In a decision surprising absolutely nobody, on Monday the Supreme Court ruled that the U.S. Patent and Trademark Office (USPTO) could not refuse to register trademarks even if they are  “immoral or scandalous.”  The trademark at issue involved the use of the mark “FUCT [F-U-C-T]” for clothing and merchandise.

The Court held that the First Amendment right to free speech trumps Section 1052(a) of Lanham Act (Section 2(a)), which prohibits the use of “immoral, deceptive, or scandalous matter; or matter which may disparage….”

The Slants, the Washington Redskins and Free Speech vs. Disparaging Trademarks

The Court’s recent decision was merely the final domino to topple in the domino chain reaction that started back in 2010 when Simon Shiao Tam, the lead singer for an Asian rock band attempted to register “The Slants” as the name of the band.  The USPTO rejected The Slants’ application, finding it was disparaging to people of Asian descent.  Tam appealed, and the Federal Circuit Court ultimately held that the USPTO’s refusal to register the trademark violated Tam’s First Amendment right to free speech. The Supreme Court affirmed the Federal Circuit Court’s decision, holding that the disparagement clause of  Section 2(a) “violates the Free Speech Clause of the First Amendment.”

The Supreme Court’s Tam decision effectively rescued the Washington Redskins’ trademarks, which the USPTO was in the process of cancelling as disparaging to Native Americans.

The FUCT Trademark, and the Final Domino

The Slants and Washington Redskins’ trademarks addressed Section 2(a)’s prohibition of disparaging trademarks, but the FUCT trademark attacked Section 2(a)’s prohibition of “immoral or scandalous matter….”  When Erik Brunetti sought to register the mark FUCT for his clothing brand, the USPTO refused to register the mark, finding that “‘FUCT’ is the past tense of the verb ‘fuck,’ a vulgar word, and is therefore scandalous.”  Brunetti appealed, the Federal Circuit agreed that the mark FUCT is vulgar, but followed the Supreme Court’s Slants decision, holding that “the bar in Section 2(a) against immoral or scandalous marks is unconstitutional because it violates the First Amendment.”

Justice Kagan, writing for a 6-3 majority, held that “the Lanham Act’s prohibition of ‘immoral [ ] or scandalous’ trademarks violates the First Amendment.”  The Court noted that historically the USPTO would refuse to register a mark if the mark was “shocking to the sense of truth, decency, or propriety” or “giving offense to the conscience or moral feeling.”  The Court noted and did not disagree with the USPTO’s conclusion that the FUCT mark “flunked the test” and was “a total vulgar.”  However,  Brunetti brought a facial challenge, basically conceding that his mark was vulgar but arguing that the “immoral or scandalous” prohibition violated his First Amendment right to free speech.  The Supreme Court agreed that Section 2(a)’s prohibition of immoral and scandalous marks is unconstitutional.

As I wrote last year, the Court’s decision is likely to spur a race to the bottom, with certain businesses seeking to gain attention and market share via shocking, vulgar and/or scandalous trademarks from the USPTO.

It was only a matter of time.

THE “GOOD OLD DAYS” BEFORE DISPARAGING, VULGAR AND SCANDALOUS TRADEMARKS

For seventy years the United States Patent and Trademark Office (USPTO) refused to register marks that consisted of “immoral, deceptive, or scandalous matter; or matter which may disparage…..” citing § 2(a) of the Lanham Act.

Last June the Supreme Court struck down section 2(a)’s prohibition of disparaging marks and the other shoe just dropped when the Federal Circuit struck down its prohibition of vulgar, immoral or scandalous marks, allowing someone to register the mark FUCT.

The Slants Crush § 2(a)’s Prohibition of Disparaging Marks 

In 2010, Simon Shiao Tam, lead singer of the Oregon based Asian American rock band, sought to disarm the “toxic language and symbols” associated with the term “slants” by registering the mark “THE SLANTS” for the band.  The USPTO found the term disparaging to people of Asian descent and refused to register the mark under § 2(a).  Tam appealed, the Trademark Trial and Appeal (TTTBA) affirmed, Tam appealed, the Federal District Court initially affirmed the TTTBA’s decision, but later decided on its own to grant en banc review and reversed, finding that § 2(a) violated the First Amendment.  The USPTO still refused to register the mark and the Supreme Court granted certiorari.  In June 2017, the Supreme Court affirmed the Federal Circuit Court, holding that the disparagement clause of § 2(a) “violates the Free Speech Clause of the First Amendment.”

