No. 12-1184
`
`IN THE
`Supreme Court of the United States
`
`OCTANE FITNESS, LLC,
`
`Petitioner,
`
`v.
`
`ICON HEALTH & FITNESS, INC.,
`
`Respondent.
`
`ON WRIT OF CERTIORARI TO THE UNITED STATES COURT
`OF APPEALS FOR THE FEDERAL CIRCUIT
`
`BRIEF FOR THE PETITIONER
`
`RUDOLPH A. TELSCHER, JR.
`Counsel of Record
`KARA R. FUSSNER
`STEVEN E. HOLTSHOUSER
`DAISY MANNING
`HARNESS, DICKEY & PIERCE, PLC
`7700 Bonhomme Avenue, Suite 400
`St. Louis, MO 63105
`(314) 726-7500
`rtelscher@hdp.com
`
` Attorneys for Petitioner
`
`249900
`
`A
`
`(800) 274-3321 • (800) 359-6859
`
`
`
`IN THE
`Supreme Court of the United States
`
`OCTANE FITNESS, LLC,
`
`Petitioner,
`
`v.
`
`ICON HEALTH & FITNESS, INC.,
`
`Respondent.
`
`ON WRIT OF CERTIORARI TO THE UNITED STATES COURT
`OF APPEALS FOR THE FEDERAL CIRCUIT
`
`BRIEF FOR THE PETITIONER
`
`RUDOLPH A. TELSCHER, JR.
`Counsel of Record
`KARA R. FUSSNER
`STEVEN E. HOLTSHOUSER
`DAISY MANNING
`HARNESS, DICKEY & PIERCE, PLC
`7700 Bonhomme Avenue, Suite 400
`St. Louis, MO 63105
`(314) 726-7500
`rtelscher@hdp.com
`
` Attorneys for Petitioner
`
`249900
`
`A
`
`(800) 274-3321 • (800) 359-6859
`
`
`
`i
`
`QUESTION PRESENTED
`
`Whether a district court, in exercising its discretion
`to award attorney fees to prevailing accused patent
`infringers in “exceptional cases” under Title 35, United
`States Code, Section 285, should use traditional equitable
`factors guided by the purposes of patent law to protect
`legitimate patent interests in reasonable ways rather than
`the Federal Circuit’s rigid test requiring both objective
`baselessness and subjective bad faith?
`
`
`
`ii
`
`PARTIES TO THE PROCEEDING
`AND CORPORATE DISCLOSURE STATEMENT
`
`The Petitioner is Octane Fitness, LLC. Octane
`Fitness, LLC is wholly owned by OF Holdings, Inc.
`
`The Respondent is Icon Health & Fitness, Inc.
`
`
`
`iii
`
`TABLE OF CONTENTS
`
`Page
` QUESTION PRESENTED . . . . . . . . . . . . . . . . . . . . . . . i
`
`PARTIES TO THE PROCEEDING AND
`CORPORATE DISCLOSURE STATEMENT . . . . . . ii
`
`TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . iii
`
`TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . vii
`
`OPINIONS BELOW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
`
`BASIS FOR THIS COURT’S JURISDICTION . . . . . .1
`
`STATUTE INVOLVED. . . . . . . . . . . . . . . . . . . . . . . . . . .2
`
`STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . .2
`
`A. Icon and Its “Shelf” Patent . . . . . . . . . . . . . . . . . .6
`
`B. Octane and Its Award-Winning Ellipticals . . . . .8
`
`C. Icon’s Lawsuit . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
`
`D. The Non-Infringement Rulings and Denial of
`Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
`
`SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . .13
`
`ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
`
`
`
`iv
`
`Table of Contents
`
`Page
`I. Section 285 of the Patent Act Confers Broad
`Discretion on District Courts to Apply
`Traditional Equitable Factors, Guided by the
`Purposes of Patent Law, to Determine Whether
`to Award Fees to a Prevailing
`Accused Infringer. . . . . . . . . . . . . . . . . . . . . . . . .17
`
`A. The Plain Language of § 285 Confers
`Discretion to District Courts to Consider
`Traditional Equitable Factors in Making
`Fee Awards. . . . . . . . . . . . . . . . . . . . . . . . . . .18
`
`1. The words “may” and “exceptional”
`confer discretion to assess the case
`as a whole. . . . . . . . . . . . . . . . . . . . . . . . .19
`
`2. The Federal Circuit’s erroneously
`transplanted sham litigation test lacks
`basis in the text of the statute. . . . . . . .22
`
`3. The Brooks test deprives § 285 of
`independent effect and Congress was
