No. 12-1163
`
`IN THE
`Supreme Court of the United States
`_________
`HIGHMARK INC.,
`
`Petitioner,
`
`v.
`
`ALLCARE HEALTH MANAGEMENT SYSTEMS, INC.,
`Respondent.
`
`_________
`On Writ of Certiorari
`to the United States Court of Appeals
`for the Federal Circuit
`_________
`
`CYNTHIA E. KERNICK
`JAMES C. MARTIN
`THOMAS M. POHL
`REED SMITH LLP
`225 Fifth Avenue
`Pittsburgh, PA 15222
`(412) 288-3131
`
`BRIEF FOR PETITIONER
`_________
`NEAL KUMAR KATYAL
`CounselofRecord
`DOMINIC F. PERELLA
`DAVID M. GINN
`R. CRAIG KITCHEN*
`AMANDA K. RICE*
`JONATHAN D. SHAUB*
`HOGAN LOVELLS US LLP
`555 13th Street, NW
`Washington, DC 20004
`(202) 637-5600
`neal.katyal@hoganlovells.com
`
`*Not admitted in DC;
`supervised by members
`of the firm
`
`CounselforPetitioner
`
`
`
`IN THE
`Supreme Court of the United States
`_________
`HIGHMARK INC.,
`
`Petitioner,
`
`v.
`
`ALLCARE HEALTH MANAGEMENT SYSTEMS, INC.,
`Respondent.
`
`_________
`On Writ of Certiorari
`to the United States Court of Appeals
`for the Federal Circuit
`_________
`
`CYNTHIA E. KERNICK
`JAMES C. MARTIN
`THOMAS M. POHL
`REED SMITH LLP
`225 Fifth Avenue
`Pittsburgh, PA 15222
`(412) 288-3131
`
`BRIEF FOR PETITIONER
`_________
`NEAL KUMAR KATYAL
`CounselofRecord
`DOMINIC F. PERELLA
`DAVID M. GINN
`R. CRAIG KITCHEN*
`AMANDA K. RICE*
`JONATHAN D. SHAUB*
`HOGAN LOVELLS US LLP
`555 13th Street, NW
`Washington, DC 20004
`(202) 637-5600
`neal.katyal@hoganlovells.com
`
`*Not admitted in DC;
`supervised by members
`of the firm
`
`CounselforPetitioner
`
`
`
`QUESTION PRESENTED
`
`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.
`
`(i)
`
`
`
`ii
`RULE 29.6 DISCLOSURE STATEMENT
`
`Petitioner Highmark Inc.’s parent corporation is
`Highmark Health. No publicly held company owns
`ten percent or more of Highmark Inc.’s stock, and no
`publicly held company owns ten percent or more of
`Highmark Health’s stock.
`
`
`
`iii
`TABLE OF CONTENTS
`
`Page
`
`QUESTION PRESENTED...........................................i
`
`RULE 29.6 DISCLOSURE STATEMENT .................ii
`
`TABLE OF AUTHORITIES........................................v
`
`OPINIONS BELOW....................................................1
`
`JURISDICTION ..........................................................1
`
`STATUTE INVOLVED ...............................................2
`
`INTRODUCTION........................................................2
`
`STATEMENT ..............................................................3
`
`A. Background......................................................3
`
`B. The District Court’s Fee Award......................6
`
`C. The Federal Circuit’s Decision .......................8
`
`SUMMARY OF ARGUMENT...................................11
`
`ARGUMENT .............................................................13
`
`I. PIERCE AND COOTER REQUIRE A
`UNITARY ABUSE-OF-DISCRETION
`STANDARD OF REVIEW FOR
`SECTION 285 FEE AWARDS.....................13
`
`A. Pierce and Cooter Control This
`Case.........................................................13
`
`B. Deferential Review Here Follows A
`FortioriFrom PierceAnd Cooter...........24
`
`
`
`iv
`TABLE OF CONTENTS—Continued
`
`Page
`
`C. Efforts To Distinguish Pierce And
`CooterAre Unavailing............................31
`
`D. Deferential Review Applies Under
`PierceAnd CooterNo Matter What
`Merits Standard This Court Adopts
`In Octane.................................................34
`
`II. THIS CASE FITS NEATLY IN THE
`CATEGORY OF CASES IN WHICH
`THIS COURT HAS ENDORSED
`DEFERENTIAL REVIEW...........................37
`
`BELOW
`DECISION
`III. THE
`EXACERBATES ABUSIVE PATENT
`LITIGATION’S
`DRAG
`ON
`INNOVATION AND ECONOMIC
`GROWTH .....................................................44
`
`CONCLUSION ..........................................................51
`
`
`
`v
`TABLE OF AUTHORITIES
`
`Page
`
`CASES:
`
`ALPOPetfoods,Inc.v. RalstonPurinaCo.,
`913 F.2d 958 (D.C. Cir. 1990) ........................... 31
`
`Andersonv. CityofBessemerCity,
`470 U.S. 564 (1985) ........................................... 10
`
`BE&KConstr.Co.v. NLRB,
`536 U.S. 516 (2002) ........................................... 43
`
`BillJohnson’sRests.,Inc.v. NLRB,
`461 U.S. 731 (1983) ........................................... 43
`
`Bilskiv. Kappos,
`130 S. Ct. 3218 (2010) ................................... 4, 48
`
`Blonder-TongueLabs.,Inc.v. Univ.ofIll.
