§ 285 Fee-Shifting

The "Exceptional Case" Standard Under § 285 After Octane Fitness

An "exceptional case" under 35 U.S.C. § 285 "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." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014). The Supreme Court discarded the Brooks Furniture framework as "unduly rigid" in favor of that flexible, equitable inquiry: district courts decide case by case, in their discretion, on the totality of the circumstances, and the movant need only prove entitlement by a preponderance of the evidence.

The inquiry proceeds in two steps. The district court first determines whether the case is "exceptional"; only if it is does the court decide, in its discretion, whether to award fees to the prevailing party. Luv N' Care, Ltd. v. Laurain, 98 F.4th 1081 (Fed. Cir. 2024) polices the first step: a district court need not articulate its assessment of every consideration, but it "must actually assess the totality of the circumstances." Because the merits rulings were themselves being vacated and remanded, the totality could not yet be assessed, and the Federal Circuit vacated the fee determination for reevaluation at the case's conclusion.

On the substantive-strength prong, losing is not enough. Fees under § 285 "are not a penalty for losing a patent infringement suit" but a form of sanction where, for example, a party advances an argument wholly unsupported by the law. In re PersonalWeb Technologies LLC, 85 F.4th 1148 (Fed. Cir. 2023). A $5.1 million award stood on exactly those facts: the patentee's claims were objectively baseless, and its constantly changing infringement theories obfuscated the merits of its case — "[e]xceptionality cannot hide behind a claim of zealous representation."

The weakness prong guards against hindsight as well. When a district court declines to end a case on summary judgment and allows the plaintiff's case to proceed, it "may have effectively determined" that the position was not objectively baseless, "making it nearly impossible" for the case to stand out as lacking substance for that period of the litigation. OneSubsea IP UK Limited v. FMC Technologies, Inc., 68 F.4th 1285 (Fed. Cir. 2023) affirmed a denial of fees on that reasoning, and a case is not exceptional simply because a party offered and relied on evidence that was ultimately found inadmissible.

The second route to exceptionality — the unreasonable manner in which the case was litigated — does not require independently sanctionable behavior; Octane Fitness expressly contemplated fee awards for unreasonable conduct that is "not necessarily independently sanctionable." Nor is litigation misconduct a prerequisite to an exceptional-case finding, and although prevailing on inequitable conduct "often makes a case 'exceptional,'" district courts may award fees on that basis without being required to do so. Energy Heating, LLC v. Heat On-The-Fly, LLC, 15 F.4th 1378 (Fed. Cir. 2021).

Appellate review stays deferential at every step: exceptional-case determinations and fee awards are reviewed for abuse of discretion, and the challenger must show "a clear error of judgment in weighing relevant factors" or a decision resting on an error of law or clearly erroneous factual findings. In re PersonalWeb Technologies LLC, 85 F.4th 1148 (Fed. Cir. 2023). That deference makes the district-court record decisive — § 285 disputes are won or lost by documenting either the unusual substantive weakness of the opposing position or the specific ways the case was litigated unreasonably.