`
`
`3
`
`A divided Federal Circuit reversed. And it did so
`on the back of an abrupt departure from its own
`precedent: The panel majority decided to review de
`novo the District Court’s finding that Allcare’s claims
`were “objectively baseless,” rather than reviewing for
`clear error, as the court has always done. Pet. App.
`9a-11a. The panel thus refused to defer to the Dis-
`trict Court’s extensive findings and reversed, relying
`on a legal theory Allcare had not even advanced.
`Pet. App. 21a. That approach drew a sharp dissent
`from Judge Mayer and a five-judge dissent from
`denial of rehearing en banc. Judge Mayer wrote
`that, “[a]pplying th[e] highly deferential standard of
`review” that had long been settled law, “there is no
`basis for overturning the trial court’s determination.”
`Pet. App. 32a. And the en banc dissenters pointedly
`condemned the panel’s de novo approach, stating
`that it “deviates from precedent” and establishes a
`standard “squarely at odds” with the approaches of
`“every regional circuit and the Supreme Court.” Pet.
`App. 191a.
`
`The dissenters were quite right about that. Re-
`markably, the Federal Circuit’s decision to employ de
`novo review in this case splits with every other
`relevant authority. It is irreconcilable with this
`Court’s cases, which hold in the context of analogous
`fee-award statutes that a district court’s findings
`should be reviewed deferentially. See Cooter & Gell
`v. Hartmax Corp., 496 U.S. 384, 400 (1990); Pierce
`v. Underwood, 487 U.S. 552, 563 (1987). It is irrec-
`oncilable with the Federal Circuit’s own cases, which
`long have held that a Section 285 finding is “re-
`viewed for clear error.” Cybor Corp. v. FAS Techs.,
`Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc).
`And it sets the Federal Circuit at odds with every
`
`
`
`
`
`
`4
`
`other court of appeals: While patent appeals—and
`thus Section 285 issues—are now consolidated in the
`Federal Circuit, every circuit considered the stand-
`ard of review for Section 285 awards in the years
`before the Federal Circuit was created. They all
`came to the opposite conclusion from the decision
`below.
`
`This Court should step in and reset the course on
`this increasingly important question. As the mem-
`bers of this Court have recognized, patent litigation
`is changing. “An industry has developed in which
`firms use patents not as a basis for producing and
`selling goods but, instead, primarily for obtaining
`licensing fees.” eBay Inc. v. MercExchange, LLC,
`547 U.S. 388, 396 (2006) (Kennedy, J., concurring).
`Often the threat of an exceptional-case finding is the
`primary deterrent to an unscrupulous patent troll
`bent on pressing baseless infringement allegations.
`And the “district court is better situated than the
`court of appeals to marshal the pertinent facts and
`apply the fact-dependent legal standard” to decide
`whether a fee award is warranted. Cooter, 496 U.S.
`at 402. The Federal Circuit’s decision to arrogate
`that responsibility to itself improperly divides labor
`between the trial courts and courts of appeals, in-
`creases costs, and gives trolls more leverage to extort
`licensing fees for patents of suspect validity. It
`creates yet another perverse incentive in a patent
`system that is already subject to exploitation.
`
`As the dissent below recognized, this Court has
`“reprimanded” the Federal Circuit often for not
`following this Court’s guidance, but “[i]t is clear from
`Highmark that [the Federal Circuit] has not learned
`[its] lesson.” Pet. App. 203a. A reminder here is in
`order. The writ should be granted.
`
`
`
`
`
`
`5
`
`
`
`
`
`STATEMENTSTATEMENTSTATEMENT STATEMENT
`
`
`
`A.A.A.A. BackgroundBackgroundBackgroundBackground
`
`
`
`
`
`Allcare is a patent assertion entity whose sole
`business is licensing U.S. Patent No. 5,301,105 (the
`’105 patent) through litigation and the threat of
`litigation. Allcare obtained the ’105 patent for
`$75,000 through an assignment from the inventor.
