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` IN THE SUPREME COURT OF THE UNITED STATES
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`OCTANE FITNESS, LLC,
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`:
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` Petitioner,
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`: No. 121184
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` v.
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`ICON HEALTH & FITNESS, INC.
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`:
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`:
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` x
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` Washington, D.C.
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` Wednesday, February 26, 2014
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` The aboveentitled matter came on for oral
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`argument before the Supreme Court of the United States
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`at 10:17 a.m.
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`APPEARANCES:
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`RUDOLPH A. TELSCHER, JR., ESQ., St. Louis, Missouri; on
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` behalf of Petitioner.
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`ROMAN MARTINEZ, ESQ., Assistant to the Solicitor
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` General, Department of Justice, Washington, D.C.; for
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` United States, as amicus curiae, supporting
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` Petitioner.
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`CARTER G. PHILLIPS, ESQ., Washington, D.C.; on behalf
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` of Respondent.
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` C O N T E N T S
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`ORAL ARGUMENT OF
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`PAGE
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`RUDOLPH A. TELSCHER, JR., ESQ.
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` On behalf of the Petitioner
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`ORAL ARGUMENT OF
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`ROMAN MARTINEZ, ESQ.
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` For United States, as amicus curiae,
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` supporting the Petitioner
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`CARTER G. PHILLIPS, ESQ.
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` On behalf of the Respondent
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`REBUTTAL ARGUMENT OF
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`RUDOLPH A. TELSCHER, JR., ESQ.
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` On behalf of the Petitioner
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` P R O C E E D I N G S
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` (10:17 a.m.)
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` CHIEF JUSTICE ROBERTS:
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`We will hear
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`argument first this morning in Case 121184, Octane
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`Fitness v. ICON Health and Fitness, Incorporated.
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` Mr. Telscher.
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` ORAL ARGUMENT OF RUDOLPH A. TELSCHER
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` ON BEHALF OF THE PETITIONER
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` MR. TELSCHER:
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`Mr. Chief Justice, and may it
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`please the Court:
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` An exceptional case under Section 285
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`requires a court to assess the full range of traditional
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`equitable considerations, including the degree of
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`reasonableness of the merits by the plaintiff's action,
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`procedural aspects of the case, and evidence of economic
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`coercion. Frivolous and badfaith cases are not
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`prerequisites to an award of fees under Section 285.
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` The Federal Circuit's test conflicts with
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`the statutory language, it violates established canons
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`of statutory construction, and it deprives district
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`courts of the discretion they need to effectively combat
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`abusive patent litigation practices.
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` Below, the Federal Circuit found that ICON's
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`claims require a Cchannel structure and that ICON's
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`claim construction to the contrary was without merit;
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`appendix at A10. The Federal Circuit also affirmed the
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`district court's grant of summary judgment that no
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`reasonable juror could find, as a matter of law, that
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`Octane's structure had an equivalent to the Cchannel;
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`appendix A13.
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` This means that ICON's infringement
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`allegations against Octane were meritless. This fact,
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`in combination with other undisputed evidence of
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`record namely the worthless nature of the patent,
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`evidence of economic coercion, and the fact that two
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`other elements of the claimed the core elements of
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`the claim were missing as well make this case
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`exceptional. And it's such that this Court should
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`reverse the district court and award fees on its own.
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` JUSTICE KENNEDY:
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`You are talking about
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`economic coercion. Suppose it were reversed. Suppose
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`that Octane had the patent and sued ICON. Would the
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`analysis be precisely the same?
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` MR. TELSCHER:
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`The analysis would be
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`primarily the same. The evidence of economic coercion
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`may be less. So, for example, if you're a smaller
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`competitor and you're suing a larger competitor, there
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`would be less opportunity for abuse. Knowing, if ICON
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`was the competitor with the weak patent, they would know
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`that their larger competitor would stand up to them. So
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`the opportunity for economic abuse would be less.
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` JUSTICE KENNEDY:
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`I've been listening to
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`your adjectives this is a search for adjectives, in
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`part. I think you used the word meritless. What is
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`there a difference between merit meritlessness and
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`objectively baseless?
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` MR. TELSCHER:
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`I don't know that the case
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`law is perfectly clear. In Christiansburg, this Court
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`did define meritless to the tune of it's unjustified and
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`without foundation.
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` JUSTICE KENNEDY:
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`Because if we remand to
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`the district court, the district court's already said
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`it's not objectively baseless, it's not brought in bad
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`faith. I'm not quite sure what words we're going to
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`give to the district court if you're to prevail.
