Lawrence M. Sung on How the Federal Circuit Looks at a Pre-Filing Investigation of Patent Infringement When Reviewing a Motion for Attorney Fees under 35 U.S.C. 285
Partner, Dewey & LeBoeuf LLP; Professor & Intellectual Property Law Program Director, University of Maryland School of Law
The adequacy of a patentee plaintiff’s pre-infringement suit investigation follows one path in the normal case, but quite a different path when a motion for attorney fees under 35 U.S.C. § 285 is in play. This commentary, written by Lawrence M. Sung, Ph.D., addresses the potential unintended consequences of seeking redress for an inadequate pre-filing investigation solely under the rubric of a motion for attorney fees under 35 U.S.C. § 285. Dr. Sung writes:
Federal Rule of Civil Procedure, Rule 11 … provides for sanctions for a failure to conduct a reasonable inquiry into the legal and factual bases of claims. … Another procedural path to seek redress for a [patent infringement] plaintiff’s deficient pre-filing investigation is through a motion under 35 U.S.C. § 285, which grants the district court discretion to award reasonable attorney fees to the prevailing party in exceptional cases. A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation. This includes conduct that violates Fed. R. Civ. P. 11, but also includes willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, and vexatious or unjustified litigation. A key difference between motions under Fed. R. Civ. P. 11 and § 285 is that Fed. R. Civ. P. 11 motions must comply with the Rule’s safe harbor provision, but § 285 motions need not.
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The Federal Circuit [in Digeo, Inc. v. Audible, Inc.] affirmed the district court’s denial of Audible’s motion for attorney fees under 35 U.S.C. § 285 … where Digeo’s claim that Audible infringed U.S. Patent No. 5,734,823, which related to video pocket readers, was dismissed because Digeo lacked title to the ‘823 patent due to forged assignments, including a false declaration that one of the inventors was deceased.
Indeed, the Federal Circuit opined that the facts of this case read like a novel in that they involved the resurrection of an inventor thought to be deceased. The file history for the ‘823 patent included a power of attorney allegedly signed by Oliver Chang as the executor of the estate of his deceased brother, Edward Chang. When Digeo sued Audible for infringement of the ‘823 patent, Digeo alleged that it was the owner of all right, title, and interest in the ‘823 patent, including the right to sue for infringement of that patent. However, Audible discovered about a year later that Edward Chang was alive and residing in Los Angeles, CA and that Oliver Chang did not sign the documents purported to be the power of attorney and assignment. Audible also secured a license from Edward Chang to the ‘823 patent retroactive to the date of issuance. As a result, Audible moved for summary judgment and alternatively for dismissal on the grounds that Digeo lacked standing because it did not possess complete ownership of the ‘823 patent and that Audible had a license under the ‘823 patent. In the summary judgment motion, Audible also moved for attorney fees under § 285, which the district court denied finding that there was no evidence Digeo knew or should have known about the forged documents.
On appeal, the Federal Circuit reminded that the determination of whether a case is exceptional and, thus, eligible for and warranting an award of attorney fees under § 285 is a two-step process in which the district court must (1) determine whether there is clear and convincing evidence that a case is exceptional, a factual determination reviewed for clear error, and (2) if so, then determine in its discretion whether an award of attorney fees is justified, a determination that the Federal Circuit reviews for an abuse of discretion. If there is clear and convincing evidence that a plaintiff has brought a baseless or frivolous suit against an accused infringer, that is a sufficient basis to require a district court to deem the case exceptional under § 285.