The Slants decision effectively rescued the Washington Redskins’ trademarks.  In 2014, the TTTBA decided to cancel the team’s registered trademarks, finding the term “Redskins” disparaging.  The team appealed to District Court, which affirmed the TTTBA’s decision, the team appealed to the Fourth Circuit and while the matter was pending, the Supreme Court issued its Slants decision.  Early this year the Fourth Circuit  reversed and remanded the district court, effectively ordering that the team’s marks be reinstated.

The Federal Circuit Orders USPTO to Register FUCT Mark, Striking Down Section 2(a)’s Prohibition of Vulgar, Immoral and Scandalous Marks 

In 2011, Erik Brunetti sought to register the mark FUCT for his clothing brand. The USPTO refused to register the mark, finding that “ ‘FUCT’ is the past tense of the verb ‘fuck,’ a vulgar word, and is therefore scandalous.”  Brunetti appealed to the TTAB.  The TTAB noted that Brunetti “used the mark in the context of ‘strong, and often explicit, sexual imagery that objectifies women and offers degrading examples of extreme misogyny’” and held the mark was “vulgar and therefore un registerable under section 2(a) of the Lanham Act.”

Brunettti appealed the TTAB decision to the Federal Circuit, which heard the appeal after the Supreme Court issued its Slants decision. In a ruling that rivals a South Park episode for the number of swear words, the Federal Circuit agreed with the TTAB that the mark FUCT is vulgar, but followed the Supreme Court’s Slants decision, holding that “the bar in § 2(a) against immoral or scandalous marks is unconstitutional because it violates the First Amendment.”   The Court rejected the USPTO’s argument, similar to its argument in the Slants case, that trademark registration is a government subsidiary, which allows the government some leeway in regulating speech.  The Court noted that “[t]here are countless songs with vulgar lyrics, blasphemous images, scandalous books and paintings, all of which are protectable under federal [copyright] law” and reversed the TTAB’s holding that the mark FUCT “is unregisterable under section 2(a).”

What’s Next for Vulgar and Scandalous Trademarks?

We are likely to see a race to the bottom. Much like shock jocks Howard Stern and Don Imus seek to increase market share with outlandish speech, some business owners are likely to see some value in garnering attention via shocking, vulgar and/or scandalous trademarks, and the USPTO will have no choice but to register those marks.

We previously wrote about the copyright battle between two of the largest cheerleader uniform manufacturers. Plaintiff Varsity Brand, Inc. claimed that Star Athletica, LLC had infringed its copyrights by manufacturing cheerleader uniforms with similar design elements, like stripes, chevrons, zigzags and color blocks. The Supreme Court granted certiorari to resolve at least nine conflicting tests for “separability”: the test as to whether the decorative elements can be “identified separately from, and …existing independently of, the utilitarian aspects of the article.”  (17 U.S.C. § 101).

Justice Thomas, writing for the 6-2 majority established a two-part test:

[T]he artistic feature of the design of a useful article is eligible for copyright protection if the feature (1) can be perceived as a two-or three-dimensional work of art separate from the useful article and (2) would qualify as a protectable pictorial, graphic or sculptural work either on its own or in some other medium if imagined separately from the useful article.

Relying entirely on the text of The Copyright Act, the Court concluded that “if the arrangements of colors, shapes, stripes and chevrons on the surface of the cheerleading uniforms were separated from the uniform and applied to another medium-for example, on a painter’s canvas-they would qualify as ‘two-dimensional … works of …art’ §101.”

The Court upheld the 6th Circuit’s decision that design elements, like those on Varsity’s cheerleader uniforms, were subject to copyright protection but remanded the case for further determination as to whether Varsity’s surface decorations “are sufficiently original to qualify for copyright protection.”  Fn 1.

