Patent Assertion Entity Activity

For the 23% of cases that terminated without a settlement, termination was generally due to the grant of
a dispositive motion in favor of the defendant or voluntary withdrawal by the plaintiff. One Responding
PAE reported that one of its Affiliates was sanctioned under Rule 11 of the Federal Rules of Civil
Procedure in multiple proceedings before the same court involving the same asserted patent. 215
Responding PAEs reported no instances during the study period in which courts awarded fees pursuant
to 35 U.S.C. § 285, which allows the district court, in exceptional cases, to grant reasonable attorney
fees to the prevailing party. The FTC, however, reviewed the dockets of lawsuits pending at the close of
the study period and found several cases in which Study PAEs were assessed fees pursuant to Section
285 after the study ended.
In April 2014, five months before the FTC’s study period ended, the Supreme Court issued two
decisions that lowered the standard for a successful litigant to obtain fees pursuant to 35 U.S.C. § 285. 216
Under the old standard, a case was exceptional under § 285 only when there was “material inappropriate
conduct,” or when it was both “brought in subjective bad faith,” and “objectively baseless.” 217 In Octane
Fitness, LLC, however, the Court held that 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.” 218
Because Highmark and Octane Fitness lowered the standard for a successful litigant to obtain fees, the
FTC might have observed more fee awards under § 285 if the entire study period had occurred after
these decisions.
215
Federal Rule of Civil Procedure 11 allows a court to sanction an attorney or its client for filings that lack factual
investigation, or are frivolous or harassing. FED. R. CIV. P. 11. See, e.g., Advanced Video Techs. LLC v. HTC Corp., No. 11
Civ. 06604 (CM), 2015 U.S. Dist. LEXIS 122423, at *35–43 (S.D.N.Y. Aug. 25, 2015) (considering but rejecting Rule 11
sanctions).
216
Highmark Inc. v. Allcare Health Mgmt. Sys., 134 S. Ct. 1744 (2014); Octane Fitness, LLC v. ICON Health & Fitness,
Inc., 134 S. Ct. 1749 (2014).
217
Highmark, 134 S. Ct. at 1746 (quoting Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 383 F.3d 1378 (Fed. Cir. 2005)).
218
Octane Fitness, 134 S. Ct. at 1751; see also id. at 1756 (holding that litigants establish their entitlement to fees under
section 285 by a preponderance of the evidence); Highmark, 134 S.Ct. at 1748 (“Because § 285 commits the determination
whether a case is ‘exceptional’ to the discretion of the district court, that decision is to be reviewed on appeal for abuse of
discretion.”).
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