Highmark Inc. v. Allcare Health Management System, Inc.

(Slip Opinion) OCTOBER TERM, 2013 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
HIGHMARK INC. v. ALLCARE HEALTH
MANAGEMENT SYSTEM, INC.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FEDERAL CIRCUIT
No. 12–1163. Argued February 26, 2014 —Decided April 29, 2014
Petitioner Highmark Inc. moved for fees under the Patent Act’s fee-
shifting provision, which authorizes a district court to award attor-
ney’s fees to the prevailing party in “exceptional cases.” 35 U. S. C.
§285. The District Court found the case “exceptional” and granted
Highmark’s motion. The Federal Circuit, reviewing the District
Court’s determination de novo, reversed in part.
Held: All aspects of a district court’s exceptional-case determination
under §285 should be reviewed for abuse of discretion. Prior to Oc-
tane Fitness, LLC v. ICON Health & Fitness, Inc., ante, p. ___, this
determination was governed by the framework established by the
Federal Circuit in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc.,
393 F. 3d 1378. Octane rejects the Brooks Furniture framework as
unduly rigid and holds that district courts may make the exceptional-
case determination under §285 in the exercise of their discretion.
The holding in Octane settles this case. Decisions on “matters of dis-
cretion” are traditionally “reviewable for ‘abuse of discretion,’ ” Pierce
v. Underwood, 487 U. S. 552, 558, and this Court previously has held
that to be the proper standard of review in cases involving similar de-
terminations, see, e.g., id., at 559; Cooter & Gell v. Hartmarx Corp.,
496 U. S. 384, 405. The exceptional-case determination is based on
statutory text that “emphasizes the fact that the determination is for
the district court,” Pierce, 487 U. S., at 559; that court “is better posi-
tioned” to make the determination, id., at 560; and the determination
is “multifarious and novel,” not susceptible to “useful generalization”
of the sort that de novo review provides, and “likely to profit from the
experience that an abuse-of discretion rule will permit to develop,”
id., at 562. Pp. 4–5.
2 HIGHMARK INC. v. ALLCARE HEALTH MANAGEMENT
SYSTEM, INC.
Syllabus
687 F. 3d 1300, vacated and remanded.
SOTOMAYOR, J., delivered the opinion for a unanimous Court.
Cite as: 572 U. S. ____ (2014) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 12–1163
_________________
HIGHMARK INC., PETITIONER v. ALLCARE HEALTH
MANAGEMENT SYSTEM, INC.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT
[April 29, 2014]
JUSTICE SOTOMAYOR delivered the opinion of the Court.
Section 285 of the Patent Act provides: “The court in
exceptional cases may award reasonable attorney fees to
the prevailing party.” 35 U. S. C. §285. In Brooks Furni-
ture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F. 3d 1378(2005), the United States Court of Appeals for the Federal
Circuit interpreted §285 as authorizing fee awards only in
two circumstances. It held that “[a] case may be deemed
exceptional” under §285 “when there has been some mate-
rial inappropriate conduct,” or when it is both “brought in
subjective bad faith” and “objectively baseless.” Id., at
1381. We granted certiorari to determine whether an
appellate court should accord deference to a district court’s
determination that litigation is “objectively baseless.” On
the basis of our opinion in Octane Fitness, LLC v. ICON
Health & Fitness, Inc., ante, p. ___, argued together with
this case and also issued today, we hold that an appellate
court should review all aspects of a district court’s §285
determination for abuse of discretion.
I
Allcare Health Management System, Inc., owns U. S.
2 HIGHMARK INC. v. ALLCARE HEALTH MANAGEMENT
SYSTEM, INC.
Opinion of the Court
Patent No. 5,301,105 (’105 patent), which covers “utiliza-
tion review” in “ ‘managed health care systems.’ ”1 687
F. 3d 1300, 1306 (CA Fed 2012). Highmark Inc., a health
insurance company, sued Allcare seeking a declaratory
judgment that the ’105 patent was invalid and unenforce-
able and that, to the extent it was valid, Highmark’s
actions were not infringing it. Allcare counterclaimed for
patent infringement. Both parties filed motions for sum-
mary judgment, and the District Court entered a final
judgment of noninfringement in favor of Highmark. The
Federal Circuit affirmed. 329 Fed. Appx. 280 (2009) (per
curiam).
Highmark then moved for fees under §285. The District
Court granted Highmark’s motion. 706 F. Supp. 2d 713(ND Tex. 2010). The court reasoned that Allcare had
engaged in a pattern of “vexatious” and “deceitful” conduct
throughout the litigation. Id., at 737. Specifically, it
found that Allcare had “pursued this suit as part of a
bigger plan to identify companies potentially infringing
the ’105 patent under the guise of an informational sur-
vey, and then to force those companies to purchase a
license of the ’105 patent under threat of litigation.” Id.,at 736–737. And it found that Allcare had “maintained
infringement claims [against Highmark] well after such
claims had been shown by its own experts to be without
merit” and had “asserted defenses it and its attorneys
knew to be frivolous.” Id., at 737. In a subsequent opin-
ion, the District Court fixed the amount of the award at
$4,694,727.40 in attorney’s fees and $209,626.56 in ex-
penses, in addition to $375,400.05 in expert fees. 2010 WL
6432945, *7 (ND Tex., Nov. 5, 2010).