The Court’s decision may have wide implications in the clothing and furniture industries, where design elements are often intertwined with the utilitarian elements of the products.

I previously wrote about a Supreme Court case pitting the United States Patent and Trademark Office (“USPTO”) and Section 2(a) of the Lanham Act against the First Amendment, the Federal Circuit, the Slants and, lurking in the wings, the Washington Redskins.

The USPTO filed its 92 page opening brief this week, repeating many of the same arguments rejected by the Federal Circuit.

Argument 1: Trademark Registration is a Privilege, Not a Right

The USPTO argues that “Section 1052(a) does not prohibit any speech but simply defines the criteria for participation in the government’s voluntary trademark program.” Citing the government’s right not to fund certain types of art or to disallow certain symbols on license plates, the USPTO argues “[t]he First Amendment does not require the federal government to assist those, who wish to sell products or services using racial slurs, religious insults or other disparaging marks.”

Argument 2: Banning Disparaging Marks Does Not Restrict Speech

The USPTO describes the history of the Lanham Act and the common-law rights a trademark owner holds even if he or she lacks federal trademark registration. The USPTO argues that “Section 1052(a) limits the marks that may be federally registered, but it does not restrict the mark holder’s ability to use its mark or to engage in any other speech.”

Argument 3: Section 1052(a)’s Ban On Disparaging Marks is Consistent with Other Constitutional Restrictions

Citing the government’s right not to participate where “government assistance will closely associate the government with offensive terminology,” the USPTO analogized to artists who have been denied federal arts funding, or proponents of specialty state license plates including the confederate flag.  “Registration of THE SLANTS would cause the mark to be published on the Principal Register; would cause a certificate  for the mark to be issued ‘in the name of the United States’ (which may be transmitted to foreign countries); and would entitle respondent to use the ® symbol to convey to the public that the mark has official status.”

Where Did the Washington Redskins Go?

The Washington Redskins asked the Supreme Court to join The Slants in opposing the USPTO, but the Supreme Court refused. The team’s case before the Fourth Circuit is stayed pending the outcome of the USPTO-The Slants decision.

What’s Next

The Slants will be filing their brief, along with a likely flood of amicus curiae briefs on either side, and then the matter will be heard by eight justices, unless a ninth supreme court justice is confirmed before oral argument.

Today the Supreme Court agreed to decide an ongoing conflict, pitting a trademark registrant’s First Amendment rights against longstanding law precluding trademark registration of “disparaging” marks.

In This Corner: Trademark Law & the USPTO

Section 2(a) of the Lanham Act, precludes trademark registration of marks that are: immoral, deceptive or scandalous matter; or matter which may disparage …or bring them into contempt or disrepute….” Since World War II, the United States Patent and Trademark Office (USPTO) has relied on Section 2(a) to deny registration to such marks, but in December 2015, for the first time, the legality of Section 2(a) was called into question.

In This Corner: The First Amendment & The Slants

An Asian-American rock band, The Slants, sought to register its name, but the USPTO rejected the name as disparaging. The Slants appealed to a federal district court, which affirmed the USPTO’s decision, but when The Slants appealed to the Federal Circuit, the majority found that Section 2(a) was unconstitutional restraint of free speech under the First Amendment.

The Slants asked the Federal Circuit to order the USPTO to register its trademark, but the court declined. The USPTO issued guidelines, advising trademark applicants that any applications with potentially disparaging marks would be held in limbo until the issue was resolved.  Then the USPTO asked the Supreme Court to decide the issue.

In This Other Corner: The Washington Redskins

Meanwhile in June 2014 the USPTO deregistered the Washington Redskins’ trademark under Section 2(a). The Washington football team appealed, lost in federal district court and appealed to the Fourth Circuit. While that appeal is currently pending, the Washington team has asked the Supreme Court to intercede.

The Judges’ Score Card: Key Issues

The Slants, the Washington team and the Federal Circuit majority basically argue that trademarks equal free speech. They contend that Section 2(a) amounts to viewpoint discrimination and is subject to strict scrutiny  review, Section 2(a) fails to withstand “strict scrutiny” and is therefore unconstitutional. “Strict scrutiny” requires the USPTO to prove that Section 2(a) serves a compelling government interest, that it is narrowly tailored to achieve that interest, and that it is the least restrictive means for achieving that interest.

