We have entered a new era where the prevailing party in a patent litigation has much better odds of recovering their attorney fees. “Until recently, winning hasn’t felt much like winning, particularly for defendants.” (Judge Grewal in Site Update Solutions v Accor) All this changed last year when the Supreme Court established a more flexible standard in Octane Fitness for determining when a patent case is exceptional, the precondition to awarding fees under the applicable fee shifting statute. Now, an exceptional case is “simply one that stands out from others.”
District Courts have begun to implement the new standard and the results are noteworthy for a number or reasons, not the least of which is whether and how fees are awarded where the prevailing party has paid a flat fee to its counsel (a fixed or set amount via lump sum or installments) as opposed to hourly fees.
In one such case, Parallel Iron v NetApp, the Delaware District Court rejected the losing party’s argument that flat fees allegedly caused the winning party’s counsel to frontload unnecessary work. The Court’s instead observed that a flat fee structure incents counsel to postpone work as opposed to doing more work sooner. While the Court is correct, it’s reasoning does not capture the more fundamental behavior encouraged by a flat fee, which is the huge incentive to lower the cost of producing legal services.