`Found., 402 U.S. 313 (1971).............................. 44
`
`BlueDaneSimmentalCorp.v. Am.
`SimmentalAss’n,
`178 F.3d 1035 (8th Cir. 1999) ........................... 30
`
`Bolt,Beranek,&Newman,Inc.v. McDonnell
`DouglasCorp.,
`521 F.2d 338 (8th Cir. 1975) ............................. 29
`
`BoseCorp.v. ConsumersUnionofU.S.,Inc.,
`466 U.S. 485 (1984) ........................................... 41
`
`BrooksFurnitureMfg.,Inc.v.
`DutailierInt’l,Inc.,
`393 F.3d 1378 (Fed. Cir. 2005) ......................... 34
`
`Chambers v. NASCO,Inc.,
`501 U.S. 32 (1991) ............................................. 38
`
`
`
`vi
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`CheckpointSys.,Inc.v. All-TagSec.S.A.,
`711 F.3d 1341 (2013)......................................... 49
`
`Colgate-PalmoliveCo.v. CarterProds.Co.,
`230 F.2d 855 (4th Cir. 1956) ............................. 29
`
`Commissioner,INSv. Jean,
`496 U.S. 154 (1990) ........................................... 36
`
`CooperIndus.,Inc.v. LeathermanToolGrp.,
`Inc.,
`532 U.S. 424 (2001) ..................................... 40, 41
`
`Cooter&Gellv. Hartmarx,
`496 U.S. 384 (1990) ................................... passim
`
`Curtiss-WrightCorp.v. Gen.Elec.Co.,
`446 U.S. 1 (1980) ............................................... 38
`
`DixieCupCo.v. PaperContainerMfg.Co.,
`174 F.2d 834 (7th Cir. 1949) ....................... 27, 29
`
`Dubilv. RayfordCamp&Co.,
`184 F.2d 899 (9th Cir. 1950) ....................... 27, 29
`
`EarthquakeSoundCorp.v. BumperIndus.,
`352 F.3d 1210 (9th Cir. 2003) ........................... 31
`
`eBay,Inc.v. MercExchange,LLC,
`547 U.S. 388 (2006) ..................................... 33, 46
`
`EmployersCouncilonFlexibleComp.v.
`Feltman,
`384 F. App’x 201 (4th Cir. 2010)....................... 30
`
`Eon-NetLPv. FlagstarBancorp, 653 F.3d
`1314, 1324 (Fed. Cir. 2011) .............................. 18
`
`
`
`vii
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`ErieRailroadCo.v. Tompkins,
`304 U.S. 64 (1938) ............................................. 39
`
`FarberwareLicensingCo.v.
`MeyerMktg.Co.,
`428 F. App’x 97 (2d Cir. 2011) .......................... 30
`
`FirstOptionsofChicago,Inc.v. Kaplan,
`514 U.S. 938 (1995) ........................................... 39
`
`Fogertyv. Fantasy,
`510 U.S. 517 (1994) ............................... 15, 35, 37
`
`Foxv. Vice,
`131 S. Ct. 2205 (2011) ................................. 23, 38
`
`Frazierv. Heebe,
`482 U.S. 641 (1987) ........................................... 38
`
`Grahamv. JeoffroyMfg.,Inc.,
`253 F.2d 72 (5th Cir. 1958) ............................... 29
`
`HardingeCo.v. LaughlinSteelCorp.,
`275 F.2d 37 (3d Cir. 1960)................................. 29
`
`Hensleyv. Eckerhart,
`461 U.S. 424 (1983) ............................... 22, 23, 38
`
`Highmark,Inc.v. AllcareHealthMgmt.
