(Bloomberg) — The U.S. Supreme Court heard oral arguments Wednesday in a case involving a health insurance company caught up in a patent dispute.
The case is testing how deferential the Federal Circuit must be when trial judges make a decision about patent case legal fees.
The court also heard arguments on a related, more general case that could make it easier for companies that defeat patent lawsuits to collect legal fees from the losers.
The insurance company case is Highmark vs. Allcare Health Management Systems, 12-1163.
The broader case is Octane Fitness v. Icon Health & Fitness, 12-1184.
Technology companies that often have to defend themselves against suits by what they regard as “patent trolls” are hoping the cases will give them weapons they can use to ward off frivolous suits.
Lawyers who represent clients who are trying to protect patents contend that poorly structured court-fee rulings could scare patent holders with valid claims from trying to protect patents in court
Allcare Health Management Systems Inc., the other party in the Highmark case, owns U.S. Patent Number 5,301,105. The patent, filed in April 1991, covers managed care company utilization review methods and methods for keeping a plan from paying for care before a review is completed.
Allcare sued Highmark over alleged infringement of the patent in April 2002, then lost.
Highmark — the holder of the Blue Shield license in central Pennsylvania, and the Blue Cross and Blue Shield licenses in western Pennsylvania, West Virginia and Delaware — is trying to get to pay $4.9 million in attorney’s fees and other legal costs.
The district court decided, in April 2010, that Allcare had been so “vexatious” about bringing a case that was “objectively baseless,” and in “bad faith,” that Highmark should get to make Allcare pay its court costs.
Members of the Federal Circuit appeals court threw out the district court ruling on court costs. The appeals court said it ought to have the ability to review the case from scratch, without deferring to the district court ruling.
Donald Dunner, a lawyer for Allcare, said during arguments that determining whether a patent case is “objectively baseless” is difficult, and that the Federal Circuit appeals court might be better situated to address that kind of issue than a district court.