The Highmark Fracture

June 1, 2013

Attorneys’ fees and sanctions awarded by trial courts in exceptional patent cases are routinely assessed in millions of dollars. The Federal Circuit is the sole appellate authority in patent cases and thus has the responsibility of reviewing these high-stakes determinations. In Highmark, Inc. v. Allcare Health Management Systems, Inc., a 2-1 majority fundamentally shifted the standard of review applied to exceptional case determinations to a de novo standard. Subsequent petition for rehearing en banc revealed a significant fracture in the Federal Circuit regarding this issue. The reviewing judges split 7-5, denying rehearing but eliciting an additional opinion for the majority and two additional dissents. The majority advocates for de novo review, while the dissent champions a deferential clear error approach. However, because exceptional case determinations are mixed questions of law and fact, neither standard will appropriately fit all cases. This Recent Development explores the essence of appellate review in the exceptional case context, analyzes the two opinions, and promotes an alternative approach that calibrates the standard of review to the nature of each issue.