Thursday, 10 April 2014

Illegal download of a cinematographic work in a different language version

Author: Thomas Jochheim (Klinkert Zindel, Partner)

Higher Regional Court of Cologne, file no 6 W 255/12, 1 February 2013; Higher Regional Court of Cologne, file no 6 W 254/12, 23 September 2013

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu051, first published online: April 10, 2014

The granting of rights regarding the German-language version of a cinematographic work may entitle the licensee to take legal action against the illegal download of another language version of that work in Germany.

Legal context

According to German law, a copyright is not transferable, unless it is transferred in execution of a testamentary disposition. The author may grant a right to another person to use the work in a particular manner or in any manner (exploitation right). An exploitation right may be granted as a non-exclusive right or as an exclusive right, and may be limited in respect of place, time and content.

A non-exclusive exploitation right entitles the licensee to use the work in the manner permitted to him. An exclusive exploitation right also entitles the licensee to use the work in the manner permitted to him, but to the exclusion of all other persons, including the licensor. As a matter of fact, the exclusive licensee not only has a ‘positive right’ to use the work, but also a ‘negative right’ of prohibition. He is therefore entitled to take legal actions to assert his claims against infringements as stipulated in s 97 of the German Copyright Act (‘Any person who infringes copyright or any other right protected under this Act may be required by the injured party to eliminate the infringement or, where there is a risk of repeated infringement, may be required by the injured party to cease and desist’).

It is moreover recognized within Germany that the scope of protection of exclusive exploitation rights can be broader than the positive right conferred by them. In a decision of 1999 for instance, the German Supreme Court (Laras Tochter, file no I ZR 65/96—29 April 1999) stated that the right holder of the exclusive exploitation right to reproduce and disseminate a literary work was entitled to prohibit the reproduction and dissemination of an adaptation of that work, even though he was not himself entitled to use the work in this manner.

Facts

In 2013, the Higher Regional Court of Cologne had to decide on two matters regarding illegal downloads of a movie in several foreign-language versions (the ‘Higher Regional Court of Cologne, file no 6 W 255/12, 1 February 2013’) and in the Russian language-version (the ‘Higher Regional Court of Cologne, file no 6 W254/12, 23 September 2013’) via a peer-to-peer network in Germany.

In both cases, the plaintiffs were the licensees of the exclusive exploitation rights of a movie in Germany, including the original English-language version as well as the German version. However, in the first case, the plaintiff′s licence agreement included an additional clause stating that the licensor was not entitled to exploit any language versions other than those licensed to the plaintiff in Germany.

The plaintiffs asserted their claim for disclosure. The request was granted in the first case and denied in the second one.

The Cologne Higher Regional Court stated in both cases that the exclusive exploitation right encompasses a negative right of prohibition, as stipulated in s 97 of the Germany Copyright Act. The court agreed that the claim for disclosure was an auxiliary claim linked to the right of prohibition (s 97 of the Germany Copyright Act). It therefore appeared necessary to make the claim for disclosure dependent on the condition that s 97 of the Germany Copyright Act was fulfilled.

The court further agreed that in order to ensure effective protection, the right of prohibition may be broader than the right holder′s positive right of use. A right holder may therefore be entitled to prohibit a certain use, if that use has an economic impact on its positive rights of use.

As a result, the court found that the plaintiff in the first case had the right to prohibit the foreign-language versions. In particular, it plaintiff referred to the additional clause in the licence agreement and stated that the scope of this clause was to enable the exhaustive and best possible exploitation of that movie in Germany. This scope would, however, be significantly impaired, if people downloaded the movie illegally, especially in foreign-language versions that were widespread in Germany, instead of buying it.

However, in the second case the court denied the plaintiff's right to prohibit the Russian-language version in Germany. Although the plaintiff had the exclusive right to exploit the movie in English, German and also Flemish and Dutch, there was no basis to conclude that he could prohibit all other versions of the movie in Germany. To ensure this, he should have had added an appropriate clause to his licence agreement, but this had not happened.