`Sys.,Inc.,
`329 F. App’x 280 (Fed. Cir. 2009) ....................... 6
`
`Highmark,Inc.v. AllcareHealthMgmt.
`Sys.,Inc.,
`687 F.3d 1300 (Fed. Cir. 2012) ......................... 17
`
`
`
`viii
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`Highmark,Inc.v. AllcareHealthMgmt.
`Sys.,Inc., 706 F. Supp. 2d 713
`(N.D. Tex. 2010) .................................................. 1
`
`HogeWarrenZimmermannCo.v.
`Nourse&Co.,
`293 F.2d 779 (6th Cir. 1961) ............................. 29
`
`ICUMed.,Inc.v. AlarisMed.
`Sys.,Inc.,
`2007 WL 6137003 (C.D. Cal. 2007), aff’d,
`558 F.3d 1368 (Fed. Cir. 2009) ......................... 17
`
`Johnsonv. Jones,
`149 F.3d 494 (6th Cir. 1998) ............................. 30
`
`Koonv. UnitedStates,
`518 U.S. 81 (1996) ................................. 25, 26, 37
`
`LarchmontEng’g,Inc.v.
`ToggenburgSkiCtr.,
`444 F.2d 490 (2d Cir. 1971)............................... 29
`
`LucentTechs.,Inc.v. Gateway,Inc.,
`580 F.3d 1301 (Fed. Cir. 2009) ........................... 5
`
`Marctec,LLCv. Johnson&Johnson,
`2010 WL 680490 (S.D. Ill. 2010),
`aff’d, 664 F.3d 907 (Fed. Cir. 2012) .................. 17
`
`MayoCollaborativeServs. v. Prometheus
`Labs.,Inc.,
`132 S. Ct. 1289 (2012) ......................................... 4
`
`McAllisterv. UnitedStates,
`348 U.S. 19 (1954) ............................................. 39
`
`
`
`ix
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`MedtronicNavigation,Inc.v. BrainLAB
`MedizinischeComputersystemeGmbH,
`603 F.3d 943 (Fed. Cir. 2010) ........................... 30
`
`MilgoElec.Corp.v. UnitedBus.
`Comm’cns,Inc.,
`623 F.2d 645 (10th Cir. 1980) ......................29-30
`
`Millerv. Fenton,
`474 U. S. 104 (1985) .................................... 16, 38
`
`MonolithicPowerSys.,Inc.v. O2Micro
`Int’lLtd.,
`726 F.3d 1359 (Fed. Cir. 2013) ......................... 15
`
`NationalAss’nofProf’lBaseballLeagues,
`Inc.v. VeryMinorLeagues,Inc.,
`223 F.3d 1143 (10th Cir. 2000) ......................... 30
`
`NationalBus.Forms&Printing,Inc.v.
`FordMotorCo.,
`671 F.3d 526 (5th Cir. 2012) ............................. 30
`
`NationalHockeyLeaguev. Metro.Hockey
`Club,Inc.,
`427 U. S. 639 (1976) .......................................... 38
`
`Newmanv. PiggieParkEnters.,Inc.,
`390 U.S. 400 (1968) (per curiam)...................... 35
`
`NortonCo.v. CarborundumCo.,
`530 F.2d 435 (1st Cir. 1976).............................. 29
`
`NoxellCorp.v. FirehouseNo.1
`Bar-B-QueRest.,
`771 F.2d 521 (D.C. Cir. 1985) ..................... 25, 35
`
`
`
`x
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`Oetikerv. JuridWerkeGmbH,
`671 F.2d 596 (D.C. Cir. 1982) ........................... 30
`
`OldReliableWholesale,Inc.v.