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` MR. TELSCHER:
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`Well
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` JUSTICE GINSBURG:
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`You you had just said
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`that we should return it to the district court with
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`orders to require fee shifting. And how could that be
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`if the discretion is to be exercised by the district
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`court?
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` I can understand your asking for a remand,
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`but I can't understand your asking for a reversal and an
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`order that the fees be reimbursed.
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` MR. TELSCHER:
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`We understand the tension
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`between a discretionary standard and asking for a remand
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`with a finding. However, there are cases that are
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`rare not that rare, but they are rare enough where
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`appellate courts look at a record and have a firm and
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`definite conviction that an award should be made such
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`that it would be an abuse of discretion
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` JUSTICE GINSBURG:
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`And you think this Court
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`is the proper court to look at the record and make that
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`determination, that the district court got it wrong when
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`the district court didn't think this was an exceptional
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`case.
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` MR. TELSCHER:
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`On this record, yes, Your
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`Honor. The the Federal Circuit's finding is such
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`that the the infringement claim is meritless. As a
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`matter of law, the claim construction position had no
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`possibility of success under 35 U.S.C. Section 112,
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`paragraph (f).
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` JUSTICE SCALIA:
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`Well, what do you what
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`do you want to add to meritless? Don't you have to add
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`something to meritless? I mean, every time you win the
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`summary judgment motion, that's a determination that the
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`claim is without merit, isn't it?
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` MR. TELSCHER:
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`It is not, Your Honor.
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` JUSTICE SCALIA:
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`Doesn't meritless just mean
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`without merit?
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` MR. TELSCHER:
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`No, it for example, in
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`most patent cases, there is the Markman phase. So a
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`district court judge, as a matter of law, is required to
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`find on the claim construction. So there could be a
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`reasonable dispute about the meaning of a term that's
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`resolved against the plaintiff, so it just because
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`they lose a claim construction doesn't mean their
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`position was meritless.
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` JUSTICE SCALIA:
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`Okay. I understand. Well,
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`all right. What what must be added to the word
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`meritless?
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` MR. TELSCHER:
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`In our strong view
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` JUSTICE SCALIA:
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`That no no reasonable
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` MR. TELSCHER:
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`If someone brings a claim
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`construction position that's unreasonably weak, in our
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`view that qualifies under Section 285 and is consistent
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`with the words that other cases have used.
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` JUSTICE SCALIA:
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`That that's not a
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`standard I would I would want to, you know you
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`realize how how differently various district courts
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`would operate if if you just say what was your
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`phrase? Unreasonably weak?
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` MR. TELSCHER:
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`And yet, that's the
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` JUSTICE SCALIA:
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`You've got to give me
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`something tighter than that.
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` MR. TELSCHER:
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`That is the standard,
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`however, that this Court used in Martin and in Pierce.
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` And if we're looking at if if we want
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`to make so so in for example, in most of these
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`cases what we're talking about is going to typically
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`involve the merits. And so if we say that the only way
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`you can get a fee award is to have a zeromerit,
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`frivolous case, it's impossible to show. It's
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`inconsistent with the statutory language.
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` So when we're looking at this from a
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`statutory context, on the merits, what should qualify?
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`And there comes a point at which a case goes from strong
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`to medium and it crosses into the territory of weak. It
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`gets weaker and weaker, and then it becomes frivolous.
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` This Court, even in Pierce, recognized that
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`the reasonableness standard was something more than
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`frivolous. And we think if Section 285 is to have any
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`teeth in deterring the abusive practices currently in
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`the system, something more than frivolousness is
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`required, and it is consistent with this Court's prior
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`precedent.
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` CHIEF JUSTICE ROBERTS:
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`We're deal we're
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`dealing with a term that could be read in many different
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`ways: exceptional. Right? Maybe that means 1 out of
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`100; maybe it means 10 out of 100. And why shouldn't we
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`give some deference to the decision of the court that
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`was set up to develop patent law in a uniform way? They
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`have a much better idea than we do about the
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`consequences of these fee awards in particular cases.
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`And since we're just as Justice Kennedy pointed
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`out dealing with adjectives you know, meritless,
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`frivolous, exceptional why don't give some deference
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`to their judgment?
