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Category Archives: Exceptional Case

SoCal IP Institute :: August 8, 2011 :: Exceptional Cases

We will be discussing two recent Federal Circuit cases regarding exceptional cases in the patent context.  We will discuss these cases in our weekly SoCal IP Institute meeting on Monday, August 8, 2011.  Brief synopses of the cases are presented below.

Old Reliable Wholesale, Inc. v. Cornell Corporation, Case. No. 2010-1247 (Fed. Cir. March 16, 2011) (attached).  Old Reliable is the owner of a patent covering insulated roof board.  Cornell is a manufacturer of roofing and manufactures several different types of insulated roofing including the VT-1 and VT-2 products.  Old Reliable brought suit in 2006 alleging that the VT-1 product infringed several claims of the patent.  In response, Cornell alleged that the VT-2 product anticipated the patent.  Old Reliable argued that VT-2 failed to teach all of the limitations of the claims.  In 2007, Cornell deposed the inventor (and Old Reliable’s owner) of the asserted patent.  During this deposition, the inventor admitted that the VT-2 did “exactly the same thing” as the asserted patent and that one other product, a Branch River Air-Flo product, also was very similar.  The district court construed the claim terms and then found that the patent was anticipated by the Air-Flow product and obvious in view of the VT-2 and Air-Flo product.  Old Reliable appealed and the Federal Circuit affirmed without opinion.

Cornell then filed a motion seeking attorney’s fees as an exceptional case under 35 U.S.C. 285.  This motion was granted-in-part.  Cornell was awarded attorney’s fees and costs for all activities after the deposition of the asserted patent’s inventor.  At that point, the district court concluded, Old Reliable should have known that it’s case was baseless.  The Federal Circuit reversed finding that the exacting standard for an award of attorney’s fees as an exceptional case was not met.  In particular, the Federal Circuit found that there was still a reasonable issue of fact as to whether the asserted patent was anticipated or obvious in view of the art discussed in the deposition.  Accordingly, the court was unwilling to conclude that Old Reliable lacked a reasonable foundation for arguing that its patent was not anticipated.  The decision to grant attorney’s fees was, therefore, reversed and vacated.

Eon-Net LP et al., v. Flagstar Bancorp, No. 2009-1308 (Fed. Cir., 2011) (attached).  Eon-Net is one of a few patent holding companies formed to enforce patents related to document processing systems for creating digital copies of physical documents and for extracting information from those documents for use by other software programs.  Eon-Net asserted the patents in this family in more than 100 suits between 2001 and 2005.

Eon-Net sued Flagstar alleging that user information input via Flagstar’s website infringed one of the patents.  Flagstar moved for summary judgment on the basis that it was licensed by its software supplier and for sanctions under Rule 11 because, it claimed, that the input of information via a website is could not infringe the scanning of tangible documents as required by the claims.  As a result, Flagstar asserted that Eon-Net’s pre-suit investigation was inadequate.  The district court granted both motions.  The Federal Circuit initially vacated and remanded the summary judgment and sanctions for failure to grant Eon-Net opportunity to present its claim construction argument before the motions were granted.  The district court construed the claims of the originally asserted patent and two others finding that the terms “document,” “file,” “extract,” and “template” were limited to information originating from a hard copy document.  The parties stipulated to non-infringement, Flagstar again moved for attorney’s fees and this motion was granted.

On appeal for a second time to the Federal Circuit, Eon-Net sought review of the claim construction ruling, the exceptional case finding and the imposition of Rule 11 sanctions.  The Federal Circuit affirmed the claim construction ruling because, “The written description repeatedly and consistently defines the invention as a system that processes information derived from hard copy documents.”

The exceptional case finding was also affirmed because the district court applied the right  35 U.S.C. Section 285 standard when, absent litigation misconduct or misconduct securing the patent, sanctions may be imposed if (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively baseless.  Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005).  The district court found that Eon-Net had failed to take part meaningfully in the claim construction process, filed contradictory declarations and “attempted to evade a careful analysis of the claim terms through the Markman process.”   The court also affirmed the district court’s determination that no reasonable construction of the claims would support a suit against Flagstar because the specification always required a physical document as the basis of the information. The court found that the suit was brought in bad faith because Eon-Net sought to “exploi[t] the high cost to defend complex litigation to extract a nuisance value settlement from Flagstar.”

The Rule 11 sanctions award was affirmed because, in view of the exceptional case factual findings, the case was “legally or factually ‘baseless’ from an objective perspective” and the attorney failed to conduct a “reasonable and competent inquiry” before filing the complaint.

A reasonable pre-suit investigation, however, also requires counsel to perform an objective evaluation of the claim terms when reading those terms on the accused device. See Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1300–01 (Fed. Cir. 2004); S. Bravo Sys., Inc. v. Contain-ment Techs. Corp., 96 F.3d 1372, 1375 (Fed. Cir. 1996).

The court concluded that Eon-Net’s contrary claim construction position “borders on the illogical” and that “[t]he specification exposes the frivolity of Eon-Net’s claim construction position.”  Accordingly, the district court’s entire decision was affirmed.