`CornellCorp.,
`635 F.3d 539 (Fed. Cir. 2011) ............... 13, 35, 39
`
`Ornelasv. UnitedStates,
`517 U.S. 690 (1996) ..................................... 40, 41
`
`Park-In-Theatres,Inc.v. Perkins,
`190 F.2d 137 (9th Cir. 1951) ............................. 27
`
`Pennsylvaniav. Del.Valley
`Citizens’Council,
`483 U.S. 711 (1987) ........................................... 23
`
`Piercev. Underwood,
`487 U.S. 552 (1988) ................................... passim
`
`PiperAircraftCo.v. Reyno,
`454 U.S. 235 (1981) ........................................... 38
`
`PrecisionLinksInc.v. USAProds.Grp.,Inc.,
`No. 2012-1461, 2013 WL 2450630 (2013)......... 49
`
`PremierElec.Const.Co.v. Nat’lElec.
`ContractorsAss’n,Inc.,
`814 F.2d 358 (7th Cir. 1987) ............................. 43
`
`ProfessionalRealEstateInvestors,Inc.v.
`ColumbiaPicturesIndus.,Inc.,
`508 U.S. 49 (1993) (PRE) ............................ 42, 43
`
`R.M.PalmerCo.v. Luden’sInc.,
`236 F.2d 496 (3d Cir. 1956)............................... 28
`
`
`
`xi
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`SalveReginaCollegev. Russell,
`499 U.S. 225 (1991) ................................ 37,39, 40
`
`Schmidtv. Zazzara,
`544 F.2d 412 (9th Cir. 1976) ............................. 29
`
`SecuracommConsulting,Inc.v.
`SecuracomInc.,
`224 F.3d 273 (3d Cir. 2000)............................... 30
`
`SlimfoldMfg.Co.v. Kinkead,Inc.,
`932 F.2d 1453 (Fed. Cir. 1991) ......................... 30
`
`StephenW.Boney,Inc.v.
`BoneyServs.,Inc.,
`127 F.3d 821 (9th Cir. 1997) ............................. 31
`
`Talon,Inc.v. UnionSlideFastener,Inc.,
`266 F.2d 731 (9th Cir. 1959) ............................. 29
`
`TamkoRoofingProds.,Inc.v.
`IdealRoofingCo.,
`282 F.3d 23 (1st Cir. 2002)................................ 30
`
`TaurusIP,LLCv. DaimlerChryslerCorp.,
`726 F.3d 1306 (2013)......................................... 49
`
`TechnographPrintedCircuitsLtd.v.
`MethodeElecs.,Inc.,
`484 F.2d 905 (7th Cir. 1973) ............................. 29
`
`TE-TA-MATruthFound.-FamilyofURI,Inc.
`v. WorldChurchoftheCreator,
`392 F.3d 248 (7th Cir. 2004) ............................. 30
`
`
`
`xii
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`TireKingdom,Inc.v. MorganTire&
`Auto,Inc.,
`253 F.3d 1332 (11th Cir. 2001) ......................... 30
`
`Topliffv. Topliff,
`145 U.S. 156 (1892) ...........................................38
`
`UnitedStatesv. DiSomma,
`951 F.2d 494 (2d Cir. 1991)............................... 26
`
`UnitedStatesv. Rivera,
`994 F.2d 942 (1st Cir. 1993)........................ 25, 26
`
`CONSTITUTIONAL PROVISIONS:
`
`U.S. Const., Article I, § 8, cl. 8 ............................... 47
`
`STATUTES:
`
`15 U.S.C. § 1117(a)(3)............................................. 29
`
`18 U.S.C. § 3145(c).................................................. 25
`
`28 U.S.C. § 1254(1) ................................................... 1
`
`28 U.S.C. § 2412(d) ........................................... 12, 27
`
`35 U.S.C. § 70 ......................................................... 26
`
`35 U.S.C. § 285 ............................................... passim
`
`35 U.S.C. § 299........................................................ 46
`
`Pub. L. No. 79-587, 60 Stat. 778 (1946)................. 27
`
`Pub. L. No. 82-593, 66 Stat. 792 (1952)................. 27
`
`Pub. L. No. 93-600, 88 Stat. 1955 (1975) ............... 30
`
`Pub. L. No. 111-349, 124 Stat. 3674 (2011) ........... 33
`
`
`
`xiii
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`RULES:
`
`Fed. R. Civ. P. 11 ............................................ passim
`
`LEGISLATIVE:
`
`S. Rep. No. 79-1503 (1946) ..................................... 27
`
`S. Rep. No. 82-1979 (1952) ..................................... 28
`
`OTHER AUTHORITIES:
`
`J. Allison etal., PatentQualityand
`SettlementAmongRepeatPatent
`Litigants, 99 Geo. L.J. 677 (2011) ....................... 47
`
`Am. Intellectual Property Law Ass’n, Report
`oftheEconomicSurvey2013............................ 44
`
`J. Bessen etal., ThePrivateandSocialCosts
`ofPatentTrolls (Boston Univ. Sch. of
`Law Working Paper No. 11-45, 2011) .............. 47
`
`J. Bessen & M. Meurer, TheDirectCosts
`fromNPEDisputes(forthcoming
`99 Cornell L. Rev. 2014).............................. 45, 47
`
`C. Chien, OfTrolls,Davids,Goliaths,and
`Kings:NarrativesandEvidenceinthe
`LitigationofHigh-TechPatents, 87 N.C.