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` MR. TELSCHER:
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`Well, I think we need to look
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`at the basis of the judgment, which is grounded in the
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`fact that they've they've found constitutionally that
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`the the PRE standard was required. And I think this
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`Court's precedent in BE&K just two years earlier says
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`that the validity of feeshifting statutes is not
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`governed by the PRE standard.
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` And if if the Court were to so hold, that
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`would throw into question all of the fee statutes of
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`this country because, accordingly, they presumptively
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`would have to have the sham litigation test to be
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`constitutional.
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` JUSTICE SOTOMAYOR:
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`What is the difference
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`between the Federal Circuit's use of objective
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`reasonable objectively meritless and your standard?
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` MR. TELSCHER:
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`To my way
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` JUSTICE SOTOMAYOR:
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`I know that you've been
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`arguing that they shouldn't be using subjective intent,
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`so I'm putting that aside. And you can tell me why
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`Kilopass doesn't answer that now.
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` But what's the difference you see?
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` MR. TELSCHER:
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`To my way of thinking, when
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`you say meritless or baseless, it means there's
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`absolutely no foundation of zero merit. When we talk
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`about objectively unreasonable and, again, as this
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`Court found in Pierce it suggests something lesser
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`than frivolousness. And the reality of I think of
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`district court litigation is it's near impossible to
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`show that something is frivolous, that somebody had no
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`argument
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` JUSTICE SCALIA:
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`I don't understand your
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`answer to the question. How does the first part of the
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`Federal Circuit's test differ from your perception of
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`what meritless means?
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` MR. TELSCHER:
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`We understand the first part
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`of the Federal Circuit's test to require zero merit or
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`frivolousness, which is what the district court she
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`used interchangeably "objectively baseless" and
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`"frivolousness." So we think frivolousness is too low
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`of a standard under 285.
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` JUSTICE KENNEDY:
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`So would you say without
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`substantial merit? I mean, we're playing around with
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`words again.
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` MR. TELSCHER:
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`Without substantial merit,
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`unreasonably weak, or low likelihood of success, I think
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`those are all ways of getting to the same point, which
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`is something less than zero merit will satisfy under
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`285.
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` JUSTICE ALITO:
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`You have several objections,
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`I take it, to what the Federal Circuit has said. One is
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`that you think objectively baseless is too low, correct?
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`Yes.
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` JUSTICE ALITO:
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`You also don't think bad
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` MR. TELSCHER:
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`Agreed.
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` JUSTICE ALITO:
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`And do you also believe that
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`litigation misconduct taken in conjunction with a case
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`that is, let's say, of little merit, but perhaps not as
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`low as the standard that you have, that you're
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`suggesting, would justify an award of fees?
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` MR. TELSCHER:
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`Yes. We believe litigation
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`misconduct, especially in consideration with a weak case
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`on the merits, makes for a strong candidate for
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`exceptional.
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` JUSTICE ALITO:
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`Well, now I'm a say I'm a
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`district judge someplace and I rarely get a patent case.
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`How am I supposed to determine whether the case is
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`exceptional if the standard is take everything into
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`account, litigation misconduct, the strength of the
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`case, any indication of bad faith, and decide whether
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`it's exceptional? Exceptional compared to what? I have
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`very little basis for comparison. How do I do that?
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` MR. TELSCHER:
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`So, I do not think it's a
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`numerical comparison. I think when we're talking about
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`an uncommon case, it's what would we expect of a
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`reasonable litigant. So in the normal course, a
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`plaintiff develops a product, they bring it to market,
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`they get a patent, they're successful. A defendant
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`recognizes the success. They look at the patent, and
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`they try to design around and a reasonable dispute
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`ensues. So that's a normal case.
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` What we're saying to a district court judge,
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`the guidance we would give them is that this litigant,
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`this plaintiff acted in reasonable ways, and district
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`court judges are called on every single day to make
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`those determinations.
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` JUSTICE ALITO:
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`Compared to what? Compared
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`to the types of cases that the district court hears on a
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`more regular basis?
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` MR. TELSCHER:
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`District courts handle
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` JUSTICE ALITO:
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`Or compared to patent cases?
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` MR. TELSCHER:
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`I think all cases. Complex
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`litigation requires litigants to act reasonably in
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`procedural aspects and on the merits. I think
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` JUSTICE ALITO:
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`See, this is what I find
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`somewhat troubling about your "take everything into
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`account" standard. Most district court judges do not
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`see a lot of patent cases, and when they see one, it's
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`very unusual. So you've got these patent attorneys
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`showing up in court. They are different from other
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` JUSTICE ALITO:
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`Sometimes they
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`particularly if it's a very technical case, they speak a
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`different language. They do things differently. The
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`district judge is struggling to figure out how to handle
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`the case. And then the one one party wins, the
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`other party loses, and the party that wins says, this
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`was an exceptional case and you should award fees in my
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`favor under 285.