`The patent discloses a vague “health management
`system” meant to facilitate the interaction of a
`physician, patient, bank, and insurance company.
`The patent claims at issue here cover a method of
`using a computer system to generate a list of possible
`treatments based on symptom data entered by a
`physician. Pet. App. 2a-4a.1
`
`In 2002, Allcare found a new target for its licensing
`endeavor: Highmark, a non-profit Blue Cross Blue
`Shield Plan that provides health insurance to its
`members. Allcare sent Highmark a letter claiming
`that it had commissioned an analysis of “Highmark’s
`transaction processing systems” and that it believed
`these systems infringed the ’105 patent. Pet. App.
`45a-46a. In the correspondence that followed, All-
`care threatened a lawsuit that would lead to millions
`of dollars in legal fees and “substantial damages.”
`Id. Rather than acquiesce in Allcare’s demand for
`licensing fees, Highmark sought a declaratory judg-
`ment of non-infringement and invalidity. Allcare
`counterclaimed for infringement of claims 52, 53, and
`102 of the ’105 patent. Pet. App. 5a, 47a.
`
`
`1 As Judge Mayer observed in dissent, the ’105 patent is
`probably invalid under Section 101’s subject matter eligibility
`requirements. Pet. App. 41a-43a; see Mayo Collaborative
`Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012); Bilski
`v. Kappos, 130 S. Ct. 3218 (2010).
`
`
`
`
`
`
`6
`
`After four years of discovery, Highmark moved for
`summary judgment. Allcare did not even oppose
`summary judgment on claim 102, and eventually
`withdrew that claim with prejudice. Pet. App. 5a.
`The District Court then granted summary judgment
`for Highmark on claims 52 and 53, finding that
`Highmark’s system plainly did not include at least
`one critical element of those claims. See Lucent
`Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1317
`(Fed. Cir. 2009) (“To infringe a method claim, a
`person must have practiced all steps of the claimed
`method.”).
`
`Specifically, claim element 52(c) required “entering
`* * * data symbolic of patient symptoms for tenta-
`tively identifying a proposed mode of treatment.”
`Pet. App. 3a. The District Court found that that
`element required a physician to input a patient’s
`symptoms into a computer system, which would
`respond with a list of potential treatments. Pet. App.
`73a. But as Allcare’s own expert admitted, in High-
`mark’s computer system the physician herself enters
`the symptoms and proposed treatment into the
`system. Id. As the District Court explained, a
`physician who uses Highmark’s system is not, there-
`fore, “entering * * * data * * * for tentatively identify-
`ing a proposed mode of treatment,” because the
`physician has already
`identified the treatment
`herself. Pet. App. 75a-76a (emphasis added). Be-
`cause this element was missing, Highmark could not
`infringe claims 52. Further, because claim 53 was
`dependent upon claim 52 and thus included all of its
`limitations, summary judgment was mandated on
`that claim as well. See Wolverine World Wide, Inc.
`v. Nike, Inc., 38 F.3d 1192, 1199 (Fed. Cir. 1994).
`
`
`
`
`
`
`7
`
`Allcare appealed, reiterating its infringement ar-
`guments to the Federal Circuit, which summarily
`rejected them without a written opinion. Highmark,
`Inc. v. Allcare Health Mgmt. Sys., Inc., 329 F. App’x
`280 (Fed. Cir. 2009). Then-Chief Judge Michel
`chastened Allcare’s counsel at oral argument that his
`position on infringement “makes no sense to me at
`all.” Tr. of July 10, 2009 Oral Argument at 6, High-
`mark, Inc. v. Allcare Health Mgmt. Servs., Inc., No.
`4:03-cv-1384, Doc. 541 Ex. 1 (N.D. Tex. Sept. 4,
`2009).