The USPTO, the two federal district courts, and the Federal Circuit’s dissenting opinion argue that trademarks do not equal free speech, and Section 2(a) is not subject to “strict scrutiny.” They contend that Section 2(a) does not prohibit any speech but instead denies the benefits of registration to private disparaging speech. In short, The Slants and the Washington team are entirely free to call themselves whatever they want, to publicize their names and use their names in commerce, but they are not entitled to the extra benefits conferred by federal trademark registration.

TKO or 12 Rounds?

While today’s grant of certiorari is only the beginning of the first round, recent Court decisions upholding hateful speech in other situations would tend to indicate that USPTO may be punching above its weight class and Section 2(a) might hit the canvas.

INITIAL CALL ON THE FIELD

In June 2014, the U.S. Patent and Trademark Office (USPTO) stripped the Washington Redskins (Washington) of their federal trademarks, finding the term “Redskins” was disparaging under Section 2(a) of the Lanham Act.

REPLAY OFFICIAL CONFIRMS THE CALL

Washington sought an instant replay before the District Court for the Eastern District of Virginia, but that Court affirmed the USPTO’s initial call.  Washington then sought a replay in the Fourth Circuit Court of Appeals, but this week, while that decision was under review, Washington threw a Hail Mary pass, asking the Supreme Court to intercede even before the Fourth Circuit decides Washington’s appeal.

WASHINGTON’S END AROUND

Washington’s unorthodox move is the result of another scrimmage — this one between the USPTO and the Portland dance-rock band, The Slants. As discussed in our prior post,  The Slants, a band comprised of Asian Americans, tried to register their name with the USPTO, but the USPTO refused, citing Section 2(a).  The Slants appealed the USPTO decision, lost at trial, but then won when the Federal Circuit reversed , finding that Section 2(a) was unconstitutional restraint of free speech under the First Amendment.

JOINING A GAME ALREADY IN PROGRESS

Last week the USPTO petitioned the Supreme Court to settle whether Section 2(a) violates the First Amendment. The thrust of the USPTO’s argument is that The Slants (and by extrapolation Washington) have free speech to call themselves whatever they want; the government is not stopping them.  They just aren’t entitled to “federal trademark registration,” i.e., a stamp of approval for their use of “disparaging” names.

So Washington’s latest play is essentially joining The Slants to pile on the USPTO and knock Section 2(a) out of the trademark registration game.

Nobody knows, and that’s why the United States Patent and Trademark Office (USPTO) just filed a petition asking Supreme Court to settle its turf battle with the Federal Circuit Court.

Ancient History: No Disparaging Trademarks

From WWII until March of this year, the USPTO routinely refused to issue trademarks that it considered to be disparaging under Section 2(a) of the Lanham Act.  So it wasn’t big news in 2011 when the USPTO summarily rejected Simon Shiao-Tam’s trademark registration for his rock band, “The Slants.” Mr. Tam appealed the USPTO’s decision to the Federal Circuit, which initially upheld the USPTO’s decision, but later agreed to rehear the appeal en banc.

Quantum Leap: First Amendment Trumps Lanham Act’s Prohibition of Disparaging Trademarks 

But, as we previously reported, it was huge news last December when the Federal Circuit reversed its earlier opinion and the USPTO’s decision and held that Section 2(a) violated the First Amendment, effectively stripping the USPTO of its power to deny trademarks that it deemed disparaging.   Presumably the court’s decision also strikes down Section 2(a)’s prohibition of marks that are immoral or scandalous.

Early last month, the USPTO reacted to the court’s decision, issuing guidelines that trademark applications with Section 2(a) issues would be held in limbo “while the constitutionality of these provisions remains in question…”  Shortly thereafter, Mr. Tam filed a writ of mandamus asking the Federal Circuit to force the USPTO to register The Slants trademark.