`capable of codifying such restrictions
`if intended. . . . . . . . . . . . . . . . . . . . . . . .25
`
`4. Brooks contravenes the Fogerty
`principle by treating prevailing parties
`disparately under a party-neutral
`statute.. . . . . . . . . . . . . . . . . . . . . . . . . . .27
`
`
`
`v
`
`Table of Contents
`
`Page
`
`B. Brooks Contravenes Interpretations of
`the Lanham Act’s Textually Identical
`Fee Statute. . . . . . . . . . . . . . . . . . . . . . . . . . .29
`
`C. The Legislative History of Section 285
`Confi rms Congress’ Intent to Confer
`Broad Discretion upon District Courts.. . .34
`
`D. Decades of Prior Judicial Interpretation
`of § 285 Validates Use of Traditional
`Equitable Factors Rather than Strict
`Requirements. . . . . . . . . . . . . . . . . . . . . . . . .38
`
`II. Defi ning “Exceptional” in § 285 According to
`an Equitable Discretion Test Best Serves the
`Policies and Purposes of Section 285 and the
`Patent Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
`
`A. Eliminating Higher Fee Thresholds for
`Prevailing Accused Infringers Furthers
`the Goals of Patent Law. . . . . . . . . . . . . . . .42
`
`B. More, Not Less, Discretion May Curb the
`Burgeoning Problem of Abusive Patent
`Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . .44
`
`
`
`vi
`
`Table of Contents
`
`Page
`
`III. This Court Should Hold That Section 285
`Requires District Courts to Exercise
`Discretion in Determining Fee Awards by
`Applying Traditional Equitable Factors,
`Guided by the Purposes of Patent Law, to
`Protect Legitimate Patent Rights in
`Reasonable Ways. . . . . . . . . . . . . . . . . . . . . . . . . .48
`
`CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
`
`
`
`vii
`
`TABLE OF CITED AUTHORITIES
`
`Page
`
`Case s
`
` Alyeska Pipeline Service Co. v. Wilderness Soc’y,
`421 U.S. 240 (1975). . . . . . . . . . . . . . . . . . . . . . . . . . . .26
`
`Artvale, Inc. v. Rugby Fabrics Corp.,
`363 F.2d 1002 (2d Cir. 1966) . . . . . . . . . . . . . . . . . . . .38
`
`Astrue v. Ratliff,
`130 S. Ct. 2521 (2010) . . . . . . . . . . . . . . . . . . . . . . . . . .27
`
`Bilski v. Kappos,
`130 S. Ct. 3218 (2010) . . . . . . . . . . . . . . . . . . . .41, 43, 45
`
`Blanc v. Spartan Tool Co.,
`168 F.2d 296 (7th Cir. 1948). . . . . . . . . . . . . . . . . . . . .36
`
`Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,
`489 U.S. 141 (1989) . . . . . . . . . . . . . . . . . . . . . . . . .41, 50
`
`Brooks Mfg. v. Dutailier, Inc.,
`393 F.3d 1378 (Fed. Cir. 2005) . . . . . . . . . . . . . passim
`
`Byram Concretanks, Inc. v.
`Warren Concrete Prods. Co. of N.J.,
`374 F.2d 649 (3d Cir. 1967) . . . . . . . . . . . . . . . . . . . . .38
`
`Checkpoint Sys., Inc. v. All-Tag Security S.A.,
`711 F.3d 1341 (Fed. Cir. 2013). . . . . . . . . . . . . . . . . . .47
`
`Christiansburg Garment Co. v. EEOC,
`434 U.S. 412 (1978) . . . . . . . . . . . . . . . . . . . . . . . . .26, 37
`
`
`
`viii
`
`Cited Authorities
`
`Page
`In re Ciprofl oxacin Hydrochloride Antitrust Litig.,
`544 F.3d 1323 (Fed. Cir. 2008) . . . . . . . . . . . . . . . . . .43
`
`Circuit City Stores v. Adams,
`532 U.S. 105 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
`
`Conn. Nat’l Bank v. Germain,
`503 U.S. 249 (1992). . . . . . . . . . . . . . . . . . . . . . . . . . . .18
`
`Daubert v. Merrell Dow Pharmaceuticals, Inc.,
`509 U.S. 579 (1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
`
`DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc.,
`567 F.3d 1314 (Fed. Cir. 2009). . . . . . . . . . . . . . . . . . .47
`
`In re Donaldson Co.,
`16 F.3d 1189 (Fed. Cir. 1994). . . . . . . . . . . . . . . . . . . . .7
`
`E. R.R. Presidents Conference v.
