Patent Fee Shifting: Kilopass Technology Inc. v. Sidense Corp.

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In a typical litigation, each party in a legal dispute is responsible for paying their own legal fees.  However, there are some instances where a losing party must pay for the legal fees of the prevailing party.  In patent law, this occurs in so called “frivolous” litigation.

Until recently, judges would approve fee-shifting in patent cases if one party acted in bad faith.  This is a difficult standard to prove as the prevailing party must prove the intent of the losing party.  Congress has been debating whether to change this standard.  In December of 2013, the House of Representatives passed a bill which would require judges to consider a “reasonably justified” standard.  Thus a losing party would have to pay the legal fees of a prevailing party unless the legal position of the losers was reasonably justified.  This bill has not yet been taken up by the Senate and the Senate has not drafted its own bill on the subject.

However current patent litigants may not need to wait for Congressional action.  On December 26, 2013, the Court of Appeals for the Federal Circuit provided an opinion for Kilopass Technology Inc. v. Sidense Corp.  The main issue in this case was whether Sidense’s request for fee shifting was properly denied.  In a unanimous decision, the Court of Appeals ruled that a “smoking gun” was not required to prove bad faith on Kilopass’s part.  Instead a misguided belief based on zealousness rather than reason is enough to justify fee shifting.

This new standard is much friendlier to defendants in patent lawsuits.  For example, the Court of Appeals only needed to see that Kilopass ignored numerous differences between the patent claims and Sidense’s products to justify fee shifting.  Instead of needing a smoking gun, prevailing parties can use what is essentially a reasonableness standard.  This is bad news for would be patent trolls because potential defendants will feel more comfortable taking a case to court if they can shift their legal fees.  Litigation fees can become expensive rather quickly and may deter some frivolous lawsuits from being filed.

If you need representation in a patent dispute or require any assistance from an intellectual property attorney, you can contact Stone Law at 732-444-6303 or contact us on our website.