Breaking News: The Suspense was Killing the USPTO

The Federal Circuit denied the writ, but today the USPTO petitioned the Supreme Court to resolve:

Whether the disparagement provision in 15 U.S.C. 1052(a) is facially invalid under the Free Speech Clause of the First Amendment.

Usually issues percolate up slowly over the course of years before they reach the Supreme Court, but with the Federal Circuit insisting that Section 2(a) is unconstitutional and the USPTO refusing to cede its authority to reject disparaging trademarks there’s really no place else to take the issue.  And until the issue is ultimately resolved, trademarks that the USPTO considers disparaging will continue to sit in limbo.  Four of the justices will need to vote to hear the USPTO’s petition and, absent the extremely rare issuance of an extraordinary writ (allowing accelerated briefing and oral argument), even if the Supreme Court grants certiorari the matter won’t be decided for some time.

SNAP QUIZ-Which type of lawsuit would divide the Supreme Court Justices along the following lines?

Justices Breyer, Roberts, Scalia, Kennedy, Alito and Kagan vs. Justice Thomas, Ginsburg and Sotomayor?

If you guessed federal arbitration preemption you are a winner.

Yesterday, the Supreme Court smacked down another rogue California Court for allowing consumers to circumvent DirecTV’s service agreement.  The agreement included a black hole of an arbitration provision, specifically drafted to suck all life from any court litigation claim that ever was, is, or could be.

In DirecTV v. Imburgia the consumers’ service contract provided that “any Claim either of us asserts will be resolved only by binding arbitration” and “neither of us [most specifically you-Mr. or Ms. Consumer] shall be entitled to join or consolidate claims in arbitration.”  However, the contract provided that “if the law of your state” makes the waiver of class arbitration unenforceable, then the entire arbitration provision “is unenforceable.”  But, and it’s a really big but, “the arbitration provision shall be governed by the Federal Arbitration Act.”

The consumers filed a putative class action in California state court, DirecTV sought to enforce the arbitration provision, the trial court refused, DirecTV appealed and the Court of Appeal affirmed, mis-remembering that, while in olden times [pre 2011] California law forbade class-action waivers like the one at issue, the US Supreme Court gutted that law in AT&T v. Concepcion, holding that the Federal Arbitration Act preempts and invalidates such laws.

The California Court of Appeal decided that by including the “if the law of your state” provision, DirecTV and the consumers [really just DirecTV, the consumers had nothing to do with drafting the contract] intended the specific language to trump the general provision, i.e. “the arbitration provision shall be governed by the Federal Arbitration Act. Following the canons of contract interpretation, the Court also found an ambiguity and interpreted it against the drafter, DirecTV.

Justice Breyer, writing for the majority, basically wrote what part of ‘NO’ don’t you understand?: “The Federal Arbitration Act is a law of the United States, and Concepcion is an authoritative interpretation of that Act.  Consequently, the judges of every State must follow it.”

In a bit of snark, Justice Breyer wrote that the parties to the contract could have decided to “have portions of their contract governed by the law of Tibet, the law of pre-revolutionary Russia or (as is relevant here) the law of California including the [prior anti-class action waiver law]….”  But the contract’s reference to “the law of your state” can only mean the valid law of your state and not the law of your state before the US Supreme Court trumped California’s quaint and antiquated laws that allowed consumers to band together in class-actions.

Justice Thomas dissented that the Federal Arbitration Act does not apply to state court proceedings. Justice Ginsburg, joined by Justice Sotomayor dissented, attempting to give the “customer, not the drafter [DirecTV], the benefit of the doubt.”  She noted that the DirecTV litigation was three years old when the US Supreme Court issued the Concepcion decision, and thus when the contract was formed “the law of your state,” at least in California, rendered DirecTV’s arbitration provision unenforceable.  Calling DirecTV’s service contract a “take-it-or-leave-it contract,” Justice Ginsburg bemoaned the societal costs of decisions like Concepcion which, she noted, “predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws.”