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` And the district judge says:
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`How can I tell
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`whether this is exceptional? If I had had if I had
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`25 patent cases, I could make some comparisons. But I
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`don't have a basis for doing that.
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` Now, the Federal Circuit has a basis for
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`doing it.
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` MR. TELSCHER:
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`Well, first of all,
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`Congress Congress has spoken and said that in
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`exceptional cases, the district court should do this.
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`And I also I think if you went back 10 to 15 years
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`ago, perhaps the notion that district court judges
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`haven't seen a lot of patent cases might be true.
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` District court judges see lots and lots of
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`patent cases. Many of those cases may not be decided on
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`the merits. The only thing that the Federal Circuit
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`sees are the ones that went to final conclusion. So I
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`do think district court judges see a lot of patent
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`litigation.
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` I also think
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` JUSTICE ALITO:
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`Is that really true?
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`There's nearly 700 district judges in the country.
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`If if we had a statistic about the average number of
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`patent cases that a district judge hears and receives
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`on, let's say, a 5year period, what would it be?
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` MR. TELSCHER:
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`I don't know what that number
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`is, Your Honor. But I know that district court judges
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`carry a widely varying docket of different areas of law
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`and are called upon to learn the law and assess the
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`reasonableness of those positions.
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` JUSTICE SCALIA:
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`Mr. Telscher, it occurs to
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`adjectives should be attached to meritless. And the
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`reason you can't is, since it is a totality of the
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`circumstances test, that is only one factor and it
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`doesn't have to be an absolute degree of meritlessness.
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`Even in a I assume you would say that even in a very
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`close case, if there has been outrageous litigation
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`abuse by the other side, the court would be able to say:
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`side. Couldn't the couldn't the court do that?
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` MR. TELSCHER:
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`That's absolutely correct,
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`Your Honor.
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` JUSTICE SCALIA:
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`So then how can we possibly
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`define meritless? We can't, because it goes up and
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`down, even in a case where it's it's a close case, it
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`could still be exceptional.
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` MR. TELSCHER:
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`It's the degree of the
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`unreasonable nature of the case as one factor.
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` CHIEF JUSTICE ROBERTS:
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`Do you agree with
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`the Solicitor General's test that fees are authorized
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`when they are I'm quoting "necessary to prevent
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`gross injustice"?
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` MR. TELSCHER:
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`Yes, we do, Your Honor.
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` CHIEF JUSTICE ROBERTS:
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`Well, now, I was
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`friend on the other side would say that. I mean, gross
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`injustice sounds like a very tiny portion of cases;
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`lower than meritless. I mean it's injustice is bad
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`too. It's doesn't mean you just loss, but there's
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`something very unjust about it. Gross injustice, well,
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`it's just some more adjectives, and it's the test I
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`gather that's the test you adopt.
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` MR. TELSCHER:
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`Well, it's certainly what
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`the what's what Congress said in the legislative
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` CHIEF JUSTICE ROBERTS:
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`Well, but you've
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`been up here for several minutes and you haven't even
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`used those particular or that adjective, which is
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`your test.
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` MR. TELSCHER:
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`Section 285 is remedial, so
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`certainly in order to remedy something there must be
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`some level of injustice. I think consistent with the
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`notion that a case is exceptional and uncommon is the
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`notion that it's gross injustice, not justice. And to
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`my way of thinking, when somebody brings a very weak
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`case, which we believe this one was, and it costs
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`someone $2 million to defend it, and they go through
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`that and they pay that price tag, a district court
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`should be able to find that that is gross injustice.
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`And I think it is, especially for many of the small
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`businesses in this country when they face these types of
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`suits.
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` JUSTICE KAGAN:
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`Mr. Telscher, could I just
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`ask very quickly the factors that you would think a
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`court should consider. One is the degree to which the
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`case is meritless. Another, I presume, is bad faith.
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`Another is litigation misconduct. Is there anything
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`else or are those the three?
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` MR. TELSCHER:
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`No, there there's more. I
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`think it's there's no exhaustive list and, for
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`example, even in this case and in ParkinTheatres
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`where the court said other equitable consideration. We
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`believe it is a totality of the circumstances. Anything
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`that bears on the gross injustice and the uncommon
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`nature of the case.