Moreover, in the court's opinion, it was not evident that the Russian-language version of the movie had any economic impact on the plaintiff's rights. Even though about one million people in Germany have Russian roots, a significant percentage of those people were born in Germany and were unlikely to have a sufficient grasp of Russian to watch a movie in that language. For this reason alone, such people could not be considered interested in the Russian-language version, so the plaintiff's exclusive rights could not be affected by that part of the population. On the other hand, people based in Russian-speaking areas who were interested in the Russian-language version of the movie would not consider buying it in English, German, Flemish or Dutch.

Analysis

The court rightly concludes that the possibility to illegally download a movie in a language version other than the exclusively licensed language version may still have an economic impact on the positive rights of use of the specific right holder.

However, the denial of any economic impact in the second case is not fully convincing. Many people prefer to watch movies in their original version, particularly if this is the English one. Many cinemas offer both original and dubbed versions of foreign movies. Moreover, unlike in Germany or France, it is not common in Eastern Europe to dub all movies, so a significant percentage of the people there are accustomed to watching movies in English. It is therefore unclear why people from Russian-speaking countries would not be at least interested in the original language version of the movie in this case—which would have an economic impact on the plaintiff's rights.

Practical significance

The decisions demonstrate the importance of drafting licence agreements carefully. This applies all the more as s 31(5) of the German Copyright Act states that, if the types of exploitation are not specifically designated when an exploitation right is granted, the types of use to which the right extends shall be determined in accordance with the purpose envisaged by both parties to the contract. This also applies, among other things, to the questions of whether an exploitation right has in fact been granted, whether that right is exclusive or non-exclusive, and how far the exploitation right and the right of prohibition extend. As a result, if not specifically stated otherwise in the agreement, copyright tends to remain with the author.

Friday, 4 April 2014

INTA 2014: JIPLP and other attractions ...

We've already posted an item on the fact that the Journal of Intellectual Property Law & Practice will be represented on the Oxford University Press booth at next month's International Trademark Association Meeting in Hong Kong. This provides a wonderful opportunity for readers, authors and subscribers to express their views and discuss their hope for JIPLP with those responsible for it. And now here's another reason for coming to visit us. According to OUP, there's a further attraction:
Book Signing: A Practical Guide to Trade Mark Law Fifth Edition
Meet the author, Amanda Michaels, 3-4pm, Monday 12th May,
International Trademark Association Annual Meeting, 2014
To purchase your copy and get it signed by the author visit the OUP booth #409
Amanda is a leading practitioner in the field of trade marks as well as a JIPLP contributor. Do come and say "hello" to her -- and to us!

Switzerland still not part of Germany, even for trade mark purposes

Author: Jeremy Phillips (Editor, Journal of Intellectual Property Law & Practice)

Case C-445/12 P Rivella International AG v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), Baskaya Di Baskaya Alim E C Sas, Court of Justice of the European Union (First Chamber), 12 December 2013

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu032, first published online: April 2, 2014

The use of a trade mark in Switzerland may, by its very nature, be deemed to constitute use of that mark in Germany, under the terms of a bilateral treaty between Germany and Switzerland on the reciprocal recognition of use of intellectual property rights, but the effect of that treaty does not extend to such deemed use being use of an earlier mark in Germany under the opposition provisions of the autonomous system for the Community trade mark.

Legal context

Under Article 42(3) of the Regulation 207/2009 on the Community trade mark, an applicant for registration of a Community trade mark is entitled to request an opponent to furnish proof of use of an earlier national trade mark upon which the opposition is founded. Such use must be within the territory of the Member State to which that earlier mark belongs. Article 5 of the 1892 Convention between Switzerland and Germany on the reciprocal protection of patents, designs and trade marks provides that use of a trade mark in Switzerland is the equivalent to the use of that mark in Germany.

Facts

Baskaya applied to register as a Community trade mark a figurative sign, depicted below, in which the word ‘baskaya’ was portrayed beneath a line of five stars on a red oval background.