`L. Rev. 1571 (2009)............................................ 45
`
`C. Chien, PatentAssertionEntities:
`PresentationtotheDOJ/FTCHearingon
`PAEs(Dec. 10, 2012)......................................... 46
`
`C. Chien, PatentTrollsbytheNumbers,
`Patently-O, Mar. 14, 2013................................. 46
`
`
`
`xiv
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`C. Chien, StartupsandPatentTrolls(Santa
`Clara Univ. Sch. of Law Legal Studies
`Research Paper No. 09-12, Sept. 2012) ............ 48
`
`S. Childress & M. Davis, FederalStandards
`ofReview(4th ed. 2010).................................... 38
`
`C. Cotropia et al., Patent Assertion Entities
`(PAEs) Under the Microscope (Illinois
`Public Law and Legal Theory Research
`Paper No. 14-17, 2013) ..................................... 46
`
`P.J. Federico, CommentaryontheNew
`PatentAct,35 U.S.C.A. 1 (1954),
`reprintedat75 J. Pat. & Trademark Off.
`Soc’y 161 (1993)................................................. 27
`
`T. Holbrook, Patents,Presumptions,and
`PublicNotice, 86 Ind. L.J. 779 (2011) .............. 33
`
`Judicial Business of the United States
`Courts, 2012AnnualReportofthe
`Director.............................................................. 47
`
`Judicial Business of the United States
`Courts, 2011AnnualReportofthe
`Director..............................................................33
`
`G. Magliocca, BlackberriesandBarnyards:
`PatentTrollsandthePerilsof
`Innovation, 82 Notre Dame L. Rev. 1809
`(2007) ................................................................. 50
`
`D. Schwartz, TheRiseofContingentFee
`RepresentationinPatentLitigation,
`64 Ala. L. Rev. 335 (2012) ........................... 45, 46
`
`
`
`xv
`TABLE OF AUTHORITIES—Continued
`
`Page
`
`Webster’s New Int’l Dictionary (2d ed. 1950)........ 25
`
`B. Yeh, Cong. Research Serv., R42668,
`AnOverviewofthe“PatentTrolls”
`Debate(2012)..................................................... 45
`
`
`
`IN THE
`Supreme Court of the United States
`_________
`No. 12-1163
`_________
`HIGHMARK INC.,
`
`Petitioner,
`
`v.
`
`ALLCARE HEALTH MANAGEMENT SYSTEMS, INC.,
`Respondent.
`
`_________
`On Writ of Certiorari
`to the United States Court of Appeals
`for the Federal Circuit
`_________
`
`BRIEF FOR PETITIONER
`_________
`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
`bancis reported at 701 F.3d 1351 (Pet. App. 179a).
`
`JURISDICTION
`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 the petition to April
`5, 2013. This Court’s jurisdiction rests on 28 U.S.C.
`§ 1254(1).
`
`
`
`2
`
`STATUTE INVOLVED
`Section 285 of the Patent Act, 35 U.S.C. § 285,
`provides: “The court in exceptional cases may award
`reasonable attorney fees to the prevailing party.”
`
`INTRODUCTION
`Section 285 of the Patent Act asks a court “to
`answer a single question—‘Is this case exceptional?’ ”
`Pet. App. 213a; 35 U.S.C. § 285.
`In OctaneFitness
`LLC v. Icon Health and Fitness, Inc., No. 12-1184,
`this Court will decide what it means for a case to be
`“exceptional.”
`Regardless of which substantive
`standard the Court settles on in Octane, a district
`court’s exceptional-case finding must be reviewed for
`abuse of discretion.