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` So, for example, in this case, the fact that
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`Icon brought a patent that it, with all of its
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`resources, couldn't commercialize, was indisputably
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`worthless. To this day they've never made a product
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`under this patent. That's a factor that bears on the
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`equities of this case and the uncommon nature and is one
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`that doesn't fall neatly within those categories.
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` The fact that our client licensed under a
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`different patent that shows its linkage is another
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`factor that shows that what they are asserting isn't
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`reasonable. So I don't think there is a laundry list,
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`but the categories that you identified are the big ones.
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` JUSTICE GINSBURG:
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`I think you you did
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`say if it's an exceptional case, the district court must
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`award fees, but the statute says may. So even in the
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`exceptional case, according to the statute, the district
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`court is not required to award fees. Or do you read may
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`to mean something else?
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` MR. TELSCHER:
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`Certainly, there there has
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`been the issue of whether this determination is a
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`one or twostep finding. My belief is that district
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`courts will look at all of the factors and make up their
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`mind whether it's exceptional and in that same step
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`award fees. There has been the notion that first we
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`determine a case is exceptional and then we make the
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`determination of whether fees should be granted. I'm
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`not sure once a court determines that a case is
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`exceptional, what other factor would bear on that on
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`that determination.
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` If there are no other questions, I'd like to
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`reserve the rest of my time for rebuttal.
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` CHIEF JUSTICE ROBERTS:
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`Thank you, counsel.
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` Mr. Martinez.
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` ORAL ARGUMENT OF ROMAN MARTINEZ
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` FOR THE UNITED STATES, AS AMICUS CURIAE,
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` SUPPORTING THE PETITIONER
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` MR. MARTINEZ:
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`Mr. Chief Justice, and may it
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`please the Court:
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` Section 285 grants district courts
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`discretionary authority to look at the totality of the
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`circumstances and award fees when necessary to prevent
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`gross injustice. Such awards can be proper in unusual
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`cases where the losing party has committed bad faith or
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`harassing conduct during the litigation, or has advanced
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`objectively unreasonable legal arguments, just as courts
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`had held under the 1946 statute. The Court should
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`restore this understanding of Section 285 and make four
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`additional points that we think will clarify the inquiry
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`for the district courts:
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` First and most importantly, the Court should
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`say that baselessness and bad faith do not both have to
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`be present in a case in order to justify a fee award;
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` Second, the Court should the Court should
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`say that district courts can grant fees based on a
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`combination of different factors even if no single
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`factor would necessarily support the award on its own;
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` Third, the Court should say that an
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`objectively unreasonable argument can trigger a fee
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`award, even if that argument is not so unreasonable that
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`it's actually considered frivolous;
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` And fourth, the Court should say that clear
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`and convincing evidence is not required.
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` I'd like to turn to Justice Scalia's
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`question and the discussion that occurred earlier about
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`the battle of the adjectives, so to speak. We think
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`that, as I said earlier, that the a fee award should
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`be appropriate or can be appropriate in a case in which
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`there's an objectively unreasonable litigating position
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`or objectively unreasonable arguments that are made in a
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`case. We appreciate that that's not a a 100 percent
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`precise, brightline test, but we think it's similar
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`to it's, in fact, the same as what the Court has said
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`in other contexts, such as EAJA in the Pierce case
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` JUSTICE SCALIA:
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`Now matter what other
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`factors exist, it has to be objectively unreasonable.
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` MR. MARTINEZ:
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`I
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` JUSTICE SCALIA:
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`I mean, even if it is clear
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`from other factors that this is a shakedown, a big
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`country a big company trying to suppress a little
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`company, even if it's clear that there has been
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`outrageous litigation abuse, misconduct by attorneys?
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` MR. MARTINEZ:
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`It is an important point,
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`Justice Scalia
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` JUSTICE SCALIA:
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`All of those things cannot
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`justify shifting the award unless it is objectively
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`unreasonable.
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` MR. MARTINEZ:
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`No, Justice Scalia, that's
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`not our position.
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` JUSTICE SCALIA:
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`Oh, okay.