The goods in respect of which registration was sought were ‘meat, fish, poultry and game; meat extracts; preserved, dried and cooked fruits and vegetables; jellies, jams, fruit sauces; eggs, milk and milk products; edible oils and fats’ (Class 29), ‘coffee, tea, cocoa, sugar, rice, tapioca, sago, artificial coffee; flour and preparations made from cereals, bread, pastry and confectionery, ices; honey, treacle; yeast, baking-powder; salt, mustard; vinegar, sauces (condiments); spices; ice’ (Class 30) and ‘beers; mineral and aerated waters and other non-alcoholic drinks; fruit drinks and fruit juices; syrups and other preparations for making beverages’ (Class 32).


Rivella opposed the application, invoking a likelihood of confusion for the purposes of Article 8(1)(b) of Regulation 40/94 (now Art 8(1)(b) of Regulation 207/2009). The opposition was based on the earlier international figurative mark, depicted above, with effect in Germany, Spain, France, Italy, Austria and the Benelux countries, for ‘beer, ale and porter; mineral and aerated waters and other non-alcoholic drinks; syrups and other preparations for making beverages’ (Class 32).

Baskaya sought, as it was entitled to do, proof of use of the earlier trade mark by Rivella. At this point, events took an unusual turn since, in March 2009, Rivella said that it was maintaining the opposition only in respect of the German part of its international registration; the company submitted a number of documents as proof of use of its mark in Switzerland. It relied, in that regard, on Article 5 of the 1892 Convention between Switzerland and Germany on the reciprocal protection of patents, designs and trade marks. According to Rivella, under that convention, use of its mark in Switzerland was equivalent to its use in Germany. The Opposition Division rejected the opposition for lack of proof of use of the earlier trade mark within Germany since that the documents provided by Rivella showed that the mark cited in opposition was used only in Switzerland and rejected the application of the 1892 Convention.

Rivella then appealed unsuccessfully to the Fourth Board of Appeal. In the view of the Board of Appeal, the only relevant legal framework within which the use of Rivella's mark was to be considered was that of Regulation 207/2009 on the Community trade mark and, more specifically, Articles 42(2) and (3) of that Regulation, under which the earlier trade mark must have been put to genuine use in the Member State in which it was protected.

Rivella then brought an action before the General Court for annulment of the Board of Appeal's decision. The sole basis of this action was that since, under Article 5(1) of the 1892 Convention, a trade mark was deemed to be used in Germany if it was used in Switzerland, Rivella was not further obliged to furnish proof of genuine use of its earlier trade mark in Germany.

The General Court considered that questions relating to the proof furnished in support of the grounds for opposition to an application for registration of a Community trade mark and questions relating to the territorial aspect of the use of marks were governed exclusively by the relevant provisions of Regulation 207/2009, irrespective of the domestic law of the Member States. The national or international nature of an earlier trade mark cited in Community opposition proceedings in no way meant that the national law applicable to that earlier trade mark was applicable in those proceedings. Although procedures for the registration of trade marks were covered by the national law of each Member State, the same could not be said of the determination of the territory in which genuine use of the earlier trade mark must be established, as that question was governed by EU law. Accordingly the General Court dismissed Rivella's action for annulment.

Rivella then appealed further to the Court of Justice of the European Union (CJEU), in essence raising a subtler version of its earlier ground of appeal. The CJEU dismissed the appeal.

Analysis

The appeal turned principally on two propositions. Rivella first argued that the General Court erred in law by applying the genuine use requirement under Article 42(3) to its earlier trade mark, even though that trade mark was an international trade mark rather than a national trade mark and was therefore not covered by those provisions. The CJEU disagreed. Article 42(3) did not, however, distinguish national trade marks from those granted under the international registration system since the term ‘earlier national trade marks’ mentioned in Article 42(3) had to be understood as referring trade marks which had effect in a Member State, regardless of their provenance via national or international grant mechanisms. If this were not so, observed the CJEU, Rivella's argument would circumvent the trade mark protection system of which Articles 42(2) and 42(3) formed part, depriving them of their useful effect.