`That result is dictated by the Court’s decisions in
`Pierce v. Underwood, 487 U.S. 552 (1988), and
`Cooter&Gell v. Hartmarx, 496 U.S. 384 (1990). In
`Pierce and Cooter, this Court held that abuse of
`discretion is the appropriate standard of review for
`district court
`findings akin to the Section 285
`exceptional-case determination.
`In so doing,
`it
`outlined several
`factors
`that
`are
`critical
`to
`determining whether a mixed question of law and
`fact should be reviewed deferentially. Each one cuts
`in favor of a deferential standard for exceptional-case
`findings.
`Indeed, the case for deferential review is even
`stronger for Section 285 findings than it was in
`Pierceand Cooter. While the congressional language
`at
`issue in those cases merely permitted the
`inference that Congress intended district
`court
`findings to be viewed deferentially,
`the text of
`Section 285 clearly reflects Congress’s intent to
`
`
`
`3
`
`commit the exceptional-case question to a district
`court’s discretion. And while the Court in Pierceand
`Cooterlacked a “long history of appellate practice” to
`shed light on the standard-of-review question,
`appellate
`courts
`have
`long
`and
`consistently
`examined Section 285 fee awards
`through a
`deferential lens. Moreover, there is a compelling
`policy rationale for deferential review:
`It makes
`affirmance of fee awards more likely and thus helps
`dissuade patent “trolls” and others from pursuing the
`frivolous suits that are clogging federal court dockets
`and imposing a multi-billion-dollar drag on the U.S.
`economy.
`This case is a perfect illustration of all of these
`points. After more than four years of discovery and
`litigation, and after a painstaking review of the case,
`see Pet. App. 44a-178a, the district court exercised
`its
`discretion and
`awarded
`fees,
`specifically
`concluding that Allcare had engaged in “the sort of
`conduct that gives the term ‘patent troll’ its negative
`connotation.” Pet. App. 69a n.6. Yet the Federal
`Circuit disregarded the district court’s exhaustive
`findings and reversed.
`In doing so, it relied on a
`newly minted claim-construction theory that Allcare
`did not advance and that
`is inconsistent with
`concessions made by Allcare’s own expert.
`The
`Federal Circuit’s decision was wrong and should be
`reversed.
`
`STATEMENT
`
`A. Background
`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
`
`
`
`4
`
`$75,000 through an assignment from the inventor.
`The patent discloses a “health management system”
`meant to facilitate the interaction of a physician,
`patient, employer, bank, and insurance company.
`Pet. App. 3a. The primary patent claim at issue here
`covers a vague method of entering patient symptom
`data into a data processor for the purpose of
`“tentatively identifying” a proposed treatment. Id.
`The system is then supposed to indicate whether the
`proposed treatment appears on a list of procedures
`that must be manually reviewed for medical
`necessity (a process known as “utilization review”)
`and, if so, to suspend payment until the necessary
`review is complete. Id.1
`Following a failed effort to voluntarily license the
`‘105 patent, Allcare turned to more underhanded
`means:
`It commissioned a company called Seaport
`Surveys to conduct misleading telephone “surveys” to
`try to identify companies using computer systems in
`the utilization review process. Pet. App. 45a; J.A.
`467. A Seaport Surveys employee, reading from a
`script drafted by Allcare (Pet. App. 84a), would claim
`to be a “consultant” attempting
`to
`“identify
`organizations that are leaders in the electronic
`processing of authorizations and referral requests.”
`J.A. 491-92. He would then ask a series of broad
`questions about the company’s computer system
`capabilities. Allcare compiled a list of potential
`litigation targets based on the answers to those
`broad survey questions. J.A. 498-99.
`
`1 As Judge Mayer observed in his dissent below, 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); Bilskiv. Kappos, 130 S. Ct. 3218 (2010).
`
`
`
`5
`
`In 2002, Allcare added a new target to its list:
`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.
`(As it turned out, Allcare had never
`commissioned the purported analysis or done any
`other substantial pre-filing investigation. See Pet.
`App. 53a-66a.) In the correspondence that followed,
`Highmark pointed out that it could not possibly be
`infringing the patent because its computer system
`was not used for “tentatively identifying” proposed
`treatments, as
`the patent
`required.
`Publicly
`available information confirmed that point. Pet.
`App. 66a.