The Federal Circuit affirmed in part and reversed in
——————
1 “ ‘Utilization review’ is the process of determining whether a health
insurer should approve a particular treatment for a patient.” 687 F. 3d,
at 1306.
Cite as: 572 U. S. ____ (2014) 3
Opinion of the Court
part. 687 F. 3d 1300. It affirmed the District Court’s
exceptional-case determination with respect to the allega-
tions that Highmark’s system infringed one claim of the
’105 patent, id., at 1311–1313, but reversed the determi-
nation with respect to another claim of the patent, id., at
1313–1315. In reversing the exceptional-case determina-
tion as to one claim, the court reviewed it de novo. The
court held that because the question whether litigation is
“objectively baseless” under Brooks Furniture “ ‘is a ques-
tion of law based on underlying mixed questions of law
and fact,’ ” an objective-baselessness determination is
reviewed on appeal “ ‘de novo’ ” and “without deference.”
687 F. 3d, at 1309; see also ibid., n. 1. It then determined,
contrary to the judgment of the District Court, that “All-
care’s argument” as to claim construction “was not ‘so
unreasonable that no reasonable litigant could believe it
would succeed.’ ” Id., at 1315. The court further found
that none of Allcare’s conduct warranted an award of fees
under the litigation-misconduct prong of Brooks Furniture.
687 F. 3d, at 1315–1319.
Judge Mayer dissented in part, disagreeing with the
view “that no deference is owed to a district court’s finding
that the infringement claims asserted by a litigant at trial
were objectively unreasonable.” Id., at 1319. He would
have held that “reasonableness is a finding of fact which
may be set aside only for clear error.” Ibid. The Federal
Circuit denied rehearing en banc, over the dissent of five
judges. 701 F. 3d 1351 (2012). The dissenting judges
criticized the court’s decision to adopt a de novo standard
of review for the “objectively baseless” determination as an
impermissible invasion of the province of the district
court. Id., at 1357.
We granted certiorari, 570 U. S. ___ (2013), and now
vacate and remand.
4 HIGHMARK INC. v. ALLCARE HEALTH MANAGEMENT
SYSTEM, INC.
Opinion of the Court
II
Our opinion in Octane Fitness, LLC v. ICON Health &
Fitness, Inc., rejects the Brooks Furniture framework as
unduly rigid and inconsistent with the text of §285. It
holds, instead, that the word “exceptional” in §285 should
be interpreted in accordance with its ordinary meaning.
Ante, at 7. An “exceptional” case, it explains, “is simply
one that stands out from others with respect to the sub-
stantive strength of a party’s litigating position (consider-
ing both the governing law and the facts of the case) or the
unreasonable manner in which the case was litigated.”
Ante, at 7–8. And it instructs that “[d]istrict courts may
determine whether a case is ‘exceptional’ in the case-by-
case exercise of their discretion, considering the totality of
the circumstances.” Ante, at 8. Our holding in Octane
settles this case: 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.
Traditionally, decisions on “questions of law” are “re-
viewable de novo,” decisions on “questions of fact” are
“reviewable for clear error,” and decisions on “matters of
discretion” are “reviewable for ‘abuse of discretion.’ ”
Pierce v. Underwood, 487 U. S. 552, 558 (1988). For rea-
sons we explain in Octane, the determination whether a
case is “exceptional” under §285 is a matter of discretion.
And as in our prior cases involving similar determina-
tions, the exceptional-case determination is to be reviewed
only for abuse of discretion.2 See Pierce, 487 U. S., at 559(determinations whether a litigating position is “substan-
——————
2 The abuse-of-discretion standard does not preclude an appellate
court’s correction of a district court’s legal or factual error: “A district
court would necessarily abuse its discretion if it based its ruling on an
erroneous view of the law or on a clearly erroneous assessment of the
evidence.” Cooter & Gell v. Hartmarx Corp., 496 U. S. 384, 405 (1990).
Cite as: 572 U. S. ____ (2014) 5
Opinion of the Court
tially justified” for purposes of fee-shifting under the
Equal Access to Justice Act are to be reviewed for abuse of
discretion); Cooter & Gell v. Hartmarx Corp., 496 U. S.
384, 405 (1990) (sanctions under Federal Rule of Civil
Procedure 11 are to be reviewed for abuse of discretion).
As in Pierce, the text of the statute “emphasizes the fact
that the determination is for the district court,” which
“suggests some deference to the district court upon ap-
peal,” 487 U. S., at 559. As in Pierce, “as a matter of the
sound administration of justice,” the district court “is
better positioned” to decide whether a case is exceptional,
id., at 559–560, because it lives with the case over a pro-
longed period of time. And as in Pierce, the question is
“multifarious and novel,” not susceptible to “useful gener-
alization” of the sort that de novo review provides, and
“likely to profit from the experience that an abuse-of-
discretion rule will permit to develop,” id., at 562.
We therefore hold that an appellate court should apply
an abuse-of-discretion standard in reviewing all aspects of
a district court’s §285 determination. Although questions
of law may in some cases be relevant to the §285 inquiry,
that inquiry generally is, at heart, “rooted in factual de-
terminations,” Cooter, 496 U. S., at 401.
* * *
The judgment of the United States Court of Appeals for
the Federal Circuit is vacated, and the case is remanded
for further proceedings consistent with this opinion.
It is so ordered.