In the case of Highmark Inc. v. Allcare Health Management Sys., the US Supreme Court is scheduled to rule on whether a district court’s finding that patent infringement litigation was objectively baseless, and thus supported an award of attorneys’ fees to the defendant, is best decided by a trial court judge.
Allcare is the owner of US Patent No. 5,301,105, which is directed to “managed health care systems” used by organizations such as insurance companies to interact with health care providers.
In 2001, Allcare hired a market research firm to interview managed care companies such as Highmark. Highmark’s answers suggested to Allcare that it might be infringing the ‘105 patent. Allcare contacted Highmark and encouraged it to consider taking a license to the patent.
Highmark argued that it did not infringe the patent because, in Highmark’s view, the patent’s claims did not cover Highmark’s system. Highmark also argued that the patent was unenforceable due to Allcare’s inequitable conduct.
When the parties we unable to negotiate an agreement, Highmark sued Allcare for patent infringement.
A special master found that there was no infringement as a matter of law and recommended that summary judgment of non-infringement be granted. The district court then dismissed the case. Allcare appealed, and the Federal Circuit affirmed the summary judgment.
While the appeal on the merits was pending, Highmark moved for an “exceptional-case” finding and Rule 11 sanctions against Allcare. Highmark called Allcare a “troll” who “sells no products” and “offers no services” but tries to make money by licensing its patent or threatening litigation.
In 2010, the district court awarded Highmark $4,694,740 in attorneys’ fees and $209,626 in costs based on a finding that the dispute was an “exceptional case.”
Allcare appealed, and the Federal Circuit reviewed the district court’s grounds for its exceptional-case determination de novo. The circuit court deferred to the district court, finding that it “did not clearly err in concluding that Allcare’s…allegations were brought in subjective bad faith.”