`Allcare nevertheless persisted in its
`demand for licensing fees and threatened a lawsuit
`that would lead to millions of dollars in legal fees
`and “substantial damages.” Pet. App. 45a. Rather
`than acquiesce, Highmark sought a declaratory
`judgment
`of non-infringement
`and
`invalidity.
`Allcare counterclaimed for infringement of claims 52,
`53, and 102 of the ’105 patent. Pet. App. 5a, 47a.
`After
`four years
`of
`costly and burdensome
`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. SeeLucentTechs.,Inc.v. Gateway,Inc., 580
`F.3d 1301, 1317 (Fed. Cir. 2009) (“To infringe a
`
`
`
`6
`
`method claim, a person must have practiced all steps
`of the claimed method.”).
`required
`52(c)
`Specifically,
`claim element
`“entering * * * data symbolic of patient symptoms for
`tentatively
`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,
`and as Highmark consistently had pointed out from
`the outset,
`in Highmark’s computer system the
`physician herself enters the symptoms andproposed
`treatment into the system. Id. A physician who uses
`Highmark’s system is not, therefore, entering data
`“for tentatively identifying a proposed mode of
`treatment,” because the physician has already
`identified the treatment herself. Pet. App. 75a-76a
`(emphasis added).
`Because this element was
`missing, Highmark could not infringe claim 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.
`Allcare appealed to the Federal Circuit, which
`summarily affirmed 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 argument that
`his position on infringement “makes no sense to me
`at all.” J.A. 636.
`B. The District Court’s Fee Award
`Highmark moved for fees under Section 285 of the
`Patent Act, which provides
`that a “court
`in
`exceptional cases may award reasonable attorney
`
`
`
`7
`
`fees to the prevailing party.” 35 U.S.C. § 285. The
`District Court conducted an extensive review of the
`record,
`covering
`the
`ground
`from Allcare’s
`inadequate pre-filing investigation to its assertion
`and eventual withdrawal of
`frivolous claims and
`defenses. After reviewing the travel of the case, the
`District Court concluded that it was exceptional
`under Section 285. Pet. App. 90a-92a.
`The court relied on a broad range of considerations
`to support its finding. For example, it determined
`that Allcare had not adequately investigated its case
`before filing, and that an investigation would have
`shown that Highmark was not infringing Allcare’s
`patent. Pet. App. 64a-66a. As the court put it,
`“Allcare had not done its homework when it began
`trolling for dollars and threatening litigation.” Pet.
`App. 69a; see also Pet. App. 93a (noting that there
`was “no apparent investigation by counsel”). Even
`after litigation commenced, Allcare passed up an
`opportunity to have its expert inspect Highmark’s
`system to determine whether it fell within the terms
`of the patent claims. Pet. App. 70a. 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 “without support” by Allcare’s
`“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 the Seaport
`survey “as a ruse to identify potential targets for
`
`
`
`8
`
`licensing demands”; that it had asserted a frivolous
`res judicata defense; that it had changed its position
`several
`times on claim construction “[w]ithout
`reasonable explanation” and after
`court-ordered
`deadlines; and that it had made misrepresentations
`to another district court in order to get the case
`transferred to the Northern District of Texas. Pet.
`App. 69a, 82a-83a, 91a.
`In another order, the
`District Court clarified that Allcare had done all of
`this in subjective bad faith. Pet. App. 175a.
`The District Court’s fee-shifting opinion spanned
`more than 55 pages. Pet. App. 44a-178a. And it
`concluded, after an extensive factual review, that
`Allcare had engaged in “the sort of conduct that gives
`the term ‘patent troll’ its negative connotation.” Pet.
`App. 69a n.6. The record “firmly convince[d]” the
`court that Allcare’s use of “frivolous” and “vexatious
`tactics” made the case exceptional under Section 285.
`Pet. App. 82a, 90a-92a.2
`C. The Federal Circuit’s Decision
`The Federal Circuit reversed the District Court’s
`fee award in part. Pet. App. 14a-31a. Although
`Section 285 says only that district courts may shift
`fees in “exceptional” cases, the Federal Circuit has
`grafted a number of rigid requirements onto the
`
`2 The District Court initially imposed sanctions against
`Allcare’s attorneys under Federal Rule of Civil Procedure 11,
`but later vacated those sanctions for procedural reasons and
`declined to re-impose them. Pet. App. 86a-90a, 99a-102a,
`151a-52a. It took care to note that its decision to vacate the
`Rule 11 sanctions had “no bearing on the exceptional-case
`finding.”