`
`
`
`
`
`
`
`
`
`
`
`B.B.B.B. TheTheTheThe ExceptionalExceptionalExceptionalExceptional----Case FindingCase FindingCase FindingCase Finding
`
`
`
`Highmark moved for fees under Section 285 of the
`Patent Act, which provides that a “court in excep-
`tional cases may award reasonable attorney fees to
`the prevailing party.” 35 U.S.C. § 285. Under Sec-
`tion 285, a case can be deemed “exceptional” for
`various types of misconduct. Brooks Furniture Mfg.,
`Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed.
`Cir. 2005). Apart from misconduct, a case can be
`exceptional if it meets two requirements: It must be
`“objectively baseless”—that is, “so unreasonable that
`no reasonable litigant could believe it would suc-
`ceed”—and it must be brought in bad faith. Old
`Reliable Wholesale, Inc. v. Cornell Corp., 635 F.3d
`539, 544 (Fed. Cir. 2011); Brooks, 393 F.3d at 1381.
`
`After an extensive review of the record, the District
`Court concluded that this case was exceptional, in
`part because Allcare’s infringement contentions were
`objectively baseless and made in bad faith. Pet. App.
`90a-92a, 174a-177a. The court determined that
`Allcare had not adequately investigated its case
`before filing, and that an investigation could have
`shown that Highmark was not infringing Allcare’s
`patent. Pet. App. 64a-66a. As the court put it,
`
`
`
`
`
`
`8
`
`“Allcare had not done its homework when it began
`trolling for dollars and threatening litigation.” Pet.
`App. 69a. The District Court likewise found that
`Allcare continued to pursue “meritless allegations
`after the lack of merit became apparent,” Pet. App.
`77a, and, indeed, after they were shown to be “with-
`out support by its own expert’s report and deposition
`testimony.” Pet. App. 78a. Allcare even “appear[ed]
`to acknowledge that it continued to pursue meritless
`allegations as insurance or leverage.” Id.
`
`Moreover, the District Court pointed to numerous
`instances of Allcare’s “vexatious” and “deceitful”
`conduct over the course of the litigation. Pet. App.
`90a. It found that Allcare had “used a survey with a
`stated purpose of identifying leaders in the medical-
`information-processing industry as a ruse to identify
`potential targets for licensing demands”; that it had
`asserted a frivolous res judicata defense; that it had
`changed its position several times on claim construc-
`tion “[w]ithout reasonable explanation” and after
`court-ordered deadlines; and that it had made mis-
`representations to another district court to get the
`case transferred to the Northern District of Texas.
`Pet. App. 69a, 82a-83a, 91a.
`
`In sum, the District Court exhaustively canvassed
`the strength of Allcare’s claims and its behavior
`during litigation. Its opinions on the fee and sanc-
`tions issues spanned well over a hundred pages. Pet.
`App. 44a-178a. And it concluded, based on that
`extensive factual review, that “Allcare’s actions align
`with the sort of conduct that gives the term ‘patent
`troll’ its negative connotation. * * * The evidence of
`these actions firmly convinces the Court of Allcare’s
`use of frivolous and vexatious tactics and supports
`an exceptional-case finding[.]” Pet. App. 69a, 82a.
`
`
`
`
`
`
`9
`
`
`C. The Federal Circuit’s DecisionC. The Federal Circuit’s Decision
`
`C. The Federal Circuit’s DecisionC. The Federal Circuit’s Decision
`
`The Federal Circuit majority reversed the excep-
`tional-case finding in part. Pet. App. 14a-31a. And
`it did so by reviewing that finding through a lens it
`had never before employed. In reviewing a district
`court’s objective-baselessness findings, the Federal
`Circuit has for many years applied clear-error re-
`view. Pet. App. 207a-209a; see infra at 22-23. The
`majority in this case abandoned that standard.
`Instead, it held that objective baselessness is “a
`question of law based on underlying mixed questions
`of law and fact and is subject to de novo review.”
`Pet. App. 9a (internal quotation marks omitted). It
`thus “review[ed] the court’s determination of objec-
`tive reasonableness without deference.” Id.