`Noerr Motor Freight, Inc.,
`365 U.S. 127 (1961) . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
`
`Eagles, Ltd. v. Am. Eagle Found.,
`356 F.3d 724 (6th Cir. 2004) . . . . . . . . . . . . . . . . . . . .32
`
`eBay Inc. v. Mercexchange, LLC,
`547 U.S. 388 (2006). . . . . . . . . . . . . . . . . . . . . . . . . . . .42
`
`Eon-Net LP v. Flagstar Bancorp.,
`653 F.3d 1314 (Fed. Cir. 2011). . . . . . . . . . . . .46, 47, 54
`
`
`
`ix
`
`Cited Authorities
`
`Page
`
`F.D.I.C. v. Meyer,
`510 U.S. 471 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
`
`FieldTurf Int’l, Inc. v. Sprinturf, Inc.,
`433 F.3d 1366 (Fed. Cir. 2006) . . . . . . . . . . . . . . . . . .47
`
`Fogerty v. Fantasy, Inc.,
`510 U.S. 517 (1994) . . . . . . . . . . . . . . . . . . . . . . . passim
`
`Forest Labs., Inc. v. Abbott Labs.,
`339 F.3d 1324 (Fed. Cir. 2003) . . . . . . . . . . . . . . .22, 47
`
`Gen. Instrument Corp. v. Hughes Aircraft Co.,
`399 F.2d 373 (1st Cir. 1968) . . . . . . . . . . . . . . . . . . . . .39
`
`Hall v. Cole,
`412 U.S. 1 (1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
`
`Hartman v. Hallmark Cards, Inc.,
`833 F.2d 117 (8th Cir. 1987). . . . . . . . . . . . . . . . . . . . .31
`
`Hensley v. Eckerhart,
`461 U.S. 424 (1983). . . . . . . . . . . . . . . . . . . . . . . . . . . .19
`
`Highmark, Inc. v. Allcare Health Mgmt. Sy s., Inc.,
`
`701 F.3d 1351 (Fed. Cir. 2012). . . . . . . . . . . . . . . . . . .25
`
`Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc.,
`687 F.3d 1300 (Fed. Cir. 2012), reh’g and reh’g en
`banc denied, 701 F.3d 1351 (Fed Cir. 2012), cert.
`granted, 82 U.S.L.W. 3177 (U.S. Oct. 1, 2013)
`(No. 12-1163) . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 28, 48
`
`
`
`x
`
`Cited Authorities
`
`Page
`
`Hughes Aircraft Co. v.
`Messerschmitt-Boelkow-Blohm, GmbH,
`625 F.2d 580 (5th Cir. 1980) . . . . . . . . . . . . . . . . .39-40
`
`iLOR, LLC, v. Google, Inc.,
`631 F.3d 1372 (Fed. Cir. 2011). . . . . . . . . . . . . . passim
`
`Jama v. Immigration and Customs Enforcement,
`543 U.S. 335 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . . .27
`
`Ji v. Bose Corp.,
`626 F.3d 116 (1st Cir. 2010) . . . . . . . . . . . . . . . . . . . . .33
`
`Kahn v. Dynamics Corp. of Am.,
`508 F.2d 939 (2d Cir. 1974) . . . . . . . . . . . . . . . . . . . . .40
`
`Kappos v. Hyatt,
`132 S. Ct. 1690 (2012). . . . . . . . . . . . . . . . . . . . . . . . . .37
`
`Kearney & Trecker Corp. v. Giddings & Lewis, Inc.,
`452 F.2d 579 (7th Cir. 1971). . . . . . . . . . . . . . . . . . . . .38
`
`Kimbrough v. United States,
`552 U.S. 85 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
`
`King v. PA Consulting Group,
`485 F.3d 577 (10th Cir. 2007) . . . . . . . . . . . . . . . 32, 33
`
`KSR Int’l. Co. v. Telefl ex Inc.,
`550 U.S. 398 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . . .42
`
`
`
`xi
`
`Cited Authorities
`
`Page
`
`Larchmont Eng’g, Inc. v. Toggenburg Ski Ctr.,
`444 F.2d 490 (2d Cir. 1971) . . . . . . . . . . . . . . . . . . . . .40
`
`Laufenberg v. Goldblatt Bros., Inc.,
`187 F.2d 823 (7th Cir. 1951). . . . . . . . . . . . . . . . . . . . .36
`
`Lear, Inc. v. Adkins,
`395 U.S. 653 (1969). . . . . . . . . . . . . . . . . . . . . . . . . . . .41
`
`Lincoln Elec. Co. v. Linde Air Prods. Co.,
`74 F. Supp. 293 (N.D. Ohio 1947) . . . . . . . . . . . . .36, 37
`
`MarcTec, LLC v. Johnson & Johnson,
`664 F.3d 907 (Fed. Cir. 2012) . . . . . . . . . . . . . . . . . . .47
`
`Medtronic Navigation, Inc. v. BrainLAB
`Medizinische Computersysteme GmbH,
`603 F.3d 943 (Fed. Cir. 2010) . . . . . . . . . . . . . . . . . . .47
`
`Modine Mfg. Co. v. Allen Group, Inc.,
`917 F.2d 538 (Fed. Cir. 1990). . . . . . . . . . . . . . . . . . . .29
`
`Newman v. Piggie Park Enters.,
`390 U.S. 400 (1968). . . . . . . . . . . . . . . . . . . . . . . . . . . .26
`
`Nightingale Home Healthcare, Inc. v.
