NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
HIGHMARK, INC.,
Plaintiff-Appellee,
v.
ALLCARE HEALTH MANAGEMENT SYSTEMS,
INC.,
Defendant-Appellant.
______________________
2011-1219
______________________
Appeal from the United States District Court for the
Northern District of Texas in No. 4:03-CV-1384-Y, Senior
Judge Terry R. Means.
______________________
Decided: September 5, 2014
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CYNTHIA E. KERNICK, Reed Smith LLP, of Pittsburgh,
Pennsylvania, for plaintiff-appellee. With her on the brief
were JAMES C. MARTIN and THOMAS M. POHL. Of counsel
was KEVIN S. KATONA.
DONALD R. DUNNER, Finnegan, Henderson, Farabow,
Garrett & Dunner, LLP, of Washington, DC, for defend-
ant-appellant. With him on the brief were DON O.
BURLEY, JASON W. MELVIN, and CORA R. HOLT; and ERIK
2 HIGHMARK, INC. v. ALLCARE HEALTH MANAGEMENT
R. PUKNYS, of Palo Alto, California. Of counsel was DAN
S. BOYD, The Boyd Law Firm, of Dallas, Texas.
______________________
Before NEWMAN, MAYER, and DYK, Circuit Judges.
PER CURIAM.
This case comes to us on remand from the Supreme
Court, which vacated our earlier opinion in which we set
aside the district court’s award of attorney fees to appellee
Highmark, Inc. (Highmark). We vacate and remand to the
district court.
Highmark filed this suit in the Western District of
Pennsylvania in 2003, seeking a declaratory judgment
that all claims of U.S. Patent No. 5,301,105 (the ’105
patent), owned by Allcare Health Management Systems,
Inc. (Allcare), were invalid, unenforceable, and not in-
fringed by Highmark’s healthcare management system.
After obtaining a transfer to the Northern District of
Texas, Allcare counterclaimed for infringement of three
claims of the ’105 patent. The district court appointed a
special master to aid in conducting claim construction and
disposing of summary judgment motions. Adopting the
special master’s recommendations on both issues, the
district court granted summary judgment of noninfringe-
ment to Highmark and entered final judgment in October
2008. This court affirmed without written opinion.
During the pendency of the appeal, Highmark moved
the district court for sanctions under Rule 11 of the Fed-
eral Rules of Civil Procedure and an award of attorney
fees under section 285 of the Patent Act, 35 U.S.C. § 285.
The district court granted attorney fees under section 285
as to Allcare, finding that (1) Allcare’s allegations of
infringement were frivolous as to two of the three assert-
ed ’105 patent claims (claims 102 and 52), and (2) Allcare
had engaged in litigation misconduct by asserting a
meritless preclusion defense, shifting its position on claim
HIGHMARK, INC. v. ALLCARE HEALTH MANAGEMENT 3
construction throughout the case, and making misrepre-
sentations to the Western District of Pennsylvania in
connection with the transfer. The district court also
granted sanctions against Allcare’s attorneys under Rule
11. The district court entered an award of approximately
$4.7 million in attorney fees against Allcare under section
285 and approximately $375,000 in sanctions against
Allcare’s attorneys under Rule 11. On reconsideration, the
district court vacated the sanctions against Allcare’s
attorneys. Allcare appealed the award of attorney fees.
Under the standards then prevailing, a party seeking
attorney fees under § 285 had to establish that the case
was “exceptional” by clear and convincing evidence. See
Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687
F.3d 1300, 1308 (Fed. Cir. 2012) (citing Forest Labs., Inc.
v. Abbott Labs., 339 F.3d 1324, 1327 (Fed. Cir. 2003)).
Furthermore, under the two-part Brooks Furniture test,
“absent misconduct in the course of the litigation or in
securing the patent, sanctions [could] be imposed against
the patentee only if two separate criteria [we]re satisfied:
(1) the litigation [was] brought in subjective bad faith,
and (2) the litigation [was] objectively baseless.” Id.
(citing Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc.,
393 F.3d 1378, 1381 (Fed. Cir. 2005)). We reviewed a
district court’s finding of subjective bad faith for clear
error and its finding of objective reasonableness without
deference. See id. at 1309–10.
Applying these standards to Allcare’s appeal as to the
claim construction issue, we affirmed in part, reversed in
part, and remanded for further proceedings. As to one of
the two claims for which the district court found Allcare’s
assertion of infringement frivolous, claim 102, we agreed,
concluding that “Allcare’s allegations . . . warranted an
exceptional case finding.” Id. at 1313. But we disagreed
with the district court’s conclusion on the other allegedly
frivolous infringement claim, claim 52, finding that “All-
care’s argument with respect to this [claim] was not ‘so
4 HIGHMARK, INC. v. ALLCARE HEALTH MANAGEMENT
unreasonable that no reasonable litigant could believe it
would succeed.’” Id. at 1315 (quoting iLOR, LLC v.
Google, Inc., 631 F.3d 1372, 1378 (Fed. Cir. 2011)). We
also set aside the district court’s findings of litigation
misconduct, although we did not apply the two-part
Brooks Furniture test.
Following our decision, the Supreme Court granted
certiorari to review this court’s practice of reviewing
exceptional case findings without deference. The Court
held that de novo review of a district court’s objective
unreasonableness finding was incorrect, and that “an
appellate court should review all aspects of a district
court’s § 285 determination for abuse of discretion.”
Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S.
Ct. 1744, 1747 (2014). The court clarified, however, that
“the abuse-of-discretion standard does not preclude an
appellate court’s correction of a district court’s legal or
factual error” because “‘[a] district would necessarily
abuse its discretion if it based its ruling on an erroneous
view of the law or a clearly erroneous assessment of the
evidence.’” Id. at 1748 n.2 (quoting Cooter & Gell v. Hart-
marx Corp., 496 U.S. 384, 405 (1990)). The case was
remanded to us for further proceedings.
In a companion case, Octane Fitness, LLC v. Icon
Health & Fitness, Inc., the Supreme Court also rejected
the “rigid” two-part Brooks Furniture test, holding that
“an ‘exceptional’ case [warranting attorney fees] is simply
one that stands out from others with respect to the sub-
stantive strength of a party’s litigating position . . . or the
unreasonable manner in which the case was litigated.”
134 S. Ct. 1749, 1756 (2014). The Court further held that
the exceptional nature of a case need not be proven with
clear and convincing evidence. Id. at 1758.
On remand in this case, we ordered supplemental
briefing. The parties take essentially opposite stances on
how we should now proceed. Allcare argues that this court
HIGHMARK, INC. v. ALLCARE HEALTH MANAGEMENT 5
should hew closely to its original opinion, reversing the
district court on all grounds save for claim 102, the frivo-
lousness of which is established. Highmark urges an
across-the-board affirmance of the district court’s attorney
fee award.
Upon careful consideration, we vacate the district
court’s award of attorney fees and remand for reconsider-
ation under the new standard articulated in Octane. The
district court need not revisit its finding with respect to
claim 102, which we previously upheld under the stricter
standards then prevailing and which Allcare now con-
cedes. In all other respects, the district court is free to
weigh any matter properly included in an exceptional case
determination under § 285.
VACATED AND REMANDED
COSTS
No costs.