Rivella next argued that the question of the ‘territorial validity’ of a nationally registered trade mark was exclusively governed by national law, especially in the case of national trade marks which have been registered under international arrangements and which had effect in a Member State. However, Rivella was in effect seeking to plead its German trade mark in the same manner as a national defensive trade mark, but the CJEU in Case C-234/06 P Il Ponte Finanziaria v OHIM [2007] ECR I-7333 had already ruled that a defensive trade mark, under which an earlier trade mark was protected on the basis of national law even if its use could not be established, could not be used to oppose the registration of a Community trade mark.

Practical significance

The line of argument taken by Rivella is one with which many readers will be familiar: a ground of appeal which is too attractive to ignore, yet too flimsy to stand a chance of succeeding.

In legal terms, this opposition is a story of unmitigated defeat for Rivella. In the world of business and commerce, it is something of a triumph in that Baskaya's Community trade mark application has been kept off the register for over six years. Baskaya would have been in a far better position if the Opposition Division had accepted that the use in Switzerland was indeed use in Germany and then dismissed the opposition on the ground that the respective marks were insufficiently similar to one another for there to be any likelihood of confusion, an outcome which in this author's opinion is by far the more probable one.

Monday, 31 March 2014

JIPLP in court

The Journal of Intellectual Property Law & Practice received a welcome citation in Kennametal Inc v Pramet Tools SRO & Another [2014] EWHC 565 (Pat), a 5 March 2014 decision of Henry Carr QC (Sitting as a Deputy Judge of the High Court).  In this patent trial the judge called for assistance from an article by Phillip Johnson. As the judgment indicates:
  1. Section 60(2) [of the UK's Patents Act 1977] is closely based on Article 30 of the Community Patent Convention (now Article 30 of the 1989 Luxembourg Agreement). In Grimme at paragraph 79, Jacob LJ said:
  2. "Advocates should recognise that where a point of patent law of general importance, such as the construction of a provision which by Treaty (either the EPC or the Community Patent Convention) is to be implemented by states parties to those conventions, has been decided by a court, particularly a higher court, of another member state, the decision matters here. For, despite the fact that there is no common ultimate patent court for Europe, it is of obvious importance to all the countries of the European Patent Union or the parties to the Community Patent Convention ("the CPC") that as far as possible the same legal rules apply across all the countries where the provisions of the conventions have been implemented. An important decision in one member state may well be of strong persuasive value in all the others, particularly where the judgment contains clear reasoning on the point."
  3. Counsel were unable to find any decision of another contracting state which deals with this point. At my request, I was referred to an article by Professor Phillip Johnson "Contributing to the wrong: the indirect infringement of patents" (Journal of Intellectual Property Law and Practice, 2010 Volume 5 Number 7) which states at page 516:
  4. "It is not necessary, however, for a person to know he is infringing a patent, only that the means may be used for putting the invention into effect. Accordingly, even if the supplier believed the supply was lawful and non-infringing this is no defence."
  5. This essentially reflects the Claimant's case in relation to Section 60(2). So, in the present case, there is no doubt that the Defendants intended the Pramet inserts should be fitted into the cutter bodies. At that point, assuming that the Pramet inserts satisfied the relevant features of the claim, the combination of cutter body and insert would infringe. That, submitted the Claimant, is enough for the purposes of Section 60(2): if a Defendant intends a particular use to be made of his product it should not matter whether he knows that the resulting combination actually infringes. That must be a matter for the court alone to be decided objectively. Otherwise, a Defendant could escape liability under Section 60(2) by saying that he misunderstood or was ill-advised as to the meaning of the patent.
We are delighted to see Phillip Johnson's article being called for by the judge. The abstract of Phillip's article reads as follows:
Legal context The law of indirect patent infringement is evolving quickly across the various jurisdictions in Europe. The member states of the European Union have similar provisions in their law relating to thing matter by reason of the Community Patent Convention despite the fact it never came into effect.

Key points This article provides a review of the jurisprudence relating to indirect infringement in Europe, with particular emphasis on the law of the United Kingdom. It seeks to provide guidance on the law will develop by comparing the approaches of the Courts in the various Member States.