`Anodyne Therapy, LLC,
`626 F.3d 958 (7th Cir. 2010). . . . . . . . . . . . . . . . . . . . .30
`
`Noxell Corp. v. Firehouse No. 1 Bar-B-Que,
`771 F.2d 521 (D.C. Cir. 1985) . . . . . . . . . . . . . . passim
`
`
`
`xii
`
`Cited Authorities
`
`Page
`
`Old Reliable Wholesale, Inc. v. Cornell Corp.,
`635 F.3d 539 (Fed. Cir. 2011) . . . . . . . . . . . . . . . . . . .25
`
`Orrison v. C. Hoffberger Co.,
`190 F.2d 787 (4th Cir. 1951) . . . . . . . . . . . . . . . . . . . . .36
`
`Park-In-Theatres, Inc. v. Perkins,
`190 F.2d 137 (9th Cir. 1951) . . . . . . . . . . . . . . . . . . . . .36
`
`Philp v. Nock,
`84 U.S. (17 Wall.) 460 (1873) . . . . . . . . . . . . . . . . . . . .34
`
`Prof’l Real Estate Investors v.
`Columbia Pictures Indus.,
`508 U.S. 49 (1993). . . . . . . . . . . . . . . . . . . . . . . . passim
`
`Reactive Metals & Alloys Corp. v. ESM, Inc.,
`769 F.2d 1578 (Fed. Cir. 1985) . . . . . . . . . . . . . . . . . .23
`
`Rohm & Haas Co. v. Crystal Chem. Co.,
`736 F.2d 688 (Fed. Cir.) . . . . . . . . . . . . . . . . . . . . . . . .35
`
`Schwartz v. Rent-A-Wreck Am. Inc.,
`468 Fed. Appx. 238 (4th Cir. 2012) . . . . . . . . . . . 32, 33
`
`Scotch Whiskey Ass’n v. Majestic Distilling Co.,
`958 F.2d 594 (4th Cir. 1992). . . . . . . . . . . . . . . . . . . . .31
`
`Scott Fetzer Co. v. House of Vacuums,
`381 F.3d 477 (5th Cir. 2004) . . . . . . . . . . . . . . . . . . . .33
`
`
`
`xiii
`
`Cited Authorities
`
`Page
`
`In re Seagate Tech.,
`497 F.3d 1360 (Fed. Cir. 2007) . . . . . . . . . . . . . . . . . .28
`
`Sebelius v. Cloer,
`133 S. Ct. 1886 (2013). . . . . . . . . . . . . . . . . . . . . . .20, 27
`
`Securacomm Consulting, Inc. v. Securacom Inc.,
`224 F.3d 273 (3d Cir. 2000) . . . . . . . . . . . . . . . . . .30, 33
`
`Siebring v. Hansen,
`346 F.2d 474 (8th Cir. 1965). . . . . . . . . . . . . . . . . . . . .39
`
`Skil Corp. v. Lucerne Prods. Inc.,
`503 F.2d 745 (7th Cir. 1974). . . . . . . . . . . . . . . . . . . . .39
`
`Sprietsma v. Mercury Marine,
`537 U.S. 51 (2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
`
`Springs Window Fashions, LP v. Novo Indus., L.P.,
`323 F.3d 989 (Fed. Cir. 2003) . . . . . . . . . . . . . . . . . . .22
`
`Stephen W. Boney, Inc. v. Boney Servs., Inc.,
`127 F.3d 821 (9th Cir. 1997) . . . . . . . . . . . . . . . . . . . .31
`
`Tamko Roofi ng Prods. v. Ideal Roofi ng Co.,
`282 F.3d 23 (1st Cir. 2002). . . . . . . . . . . . . . . 30, 33, 50
`
`Taurus IP, LLC v. DaimlerChrysler Corp.,
`726 F.3d 1306 (Fed. Cir. 2013) . . . . . . . . . . . . . . . . . .48
`
`Teese v. Huntingdon,
`64 U.S. (23 How.) 2 (1859) . . . . . . . . . . . . . . . . . . . . . .34
`
`
`
`xiv
`
`Cited Authorities
`
`Page
`
`Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc.,
`253 F.3d 1332 (11th Cir. 2001). . . . . . . . . . . . . . . . . . .33
`
`True Temper Corp. v. CF&I Steel Corp.,
`601 F.2d 495 (10th Cir. 1979). . . . . . . . . . . . . . . . . . . .39
`
`Universal City Studios, Inc. v. Nintendo Co.,
`797 F.2d 70 (2d Cir. 1986) . . . . . . . . . . . . . . . . . . . . . .33
`
`Wicker v. Standard Register Co.,
`82 F.3d 434 (Fed. Cir. 1996) . . . . . . . . . . . . . . . . . . . .29
`
`Yamanouchi Pharm. Co. v. Danbury Pharm., Inc.,
`231 F.3d 1339 (Fed. Cir. 2000) . . . . . . . . . . . . . . . . . .40
`
`Zadvydas v. Davis,
`533 U.S. 678 (2001). . . . . . . . . . . . . . . . . . . . . . . . . . . .19
`
`Statutes
`
`U.S. Const. art. I, §8, cl. 8 . . . . . . . . . . . . . . . . . . . . . . . .41
`
`15 U.S.C. § 1117 . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
`
`17 U.S.C. § 505 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
`
`28 U.S.C. § 1254. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
`
`35 U.S.C. § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
`