More than 40 years after releasing what many music aficionados consider to be the greatest classic rock song ever written, Led Zeppelin faces a lawsuit alleging that it was written (in part) by someone else. At issue is the chord progression instantly recognized the world over as the iconic opening to the song “Stairway to Heaven.” The progression is remarkably similar to that used in a song by a band called Spirit, which toured with Zeppelin in the late 1960s. Perhaps inspired by the Supreme Court’s recent “Raging Bull” decision, the estate of Spirit’s lead guitarist filed suit on May 31, 2014, alleging that the legendary song-writing duo of Jimmy Page and Robert Plant copied Spirit’s work.

The Lawsuit Against Led Zeppelin

The suit in question was filed in the Eastern District of Pennsylvania by the estate of Randy Craig Wolfe, also known as “Randy California,” the lead guitar player for Spirit. The lawsuit alleges that Led Zeppelin copied parts of Stairway from Spirit’s single, “Taurus.” Wolfe, who wrote Taurus, stated prior to his death that “it was a rip-off” of his music. His estate now seeks damages and writing credit for Wolfe.

Without opining on whether Stairway actually infringes, after listening to Taurus,  it is safe to say that even casual fans of Zeppelin’s work can likely identify the chords that Wolfe believed Zeppelin to have “ripped off.” There is also little question that Page and Plant had access to Spirit’s work. Between 1968 and 1969, the two bands played five shows together. Spirit played Taurus at each of those shows.

Why now? “Raging Bull” and the Doctrine of Laches

It is possible that a month ago, Spirit’s attorneys may have been reluctant to bring this lawsuit, given how ubiquitous Stairway has been on the radio and elsewhere throughout the past four lawsuit-free decades, during the entirety of which Spirit likely knew of the alleged infringement. While copyright claims can be raised as to sales taking place any time in the three years preceding a lawsuit, the doctrine of laches was thought to bar infringement claims that could have been raised far earlier. Laches is an affirmative defense available to bar claims where a plaintiff has unduly delayed in bringing suit.

The face of the Zeppelin suit makes clear that the basis for the claim was known in 1997, and likely much, much earlier. A previously-uncontested, 40-year-old act of alleged infringement would seemingly be the textbook case for a laches defense.

On May 19, 2014, however, the Supreme Court ruled in Petrella v. Metro-Goldwyn-Mayer, Inc. that the doctrine of laches did not bar the heir to Frank Petrella, co-author of the screenplay for “Raging Bull,” from bringing a copyright claim against the movie studio capitalizing on the work, despite the fact that she knew of the potential for a copyright claim for nearly two decades. The Court, through Justice Ginsburg, stated that “in face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief.” For the attorneys representing a party holding a 40-year-old potential copyright claim against work that continues to net Led Zeppelin millions of dollars each year, the Court’s holding had to be music to their ears.

Remaining Challenges for Spirit

Just because Zeppelin may not have an affirmative defense of laches does not mean that Wolfe’s estate has a smooth path to success. The estate’s attorneys will still have to establish, among other things, that chord progressions are copyrightable and that anything copied from Taurus should not be considered a de minimus use, too minor to be actionable.

Interestingly, this is far from the first time that Led Zeppelin has faced copyright infringement claims. The opening lyrics for “Whole Lotta Love” are remarkably similar to the final verse of the Muddy Waters song “You Need Love.” “The Lemon Song” contains a number of lyrics similar to Howlin’ Wolf’s “Killing Floor,” a song Zeppelin played routinely during the same 1968-1969 American tour in which it opened five shows for Spirit. Copyright infringement suits related to both of these works, as well as several others, resulted in out-of-court settlements and song-writing credit given to the plaintiff. A similar result is not unlikely in this case.

The Supreme Court’s recent decision in Octane Fitness v. ICON has been hailed by patent reform advocates and some commentators as a death blow to so-called “patent trolls,” patent owners who enforce patent rights despite not actually using or licensing the patents in question.  In Octane Fitness, the Court relaxed the standard for awarding attorney’s fees in patent cases.  Many believe that patent trolls, as bad actors, will now run for the hills in fear of paying successful defendants’ fees.  The reality, however, is far more nuanced.  Indeed, patent trolls’ prevalence in United States courts could actually prevent any bright line application of the Octane Fitness rule to patent trolls.