Practical significance The law in this area is little explored and there have been a number of recent decisions which are little discussed elsewhere.
Phillip Johnson is Associate Professor of Intellectual Property Law, University College Dublin, and a founder member of the The Journal of Intellectual Property Law & Practice editorial board.

Thursday, 27 March 2014

Patent litigants beware: awards of attorneys' fees just got easier with Federal Circuit's Kilopass decision

Authors: Paul Keller and Annsley Merelle Ward (1Allen & Overy, New York and London respectively)

Kilopass Technology, Inc v Sidense Corporation No 2013-1193 (Fed Cir Dec 26, 2013), Court of Appeals for the Federal Circuit, USA

Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu027, first published online: March 27, 2014

In further clarifying the burden of proof required to prove that fee-shifting should apply under 35 USC s 285, the Federal Circuit's decision continues to demonstrate the court's attempts to minimize gamesmanship in patent infringement cases and discourage unsupported allegations from being brought.

Legal context

Unlike in jurisdictions such as England and Wales, there is no presumption under US law that a proportion of the attorneys' fees of the winning party is to be paid by the losing party. Parties instead bear their own legal costs. However, under 35 USC § 285 and, as expounded in the Court of Appeals for the Federal Circuit (CAFC) in Brooks Furniture Manufacturing v Dutailier, Inc, 393 F3d 1378 (Fed Cir 2005), a District Court can decide to depart from that rule in exceptional circumstances. Under that case, a winning party had to prove
* by clear and convincing evidence (Ruiz v AB Chance Co, 234 F3d 654, 669 (Fed Cir 2000)), that the case is ‘exceptional’ (35 USC s 285; Cybor Corp v FAS Techs, Inc, 138 F3d 1448, 1460 (Fed Cir 1998) (en banc)) or, if absent conduct that makes a case ‘exceptional’, the litigation is brought in subjective bad faith and the litigation is objectively baseless (Professional Real Estate Investors v Columbia Pictures Industries, 508 US 49, 60–61), and

* that an award of attorneys' fees is appropriate.
A case is ‘exceptional’ when there has been ‘some material inappropriate conduct related to the matter in litigation, such as wilful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Federal Rule of Civil Procedure 11 or like infractions’ (see Brooks Furniture, above; Cambridge Prods Ltd v Penn Nutrients, Inc 962 F2d 1048, 1050–51 (Fed Cir 1992); Beckman Instruments, Inc v LKB Produkter AB, 892 F2d 1547, 1551 (Fed Cir 1989)). Rule 11 permits courts to impose sanctions where a claim, defence or other legal contentions are ‘not warranted by existing law or by a non-frivolous argument’.

Facts

California-based Kilopass and Canada-based Sidense are competitors in the embedded non-volatile memory (NVM) market. NVM consists of memory devices that retain their information or state when power is removed. In May 2010, Kilopass commenced patent infringement proceedings in the United States District Court for the Northern District of California against Sidense, alleging both literal infringement and infringement under the doctrine of equivalents in respect of three patents related to programmable memory cells comprising of transistors located at the intersection of a column bitline and a row wordline. Claim 1 of the representative patent, US 6 940 751 requires (i) a first and second doped semiconductor region of the memory cell and (ii) that the second doped region be connected to one of the row wordlines.

Before commencing proceedings in 2005, Kilopass instructed a patent firm to assess whether technology described in a Sidense international patent application that was directed to protecting its 1T-Fuse memory product infringed Kilopass's patents. Kilopass was advised that, if Sidense's actual 1T-Fuse product was the same as that described in the international patent application, Sidense's product did in fact infringe Kilopass's patents. However, if that assumption was wrong and Sidense had eliminated any particular claimed element, most notably, the first doped region, and replaced it with a shallow trench isolation region, then Sidense ‘would not infringe [the] claims literally’ (JA 10601 (emphasis in the original)).