`35 U.S.C. § 70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34, 36
`
`
`
`xv
`
`Cited Authorities
`
`Page
`35 U.S.C. § 103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
`
`35 U.S.C. § 112 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7, 52
`
`35 U.S.C. § 145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
`
`35 U.S.C. § 258. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
`
`35 U.S.C. § 271 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
`
`35 U.S.C. § 285. . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
`
`42 U.S.C. § 1988. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
`
`42 U.S.C. § 3613 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
`
`Fed. R. Civ. P. 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47, 49
`
`Other Authorities
`
`American College Dictionary (1948). . . . . . . . . . . . . . . .20
`
`F. Scott Kieff, The Case for Preferring Patent-Validity
`Litigation Over Second-Window Review and
`Gold-Plated Patents: When One Size Doesn’t Fit
`All, How Could Two Do the Trick?, 157 U. Pa. L.
`Rev. 1937 (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
`
`Funk & Wagnalls New College Standard Dictionary
`(1947) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
`
`
`
`xvi
`
`Cited Authorities
`
`Page
`
`Manual of Patent Examining Procedure,
`Section 2181. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
`
`Michael J. Meurer, Controlling Opportunistic and
`Anti-Competitive Intellectual Property Litigation,
`44 B.C. L. Rev. 509 (2003) . . . . . . . . . . . . . . . . . . . . . .45
`
`S. Rep. No. 79-1503 (2d Sess. 1946), reprinted in
`1946 U.S. Code Cong. Serv. 1386 . . . . . . . . . . 35, 37-38
`
`S. Rep. No. 82-1979 (2d Sess. 1952), reprinted in
`1952 U.S.C.C.A.N. 2394. . . . . . . . . . . . . . . . . . . . . . . .35
`
`S. Rep. No. 93-1400 (2d Sess. 1974), reprinted in
`1974 U.S.C.C.A.N. 7132 . . . . . . . . . . . . . . . . . . . . .29, 32
`
`U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-13-465,
`INTELLECTUAL PROPERTY: ASSESSING FACTORS THAT
`AFFECT PATENT INFRINGEMENT LITIGATION COULD
`HELP IMPROVE PATENT QUALITY (2013) . . . . . . . . . . . . .4
`
`Webster’s New College Dictionary (2d Ed. 1949) . . . . .20
`
`
`
`1
`
` OPINIONS BELOW
`
`The District Court for the District of Minnesota, after
`granting summary judgment on Icon Health and Fitness,
`Inc.’s (“Icon”) allegations of patent infringement in favor of
`Octane Fitness, LLC (“Octane”), denied Octane’s motion
`for attorney’s fees under Title 35, United States Code,
`Section 285. The District Court’s Order, dated September
`6, 2011, is available at 2011 WL 3900975, and Pet. App.
`19a-28a.
`
`Octane cross-appealed the denial of attorney’s fees
`to the United States Court of Appeals for the Federal
`Circuit. The Federal Circuit affi rmed both the grant of
`summary judgment of non-infringement and the denial of
`attorney’s fees on October 24, 2012; its opinion is available
`at 496 Fed. Appx. 57, 2012 WL 5237021, and Pet. App.
`1a-17a. The order denying the petition for rehearing
`and rehearing en banc, dated December 27, 2012, is
`reproduced at Pet. App. 87a-88a. On October 1, 2013, this
`Court granted Octane’s Petition for Writ of Certiorari.
`
`BASIS FOR THIS COURT’S JURISDICTION
`
`The opinion and judgment of the court of appeals
`issued on October 24, 2012. A timely petition for rehearing
`and rehearing en banc was denied on December 27, 2012.
`On March 27, 2013, Octane fi led a petition for writ of
`certiorari, which was granted on October 1, 2013. This
`Court has jurisdiction pursuant to 28 U.S.C. § 1254.
`
`
`
`2
`
`STATUTE INVOLVED
`
`At issue in this case is 35 U.S.C. § 285 (2013), which
`states:
`
`“The court in exceptional cases may award reasonable
`attorney fees to the prevailing party.”