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` MR. MARTINEZ:
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`Our position is if the only
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`factor is an objectively unreasonable argument, that in
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`appropriate circumstances, that can be sufficient. We
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`believe very, very strongly that if there are other
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`factors present, that would only strengthen the case for
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` JUSTICE BREYER:
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`I see that. But, look,
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`what you listed in your brief on page 17, which I think
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`was nonexclusive: Willful infringement, litigation
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`misconduct, inequitable conduct by the patentee in
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`securing the patent, vexatious or unjustified
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`litigation, bad faith, the assertion of frivolous claims
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`and defenses. And then you cite cases which say all of
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`those in different instances have been sufficient,
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`either alone or together. Well, why don't we just copy
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`that? Isn't that your view?
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` MR. MARTINEZ:
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`I think our view is that
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`those are the kinds of circumstances
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` JUSTICE BREYER:
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`All right. Do you want to
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`add to that list, or to subtract?
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` MR. MARTINEZ:
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`I think as long as the Court
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`makes clear that that is an illustrative list that I
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`think captures the kind of bad faith
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` JUSTICE SCALIA:
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`You want to add et cetera,
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`right?
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` MR. MARTINEZ:
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`And add "or similar,"
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`"similar equitable" "similar inequitable conduct,"
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`which is what the Ninth Circuit said in the
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`ParkinTheatres case, which I think all the parties
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`agree is a fairly captures what Congress intended to
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` CHIEF JUSTICE ROBERTS:
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`So where does gross
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`injustice come from? I understood that to be your test.
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`You say, Fees are authorized when necessary to prevent
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`gross injustice to the defendant.
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` MR. MARTINEZ:
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`I think
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` CHIEF JUSTICE ROBERTS:
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`Again, you have your
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`long laundry list that doesn't say anything about gross
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`injustice.
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` MR. MARTINEZ:
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`Well, I think the long
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`laundry list reflects the kinds of circumstances in
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`which courts operating between 1946 and 1952
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`interpreting the prior statute, those are the
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`circumstances in which those courts had concluded that
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`there was a gross injustice. So in other words, we
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`think gross injustice is maybe the umbrella term and
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` JUSTICE BREYER:
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`You don't think it. Where
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`it comes from, which maybe you don't want to say, is the
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`Senate report on the bill, that is similar to this one
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`enacted in 1946. Still, there are some of us who think
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`that's a highly relevant consideration.
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` MR. MARTINEZ:
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`We are comfortable saying
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`that and we and we do say that and we think it's
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`especially salient and worth relying on here, not just
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`because it's the legislative history, but also because
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`that same legislative history and that same gross
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`injustice language was repeatedly cited and talked about
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`in the 1946 to '52 cases.
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` JUSTICE KAGAN:
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`But I think, Mr. Martinez,
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`what the Chief Justice is driving at is there's a bit of
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`a disconnect between your list of factors and those two
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`words. Gross injustice, I mean that's kind that's
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`really, really exceptional. That sounds like, shocks
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`the conscience. That sounds like something you've never
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`seen happen in the litigation system ever.
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` But then you're saying essentially ratchet
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`it down when you list all of these various factors. And
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`maybe that's that's right, we shouldn't be obsessed
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`with this word, gross injustice. It just seems a
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`disconnect between the two words and all the factors.
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` MR. MARTINEZ:
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`Let me let me explain by
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`stepping back.
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` JUSTICE SCALIA:
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`But it's in the Senate
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`report, so
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` (Laughter.)
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` MR. MARTINEZ:
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`Justice Kagan, we think that
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`the way to look at the statute is to try to figure out
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`what Congress understood the statute to mean in 1952.
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`And it's very clear and I think both sides agree that
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`Congress intended to essentially incorporate the the
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`thrust of the judicial opinions that had been issued
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`under the 1946 statute. Those opinions repeatedly
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`talked about gross injustice, drawing from the prior
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`legislative history, and when they awarded fees and then
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`when and when they discussed when fees would be
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`appropriate, the the circumstances that we list in
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`our brief are what they said would equate to gross
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`injustice.
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` So I think in the abstract you may be right,
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`that gross injustice is a broader standard or maybe it's
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`a little bit it's a, you know, only the most
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`exceptional of exceptional cases would be covered. But
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`in practice what Congress was looking at and what they
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`were responding to and what they were intending to put
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`in this statute was an idea of gross injustice that
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`reflected those bad faith, harassing, and unreasonable
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`situations that were presented earlier.
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` JUSTICE SCALIA:
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`So if that's what you mean,
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`why don't you say exceptional injustice instead of gross
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`injustice?
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` MR. MARTINEZ:
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`We're trying to tie the
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`interpretation of the statute to the languag