Later, Kilopass was informed by its attorneys that the Sidense ‘area of interest’ had indeed been replaced, and that the redesign had avoided infringement of Kilopass's patents or ‘at least make our case much tougher’ (JA 10604). Another firm retained by Kilopass confirmed the earlier advice it had received—although Kilopass had reasonable arguments that Sidense's field oxide region was equivalent to the doped region in Claim 1, arguing literal infringement ‘may be difficult’ (JA 11497).

At trial, the District Court found that Sidense's product did not infringe any of Kilopass's patents. The court's decision was based primarily on the difference in the ‘area of interest’ and the claimed region. The decision was affirmed by the CAFC.

In addition to its finding of no liability, however, the District Court took pains in its decision to discuss what it considered to be Kilopass's ‘gamesmanship’ in the proceedings. Most notably, the court found that Kilopass had made contrary construction arguments to the USPTO's Board of Patent Appeals and Interferences. The court also criticized Kilopass for attempting to advance previously undisclosed arguments on the doctrine of equivalents without the court's permission. This, the court held, was ‘particularly inappropriate in light of evidence that Kilopass has known for many years that Sidense does not literally infringe its patents’ (Kilopass, 2012 WL 6599428, note 8). Following the District Court's ruling, Sidense filed a motion in the District Court seeking an award of over $4.2 million in attorneys' fees under 35 USC s 285.

Relying on the standard set by the CAFC in Books Furniture, the District Court denied Sidense's motion holding that Sidense had failed to demonstrate by ‘clear and convincing evidence’ that Kilopass had brought or maintained its claim in subjective bad faith. Focusing on Kilopass's ‘good faith’ acts–such as having performed a pre-filing investigation and obtaining infringement opinions from two different law firms–the District Court concluded that Kilopass's acts had not raised to the level required by s 285, and could not grant Sidense's motion for fees (ibid, note 3). Sidense appealed to the CAFC.

Analysis

Sidense advanced four arguments before the CAFC. First, it argued that the District Court applied the wrong legal standard in requiring that it be shown that Kilopass had actual knowledge that its case had no objective foundation (MarcTec, LLC v Jonson & Johnson 664, F3d 907 (Fed Cir 2012)). The CAFC agreed. To demonstrate bad faith for s 285 purposes, proof that the plaintiff was reckless is all that is required (ie, it was known or it should have been known that there was an objective lack of foundation in the claim: Highmark v Alcare Health Management, 687 F3d 1300 (Fed Cir 2012)). The CAFC further clarified that in considering a party's subjective state of mind, courts must take into account ‘the totality of the circumstances’. Focusing narrowly on only on the evidence of ‘good faith,’ as the District Court did, is inadequate under s 285. Objective factors, including the objective merits of Kilopass's claim, must also be taken into account (Professional Real Estate Investors, p 16).

Secondly, Sidense argued that instead of having to prove bad faith and objective baselessness to satisfy the ‘exceptional’ standard under s 285, proving objective baselessness should be enough. Although the CAFC disagreed and re-affirmed that the ‘exceptionality’ inquiry under s 285 requires an analysis of both objective baselessness and subjective bad faith, it did agree that a showing of objective bad faith alone may justify a finding of exceptionality under s 285 (Professional Real Estate Investors, p 22). The Appeals Court found that if such an objective bad faith showing is made, the subjective bad faith requirement ‘may prove to have little effect on this case, as well as many that follow’ (ibid, p 23).

Third, Sidense argued that a winning party should be able to prove exceptionality by a preponderance of evidence, not ‘clear and convincing’ evidence. Here, although the particular CAFC panel hearing the case was sympathetic to Sidense's views, it was bound by the court's previous precedents, and was not in a position to reverse those now. Specifically, in reviewing the origin of the clear and convincing standard in ‘exceptionality’ cases, the CAFC panel reviewed the Supreme Court's decision in Virtue v Creamery Package Manufacturing Company, 227 US 8, 37–38 (1913) and the pronouncement that ‘an assertion of infringement of a duly granted patent is made in good faith’. The panel found, however, that Virtue did not record any such presumption or any requirement that a defendant needs to overcome such a presumption by clear and convincing evidence (Highmark, 687 F3d at 1310 (quoting Medtronic Navigation, Inc v BrainLAB Medizinische Computersysteme GmbH, 603 F3d 943, 954 (Fed Cir 2010)). Other CAFC cases that referred to the clear and convincing standard of proof under s 285 were limited to cases of fraud. Reactive Metals & Allows Corp v ESM Inc, 769 F2d 1578 expanded the clear and convincing burden to all aspects of the s 285 analysis. The panel found that the historical expansion of the standard was ‘unneeded’ and that a ‘preponderance-of-the-evidence standard is typical in civil cases–particularly with respect to compensatory provisions such as Section 285’ (Professional Real Estate Investors, p 24). It could not, however, reverse the full Appeal Court's precedent, and thus could not accept Sidense's position.