All are invited to join us in our discussion of these cases during the SoCal IP Institute meeting on Monday, August 8, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.

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SoCal IP Institute :: August 1, 2011

We will be discussing the following two cases in our weekly meeting on Monday, August 1, 2011. Brief synopses of the two cases are presented below.

TrafficSchool.com, Inc. v. EDriver Inc. (9th Cir. 7/28/2011) (attached)

In an action arising from a very close imitation of the state DMV’s website by a private, commercial website and alleging unfair competition and false advertising, judgment of the district court is affirmed in part and reversed in part where the court held that defendants violated section 43(a) of the Lanham Act, 15 U.S.C. section 1125(a), but rejected plaintiff’s state unfair competition claims with an injunction ordering the defendants to publish a disclaimer on its website, while denying plaintiffs’ monetary relief and attorney’s fees.

General Protecht Gp. (Zh. Dongzheng) v. Leviton Mfg. (Fed. Cir. 7/8/2011) (attached)

In a dispute arising from the grant of a preliminary injunction to enforce a forum selection clause in a settlement agreement, judgment of the district court is affirmed where it correctly determined that the forum selection clause applies to the case and did not abuse its discretion in granting the preliminary injunction.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, August 1, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.

SoCal IP Institute :: July 25, 2011 :: Exceptional Cases Under 35 U.S.C. 285 and The USPTO’s Proposed Changes to 37 C.F.R. 1.56(b)

We will be discussing one district court case awarding attorney’s fees under 35 U.S.C. 285 in a patent suit and the USPTO’s proposed new rule 1.56(b) after Therasense.  We will discuss the case and proposed rule in our weekly SoCal IP Institute meeting on Monday, July 25, 2011.  Brief synopses are presented below.

Precision Links, Inc. v. USA Product Group, Inc., Case No. 3:08cv576 (W.D.N.C. July 13, 2011) (attached). This is a district court decision from a district court we do not typically follow closely, but the decision implicates patent plaintiff’s potential liability for bringing a patent suit without an adequate pre-filing investigation.  In the case, Precision Links brought suit for infringement of a patent related to a tie-down strap used to hold cargo in place as it is transported.  After the defendants succeeded on a motion for summary judgment of noninfringement, they moved for an award of attorneys’ fees and costs under 35 U.S.C. 285.  The primary basis for the assertion that the case was “exceptional” was that the case was instituted in bad faith and objectively unreasonable.

The court agreed with the defendants who argued that the claim construction for the phrase “dimensioned for the passage therethrough” was completely lacking in support and was, therefore frivolous.  The court also agreed that the opinion of counsel sought by the plaintiff prior to bringing suit failed to follow the canons of claim construction, included no citations to the specification or prosecution history, and provided no analysis as to how the counsel chose to construe the patent claims.  Accordingly, the opinion relied upon by the plaintiff before bringing suit was unreasonable.  As a result, the court concluded that the case was exception under 35 U.S.C. 285 and awarded attorneys’ fees and costs.

Proposed Amendment to 37 C.F.R  1.56(b) (attached).  This is the USPTO’s revision to 37 C.F.R.  1.56(b) in response to the Therasense Federal Circuit inequitable conduct decision.

The proposed amendment, now open for comment, is as follows:

(b) Information is material to patentability if it is material under the standard set forth in Therasense, Inc. v. Becton, Dickinson & Co., ___ F.3d ___ (Fed. Cir. 2011). Information is material to patentability under Therasense if:

  1. The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or
  2. The applicant engages in affirmative egregious misconduct before the Office as to the information.

The proposed change mirrors the language of the Therasense decision.  This change lowers the bar on the duty of disclosure.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, July 25, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.

SoCal IP Institute :: January 17, 2011

Please join us for the SoCal IP Institute meeting, Monday, January 17 at Noon. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to  Amanda Jones by 9 am Monday.

We will be discussing the following:

iLOR, LLC v. Google, Inc., No. 10-1117, 1172  (Fed. Cir. Jan. 11, 2011) (case attached)  iLOR appealed from an order finding that the underlying district court litigation was “exceptional” under 35 U.S.C. § 285 and awarding attorneys’ fees and costs and expenses.  The decision was based on a finding that iLOR’s proposed construction of the term “the toolbar being displayable based on a location of a cursor in relation to a hyperlink in a first page in a first window of an application” as including a toolbar displayed upon a right-mouse click was “baseless” by the district court.  The Federal Circuit reversed finding that the proposed construction of the term was not “objectively baseless”, likening the relevant “exceptional case” inquiry to that of a finding of willful infringement.

Warrior Sports, Inc. v. Dickinson Wright, P.L.L.C., No. 10-1091  (Fed. Cir. Jan. 11, 2011) (case attached) Warrior  appealed a decision of the Eastern District of Michigan dismissing a malpractice suit brought by Warrior against its IP counsel.  The Federal Circuit vacated the dismissal order because the underlying malpractice claim required the district court to determine whether or not Warrior would have been successful in its patent infringement lawsuit but for the actions of the defendants.  Accordingly, the Federal Circuit determined that the issue arose under 28 U.S.C. § 1338 which gave the district court exclusive patent subject-matter jurisdiction.