`
`Even without deference, the panel majority af-
`firmed that Allcare’s “claim 102 infringement litiga-
`tion warranted an exceptional case finding.” Pet.
`App. 14a. But it reversed the exceptional-case
`finding as to claim 52. The panel majority held that
`Allcare’s construction of claim 52 was not objectively
`baseless because there “was support in the [patent]
`specification for Allcare’s position.” Pet. App. 20a.
`The majority admitted that Allcare had not “pointed
`to the specification as an argument in support of its
`theory.” Pet. App. 21a. But, reviewing de novo, it
`held that its own hypothetical theory was non-
`frivolous and precluded an exceptional-case finding
`nonetheless. Pet. App. 21a-22a. The panel majority
`also held that none of the instances of litigation
`misconduct found by the District Court separately
`warranted an exceptional-case finding. Pet. App.
`24a. In the end, the majority “remand[ed] th[e] case
`to the district court for a calculation of attorneys’
`
`
`
`
`
`
`10
`
`fees based on the frivolity of the claim 102 allega-
`tions only.” Pet. App. 31a.
`
`Judge Mayer filed a sharply-worded dissent. He
`wrote that under longstanding circuit precedent,
`objective baselessness is “a finding of fact which may
`be set aside only for clear error.” Pet. App. 31a. He
`further decried the Federal Circuit’s “increasing
`infatuation with de novo review of factual determi-
`nations,” which is “an enormous waste of resources
`and vitiates the critically important fact-finding role
`of the district courts.” Pet. App. 32a-33a (citing
`Anderson v. City of Bessemer City, 470 U.S. 564, 575
`(1985)). And he explained why deference is particu-
`larly appropriate in the exceptional-case context:
`
`As an appellate court, we are ill-suited to weigh
`the evidence required to make an exceptional case
`determination. In many cases, a trial court will
`declare a case exceptional only after spending
`months—and sometimes even years—reviewing
`the evidence, hearing testimony, and evaluating
`the conduct of the litigants. Its intimate familiar-
`ity with the facts of the case, and the parties in-
`volved, place it in a far superior position to judge
`whether or not a litigant’s claims of infringement
`were objectively baseless.
`
`Pet. App. 35a-36a.
`
`Judge Mayer explained that deferential review was
`required not just by the Federal Circuit’s case law
`but by this Court’s binding precedent. “Although the
`Supreme Court has not yet spoken on the appropri-
`ate standard of review applicable to section 285
`exceptional case determinations,” he wrote, “it has
`made clear that a highly deferential standard of
`review applies in analogous proceedings.” Pet. App.
`
`
`
`
`
`
`11
`
`37a. In Cooter, this Court held that “ ‘[a]n appellate
`court’s review of whether a legal position was rea-
`sonable or plausible’ ” for purposes of Rule 11 “must
`be reviewed under a highly deferential abuse of
`discretion standard.” Pet. App. 38a (quoting Cooter,
`496 U.S. at 402). And in Pierce, this Court held that
`“in the context of fee awards under the Equal Access
`to Justice Act * * * a deferential abuse of discretion
`standard applies, even though an EAJA award turns
`on the question of whether the government’s litiga-
`tion position had a ‘reasonable basis both in law and
`fact.’ ” Id. (quoting Pierce, 487 U.S. at 565). Judge
`Mayer concluded that Cooter and Pierce were bind-
`ing and required deferential review of Section 285 fee
`awards; Section 285 was not different in any relevant
`way. Pet. App. 38a-39a.
`
`that—
`Finally, Judge Mayer demonstrated
`evaluated through the proper standard of review—
`this is an easy case: “Given that Allcare persisted in
`advancing infringement allegations that were both in
`direct conflict with the plain claim language and
`unsupported by the testimony of its own expert, the
`district court had ample grounds for concluding that
`Allcare’s allegations of infringement of claim 52(c)
`were frivolous.” Pet. App. 40a. He would have
`affirmed the fee award in full.
`
`D.D.D.D. The The