`
`STATEMENT OF THE CASE
`
`Sect i on 285 provides that, in “exceptional cases,” a
`district court “may award reasonable attorney fees to
`the prevailing party.” 35 U. S.C. § 285 (2013). The terms
`of § 285 grant discretion to identify exceptional cases and
`award fees. Such discretion should include application
`of traditional equitable factors guided by the purposes
`of the Patent Ac t. Although not exclusive, the most
`important factors include the strength and reasonableness
`of the infringement claims, the likelihood of ultimate
`success, pre-litigation and litigation conduct, economic
`circumstances, and the need to incentivize defendants
`to contest allegations which extend a patent’s limited
`monopoly beyond the scope of its terms. Normal cases
`are those that use patent litigation to protect legitimate
`patent interests in reasonable ways. Logically, exceptional
`cases are those that deviate markedly from the norm. The
`Federal Circuit, however, so severely limits district court
`discretion to award fees to prevailing accused infringers
`that § 285 fee aw ards are essentially non-existent.
`
`Defending patent infringement claims is extremely
`expensive. Here, it cost Octane over $1.8 million to prevail
`without a trial, even though a cursory comparison of the
`competing linkage systems are not remotely similar, Icon’s
`
`
`
`3
`
`arguments regarding the scope of its claims stretched
`credulity beyond reason, Icon’s patent was invalid if
`it covered Octane’s linkage and there was little or no
`likelihood that Icon could prevail on a trial of infringement.
`
`But, unlike other litigation, a patent defendant has no
`effi cient way to obtain resolution of the merits. Pleading
`requirements are minimal and litigating even to summary
`judgment entails expensive discovery, experts and claim
`construction. Against even the weakest of claims, an
`accused infringer faces “Hobson’s Choice”: settle and give
`the plaintiff remedies to which it is not entitled, or spend
`a larger sum to prevail without any realistic prospect of
`fee recoupment.
`
`Abusive exploitation of the leverage opportunity this
`presents is both real and growing. Whether practicing the
`technology at issue or not, some patentees assert patents
`in unreasonable ways as a strategy founded on economic
`coercion. Ordinarily, a company has a disincentive to bring
`a weak case because it would be forced to pay lawyers
`only to later lose the case. But some patent plaintiffs,
`especially bully-type companies with superior economic
`leverage, exploit the system. Some large competitors, like
`Icon, use the process itself to hinder smaller competitors,
`like Octane, either by extracting unwarranted royalties
`or by siphoning resources. The former raises the cost of
`goods sold, which gets passed on to consumers, and the
`latter weakens the smaller competitor via the cost of the
`litigation.
`
`Some companies build business models around buying
`patents, rather than developing technology, and suing
`entire industries to amass small fortunes at the expense
`
`
`
`4
`
`of the American economy and its citizens. These entities
`are commonly referred to as patent assertion entities or
`“patent trolls,” and their tactics have garnered national
`attention. The “troll” business model became popular a
`decade ago, but abusive troll litigation steadily picked
`up steam during the past fi ve years.1 The result is that
`the “goods”, i.e., patents, are picked over and the cases
`asserted by trolls are increasingly weak.
`
`This case does not involve a classic “troll”, but does
`involve a larger competitor asserting a non-practiced
`patent against a smaller competitor in a troll-like manner.
`Asserting unreasonably weak patent claims and using
`the cost of litigation as a weapon of coercion is what all
`abusive patent cases have in common. No matter how
`weak the case, abusive plaintiffs know that most accused
`targets will pay some amount to avoid the high cost of
`patent litigation. Because prevailing accused infringers
`have no hope of recouping fees even if they win, federal
`courts serve as the playing fi eld for extortion.
`
`The evil of such practices runs counter to the purposes
`of patent laws. Consequences include substantial damage
`to small and large companies, less money for research
`and development, increased prices to consumers, undue
`limitations on competition and a substantial burden on
`
`1. “[T]he estimated total number of defendants sued by
`PMEs [patent monetization entities] more than tripled from 834
`in 2007 to 3,401 in 2011, while the increase in the total number
`of defendants sued by operating companies was not statistically
`signifi cant.” U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-13-465,
`INTELLECTUAL PROPERTY: ASSESSING FACTORS THAT AFFECT PATENT
`INFRINGEMENT LITIGATION COULD HELP IMPROVE PATENT QUALITY
`18-19 (2013).
`
`
`
`5
`
`federal courts. Properly construed, § 285 of the P atent Act
`provides a viable tool to balance the interests of patentees
`in bringing meritorious claims against the need to protect
`accused infringers from grossly unjust results.