Finally, Sidense argued that instead of requiring that a case be objectively baseless to support fee-shifting in the absence of litigation misconduct, the court should find that fee-shifting is appropriate when a patentee has filed or maintained a patent infringement suit that merely has little likelihood of success. The CAFC considered this to be the weakest of the four arguments, holding that in light of the Supreme Court's decision in Professional Real Estate Investors, Inc v Columbia Pictures Industries, Inc 508 US 49 (1993) as long as the patentee has an objectively reasonable basis for its claim, then s 285 fees should not be awarded. The CAFC reiterated that even if a defendant cannot show that a patentee's claim was objectively baseless, there are other bases for fee-shifting under s 285, ie litigation misconduct, wilful infringement or unprofessional behaviour (MarcTec, LLC and Monolithic Power, Sys Inc v O2 Micro International Ltd 726 F3d 1359, 1366 (Fed Cir 2013)). Trial courts retain broad discretion to make findings of exceptionality under s 285 in a wide variety of circumstances; proving objective baselessness and subjective bad faith is just one of them.

In a concurring opinion, Chief Judge Rader endorsed Sidense's arguments that objective baselessness and proof by a preponderance of the evidence should be sufficient for an award of attorneys' fees. He stated that trial judges should be able to assess what fees should be awarded but that Brooks Furniture ‘drastically altered’ (Professional Real Estate Investors, p 23) earlier jurisprudence that gave judges authority to assess what fees should be awarded in the totality of the circumstances. In his opinion, this decision unfairly restricted the discretion of judges to award fees.

The CAFC therefore vacated the District Court's decision denying Sidense's motion for attorney's fees and remanded for consideration whether Kilopass's doctrine of equivalents theory was objectively baseless and then, whether the totality of the circumstances demonstrated that Kilopass acted with subjective bad faith. If the District Court considers that the case is exceptional, then it should determine whether, in its discretion, it should award attorneys' fees to Sidense under s 285 or on alternative grounds, if any exist.

Practical significance

The required showing of exceptionality under s 285 has changed. If, under the totality of the circumstances, an alleged infringer can show by clear and convincing evidence that the patentee's assertions were ‘objectively baseless’, an award of attorneys' fees will be justified. As such, patent litigants considering whether to pursue ‘aggressive’ tactics should take pause and carefully consider the potential risk of losing the matter and the likelihood that they will be required to pay the attorneys' fees of the other side. This additional assessment is important especially now that the impact of non-practising entities (NPEs) is being scrutinized by the judicial and legislative branches of the US government.

Indeed, according to a 2013 report published by the US Government Accountability Office (GAO), between 2007 and 2011 patent infringement suits brought by NPEs in the USA accounted for 19 per cent of all patent lawsuits (United States Government Accountability Office, Report to Congressional Committees, August 2013, ‘Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality’, http://www.gao.gov/assets/660/657103.pdf (accessed 29 January 2014)). Although the GAO report did not touch fully on the litigation cost element, the report cited a 2011 American Intellectual Property Lawyers Association survey of patent lawyers that showed that the costs of defending one patent infringement lawsuit was between $650 000 to $5 million in 2011 (AIPLA, Report of the Economic Survey 2011 (Arlington, VA: July 2011)). This decision highlights the risks to those litigants who are not pursuing their claims in good faith but are gaming the litigation process for an improper purpose.