The unanimous Supreme Court ruling will make it easier for companies such as Octane Fitness to recover attorneys' fees in cases that are deemed "objectively baseless" and filed in bad faith.
Octane Fitness, Brooklyn Park, MN, got a favorable ruling from the U.S. Supreme Court on Tuesday. Now its case involving Icon Health and Fitness goes back to district court.
The unanimous Supreme Court ruling will make it easier for companies such as Octane Fitness to recover attorneys' fees in cases that an appeals court referred to as "objectively baseless" and filed in bad faith.
According to an Octane Fitness press release, Justice Sonia Sotomayor wrote in the ruling, "A case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award."
John Barr, a partner for Houston-based law firm Bracewell & Giuliani LLP (which did not represent either party in this case), told Club Industry that the Supreme Court found the prior legal test for determining whether or not a case was "exceptional" was wrong.
"Consequently, the Supreme Court remanded the case back to the district court to apply the new test that the Supreme Court adopted in its opinion," Barr says. "Once the new test for fees is applied by the district court, the outcome could be different, and the case could be found to be 'exceptional' or it could be the same."
Barr adds that the case could then be appealed again based on the argument that the district court made a mistake in how it applied the new test. That depends on what the district court does on remand, he says.
"There is also a new standard of review to be applied by the appellate court to a subsequent district court decision," Barr says. "The new standard of review will be the more difficult to overturn 'abuse of discretion' standard than the old 'de novo' test."
Icon Health and Fitness, Logan, UT, sued Octane Fitness for patent infringement involving two series of elliptical machines. The U.S. District Court for the District of Minnesota ruled in favor of Octane Fitness on June 17, 2011. But later that year, on Sept. 6, the court denied Octane's motion for the attorneys' fees. Icon's patent infringement claim was once again denied by the U.S. Court of Appeals for the Federal Circuit in a ruling on Oct. 24, 2012, and again, the case was not deemed "exceptional" for Octane Fitness to reclaim the attorneys' fees.
"We are thrilled to be in the position of helping relieve the burden of meritless lawsuits on businesses across all industries with this historic decision," Dennis Lee, president and CEO of Octane Fitness, said about the Supreme Court ruling. "We take intellectual property very seriously and have spent six years defending against this unjustified allegation."
Octane Fitness says its requested reimbursement is $1.8 million in attorneys' fees. A spokesperson for Octane Fitness told Club Industry its attorneys do not yet know how long it will take for the district court to rule on the case.
A spokesperson for ICON Health and Fitness declined comment to Club Industry on the Supreme Court ruling, as the case is still under pending litigation.