`
`In Brooks Mfg. v . Dutailier, Inc., 393 F.3d 1378
`(Fed. Cir. 2005), the Federal Circuit shoehorned this
`Court’s test for the “sham” litigation exception to Noerr-
`Pennington antitrust immunity into § 285’s defi niti on of
`“exceptional.” Specifi cally, in the absence of prosecution or
`litigation misconduct, Brooks requires successful patent
`defendants to prove, by clear and convincing evidence,
`that plaintiffs’ claims were both (1) objectively baseless,
`and (2) brought in subjective bad faith. Id. at 1381. Th is
`rigid framework places an insurmountable burden on
`successful accused infringers, like Octane, particularly
`where the injustice of the case lies predominantly in
`the weakness of the patent contentions. It also deprives
`district courts of their traditional equitable discretion
`to consider all relevant circumstances. This is in sharp
`contrast to other areas of intellectual property law,
`where courts have considerable discretion to award fees
`consistent with equitable considerations and the purposes
`of the particular intellectual property regime. See 15
`US.C. § 1117(a); 17 U.S. C. § 505.
`
` A correct interpretation of § 285, consistent with its
`terms, the canons of statutory interpretation, judicial
`precedent and good policy would restore balance to the
`patent enforcement system. The Patent Act tries to
`r econcile the tension between stimulating innovation
`through a strong patent system and stifl ing competition
`through the grant of monopoly rights. This case presents
`the proper vehicle to restore district courts’ discretion
`
`
`
`6
`
`under § 285 to remedy abuse of the patent system through
`unreasonable patent litigation.
`
`A. Icon and Its “Shelf” Patent
`
`In the late 1990’s, Icon invented a specifi c linkage
`system for an elliptical machine. An elliptical machine
`is a piece of exercise equipment having two foot pedals
`that travel in an elliptical path. Many elliptical machine
`designs existed at the time of Icon’s invention, U.S. Patent
`No. 6,019,71 0 (“the ‘710 patent”). SA-10-SA- 23. The unique
`and simple linkage disclosed in the ‘710 patent is a “stroke
`rail” that moves in a straight line within a c-channel at
`one end while the other end moves in an elliptical path. Id.
`at SA-18 at 3:64-4:1 7. As shown (right), the “stroke rail”
`connects the foot rail to the frame. Id. The “c-channel”
`(84) constrains the fi rst end of the stroke rail to move
`up-and-down in a straight line (“linear reciprocating
`displacement”), while the other end moves in an elliptical
`path. Id. at SA-19 at 6:3-42.
`
`
`
`7
`
` The patent examiner who granted the ‘710 patent
`regarded the “stroke rails, each having one end hingedly
`connected to a respective foot rail and having the opposite
`end connected to the frame” and producing “linear
`reciprocating movement” as the point of novelty in the ‘710
`patent and granted the patent on this basis. J.A. 123a, at
`¶3. To claim these inventive aspects, certain elements were
`recited as a means for performing a specifi ed function as
`permitted by 35 U.S.C. § 112,¶6 (now c odifi ed at § 112(f)).
`For example, Claim 1 (d) of the ‘710 patent, recited a:
`
`(d) me ans for connecting each stroke rail
`to the frame such that linear reciprocating
`displacement of the fi rst end of each stroke
`rail results in displacement of the second end
`of each stroke rail in a substantially elliptical
`path;2
`
`SA-20 at 7:11–26 (emphasis added). As it must, the
`specifi cation of the ‘710 patent discloses the stru cture
`which performs the recited functions, consistent with
`the fi gure above (i.e., the c-channel and related linkage
`structures). Id.
`
`Reading the claims and spe cification together,
`essential elements of Icon’s invention are: an adjustable
`stride elliptical machine in which (1) a stroke rail extends
`
`2. It was undisputed that this element is a means-plus-
`function limitation under 3 5 U.S.C. § 112, ¶ 6. The legal signifi cance
`is that the structure which corresponds to the recited function
`must be disclosed in the specifi cation, else the patent is invalid due
`to a “failure to point out and distinctly claim the invention.” See
`Manua l of Patent Examining Procedure, Section 2181 (II) (citing
`In re Donaldson Co., 16 F.3d 1189, 1195 (Fed. Cir. 1994) (en banc)).
`
`
`
`8
`
`from the frame to the foot rail, (2) one end of the stroke rail
`is connected via a c-channel or similar structure in such
`a way that (3) one end of the stroke rail moves back and
`forth in a straight line while the other end of the stroke
`rail moves in an elliptical path. SA-17-SA-21. Both the
`District Court and the Federal Circuit agreed the ‘710
`patent requires these ele ments.
`
`Icon’s unique idea did not work. Icon never
`commercialized an elliptical machine under the ‘710
`patent. J.A. 100a-108a; 1 17a. Instead, Icon sold a different
`machine it did not invent, and paid a royalty to a competitor
`for the linkage technology. C.A. App. A1941.