The Octane Fitness Case

At issue in Octane Fitness was the application of a federal statute allowing district courts to award “reasonable attorney fees to the prevailing party” in “exceptional cases.”  The Federal Circuit Court of Appeals had previously interpreted the provision to require findings of “material inappropriate conduct” or that the losing party’s case was both “objectively baseless” and “brought in subjective bad faith.”  Justice Sotomayor, writing for a unanimous Court, found that test too narrow, noting that the attorney’s fees statute “imposes one and only one constraint on district courts’ discretion to award attorney’s fees in patent litigation: The power is reserved for ‘exceptional’ cases.’”  The Court held the statute applied more broadly:

“an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.”

The Court also overturned the high “clear and convincing evidence” threshold, which the Federal Circuit had previously required litigants to satisfy to recover fees, finding that fees should be awarded if a party proves by a preponderance of the evidence that the case is “exceptional.”

Octane Fitness’ Impact

So, how severe a blow is this holding to the average patent troll?  The likelihood is:  Not as fatal as advertised.  Although a defendant that prevails in litigation against a patent troll will now have an easier time establishing that its case is “exceptional,” nothing in the decision suggests that cases brought by patent trolls, (patent owners who don’t use their patents) will automatically be more susceptible to a fee award than any other patent infringement litigant.  To the contrary, Octane Fitness, expressly states that “there is no precise rule or formula for making these determinations.”  Neither party in the Octane Fitness case was a patent troll, nor does the case discuss patent trolls even once.

Patent Trolls Are Not Automatically “Exceptional”

Those suggesting that Octane Fitness will dramatically alter the landscape of patent troll lawsuits, therefore, appear to be assuming that patent trolls, en masse, will fear the prospect of paying the defendants’ legal fees and opt against filing infringement suits.  But Octane Fitness provides patent trolls with plenty of room to maneuver.  The Court notes that “exceptional” means “uncommon, rare, or not ordinary.”  Patent trolls and their counsel, however, can point to substantial data refuting the proposition that their infringement suits are particularly “exceptional.”  A 2013 White House report states that 62% of all infringement suits are brought by patent trolls, who threatened more than 100,000 companies in the year prior to that report.  If such suits make up more than half of the patent suits in the federal courts, can they be said to be, by definition “uncommon, rare, or not ordinary”?

Some Patent Trolls May Be “Exceptional”

This is not to say that patent trolls will be immune from the attorney’s fees provision in question.  Far from it.  The point is simply that the strength of their cases, and the legitimacy of their litigation conduct will more likely be judged on a case-by-case basis.  The same White House report referenced above finds that many patent trolls engage in conduct that most district courts may find exceptional, including:  “focus[ing] on aggressive litigation, using such tactics as: threatening to sue thousands of companies at once, without specific evidence of infringement against any of them; creating shell companies that make it difficult for defendants to know who is suing them; and asserting that their patents cover inventions not imagined at the time they were granted.”

Nonetheless, couldn’t such conduct easily be described as “materially inappropriate” and the cases in question “objectively baseless” and “brought in subjective bad faith”?  If so, do patent trolls truly face an increased risk of paying defendants’ attorney’s fees?  Arguably not, and the prior standard clearly did little to dissuade patent troll infringement suits.

Additionally, defendants, and not only patent trolls, face a less exacting standard for having fees awarded against them.  If the troll has a valid patent and a strong case of infringement, therefore, Octane Fitness could make it twice as expensive for a defendant to fight, as the court could force the defendant to pay the troll’s fees.

In sum, the impact that Octane Fitness will have on patent troll lawsuits is far from clear.  Despite the public policy implications of such suits, they have become so ubiquitous that courts may not be able to deem them per se “exceptional.”  To the extent that the decision in Octane Fitness does result in fewer suits by patent trolls, arguably, the relaxed burden of proof (from clear and convincing to preponderance of the evidence) will have been  more significant than the Court’s revised definition of “exceptional.”  In any event, it is likely that infringement suits brought by patent trolls will continue to be decided on the merits of the particular case and the deftness of the attorneys on either side.