`Pet. App. 101a; see also Pet. App. 171a-78a
`(denying Allcare’s motion to reconsider the attorney’s fee
`award).
`
`
`
`9
`
`In particular, it has permitted
`statute’s language.
`district courts to shift fees only when a party has (1)
`asserted a
`“frivolous
`claim,”
`(2)
`engaged in
`“inequitable
`conduct
`before
`the Patent
`and
`Trademark Office,” or (3) engaged in “misconduct
`during litigation.” Pet. App. 8a. Fee-shifting cases
`in the first category have two further requirements.
`To qualify as “frivolous” under the Federal Circuit’s
`precedent, a claim must be “objectively baseless” and
`“brought in subjective bad faith.” Pet. App. 8a.
`The Federal Circuit considered the “central issue”
`in Allcare’s appeal to be whether the “infringement
`counterclaims against Highmark were frivolous.”
`Pet. App. 8a.
`It approached that question “on a
`claim by
`claim basis,”
`conducting
`a
`“single
`backwards-looking inquiry” into the “reasonableness”
`of each claim “in light of the full record.” Pet. App.
`12a-13a.
`And it reviewed the District Court’s
`findings through a lens it had never before employed.
`In reviewing objective-baselessness findings,
`the
`Federal Circuit had long applied clear-error review.
`Pet. App. 207a-09a.
`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 reviewed the
`District
`Court’s
`determination
`of
`objective
`reasonableness “without deference.” Id.
`Even without deference,
`the panel majority
`affirmed that Allcare’s “claim 102 infringement
`litigation warranted an exceptional case finding.”
`Pet. App. 14a. But it reversed the fee award as to
`claim 52. It held that Allcare’s construction of claim
`52 was not objectively baseless because there “was
`
`
`
`10
`
`support in the [patent] specification for Allcare’s
`position.” Pet. App. 20a. The majority admitted that
`Allcare had never “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 precluded an exceptional-case
`finding. 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 remanded to the
`district court “for a calculation of attorneys’ fees
`based on the frivolity of the claim 102 allegations
`only.” Pet. App. 31a.
`Judge Mayer filed a sharply worded dissent. He
`wrote that deferential review was required not just
`by Federal Circuit case law but also by this Court’s
`decisions in Cooter&Gellv. Hartmarx, 496 U.S. 384
`(1990), and Pierce v. Underwood, 487 U.S. 552
`(1988). Pet. App. 31a, 37a-39a. He further decried
`the Federal Circuit’s “increasing infatuation with de
`novo review of factual determinations,” which is “an
`enormous waste of
`resources and vitiates
`the
`critically important fact-finding role of the district
`courts.” Pet. App. 32a-33a (citing Andersonv. Cityof
`Bessemer City, 470 U.S. 564, 575 (1985)). And he
`explained why deference is particularly 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
`
`
`
`11
`
`Its intimate
`the conduct of the litigants.
`familiarity with the facts of the case, and the
`parties involved, place it in a far superior
`position to judge whether or not a litigant’s
`claims
`of
`infringement were
`objectively
`baseless.
`Judge Mayer
`Finally,
`35a-36a.
`Pet. App.
`demonstrated that—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.
`Highmark’s subsequent petition for rehearing en
`banc was denied over the dissent of five judges, who
`again emphasized the inconsistency between the
`panel majority’s decision and this Court’s precedent.
`Pet. App. 190a-214a. This Court granted certiorari.
`SUMMARY OF ARGUMENT
`I. This case begins and ends with Pierce and
`Cooter.
`In those decisions, the Court addressed fee
`and sanction standards directly analogous to the
`Federal Circuit’s “objective baselessness” test. And
`in both cases the Court held that appellate courts
`should review awards under such provisions for
`abuse of discretion. The Court explained that “issues
`involving * * * supervision of litigation”—including
`fee awards—are
`“common[ly]”
`given “abuse-of-
`discretion review.” Pierce, 487 U.S. at 558 n.1. And
`it set forth many factors that cut in favor of unitary
`
`
`
`12
`
`abuse-of-discretion review in such cases, even if a
`particular case happens to implicate “purely legal
`issue[s].” Id. at 560. Every one of those factors
`favors abuse-of-discretion review here too.
`Indeed, this is an afortioricase. Section 285’s text
`is even more suggestive of deference than the
`statutory texts at
`issue in P
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