`
`B. Octane and Its Award-Winning Ellipticals
`
`Octane was a much smaller start-up competitor
`experiencing success with its lines of high-end elliptical
`machines. J.A. 115a-116a. It did not copy the ‘710 patent
`technology. Instea d, Octane licensed a different patented
`linkage technology for its successful Q45 and Q47
`machines. J.A. 110a-113a; SA-25-SA-48.
`
`Octane’s machines do not employ a linkage remotely
`similar to that disclosed in the ‘710 patent. Octane uses
`neithe r a “stroke rail” nor a part that moves in a straight
`line within a “c-channel,” or any similar structure.
`Compare J.A. 261a-262a with SA-10-SA-23. A visual
`comparison and review of the ‘710 patent claims easily
`confi rm that the collection of parts, how they interact,
`and the overall principles of operation are fundamentally
`different.
`
`
`
`9
`
`The Q47 machine, depicted and annotated by counsel,
`utilizes a crank arm (1) on a fl ywheel (2) connected to a
`swing arm (3). C.A. App. A1964; J.A. 262a; SA-34. T he
`swing arm, in turn, is connected to the actuator casting (4).
`J.A. 262a. On one end, the actuator casting is connected
`to a rocker link (5) and the rocker link is connected to
`the frame (6) of the elliptical machine. Id. On the other
`end, the actua tor casting connects to a foot rail (7). Id. In
`operation, the fl y wheel turns lifting the entire linkage
`such that the foot rail is moved in an elliptical path and the
`rocker link moves through the air, at the end opposite the
`frame, in an arced path (as shown by the hashed lines in
`the photo). J.A. video. The elliptical path is made variable
`by changing the angle between the actuator casting and
`swing arm. Id.
`
`The Q45 is similar to the Q 47, but instead of a swing
`arm the Q45 actuator casting supports a motor (8), and the
`foot rail (7) is attached to an integrated screw (9) on the
`motor, all of which operate to vary the size of the elliptical
`path. J.A. 261a; SA-39-SA-48.
`
`
`
`10
`
`A video demonstrating the movement of the three
`linkages and shown to the district court is included at
`the end of the Joint Appendix. It shows the obvious lack
`of infringement.3 J.A. video.
`
`C. Icon’s Lawsuit
`
`After Octane’s market success, Icon brought suit
`for patent infringement on April 23, 2008. J.A. 40a-49a.
`E-mails uncovered in the litigation refl ected that Icon took
`an “old patent” it had “sitting on the shelf” and “thr[e]w” it
`at Octane. J.A. 274a; SA-72. As articulated by Icon’s Vice
`President of Global Sales, Icon was “[n]ot only coming out
`with a great product to go after [Octane], but throwing
`a lawsuit on top of that,” and that Icon was asserting a
`
`3. In the video, Icon’s technology is demonstrated by
`a prototype because the ‘ 710 patent was never successfully
`commercialized. The Q45 and Q47 machines shown in the video
`are the actual products marketed by Octane.
`
`
`
`11
`
`defunct patent because it was “just looking for royalties.”
`J.A. 391a; SA-72.
`
`Icon initially sued Octane alleging infringement of two
`unrelated patents: the ‘710 patent (SA-10-SA-21) and U. S.
`Patent No. 5,104,120, entit led “Exercise Machine Control
`System” (“the ‘120 patent”) (SA-1-SA-9). One y ear into the
`litigation, Icon was forced to voluntarily dismiss its ‘120
`patent claims after Octane learned of an adverse claim
`construction ruling Icon received in an Eastern District
`of Texas infringement action. J.A. 60a-62a.
`
`Icon (a Utah company) also initially brought the
`suit in California by joining an Octane customer located
`there. J.A. 40a-49a. On motion by Octane (a Minnesota
`company), that action was severed and the case against
`Octane transferred to Minnesota, while the case against
`the Octane distributor was dismissed. J.A. 50a-59a.
`Even though the complaint only mentioned Octane’s Q47
`machine, Icon broadly sought discovery of every Octane
`product, ultimately asserting that Octane’s Q47 and Q45
`series machines infringed the ‘710 patent. J.A. 40a-49a;
`79a-9 1a.
`
`D. The Non-Infringement Rulings and Denial of
`Fees.
`
`In June 2010, after two years of expensive litigation
`and repeated efforts to resolve the case, Octane moved
`for summary judgment of non-infringement of the ‘710
`patent. J.A. 14a-16a. At Ic on’s insistence, the district
`court held a separate claim-construction hearing, J.A.
`17a, and in December 2010, two and one-half years into
`the lawsuit, the court issued a Memorandum Opinion and
`
`
`
`12
`
`Order construing various terms of the ‘710 patent. Pet.
`App. 62a-86a. In that Opini on, the district court largely
`adopted Octane’s c
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