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Inadequate Investigation Prior to Patent Infringement Lawsuit Merits Attorneys’ Fees and Costs

Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: Jul 19, 2011 @ 6:08 pm
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Recently Judge Martin Reidinger of the United States Federal District Court for the Western District of North Carolina issued an interesting and perhaps important decision relating to the granting of attorneys’ fees and costs in Precision Links Inc. v. USA Products Group, Inc.

The case was an action for patent infringement involving U.S. Patent No. 5,673,464. The invention disclosed in the ‘464 Patent is a tie-down strap used to restrain cargo during transport. The Plaintiff is the owner of the patent and the manufacturer of the adjustable tie-down strap that is claimed to be covered by the Patent. The Defendant, USA Products Group, is alleged to import a strap accused of infringing the ‘464 patent and was alleged to have sold the accused strap to Defendant Home Depot USA, Inc., which is alleged to have sold the accused strap. Shortly after the Markman ruling the district court entered summary judgment in favor of the Defendants. Not being satisfied with victory, the Defendants moved for attorneys’ fees and costs, arguing that the case was “exceptional”, as defined by 35 U.S.C. § 285.

A district court has the authority to award attorneys’ fees to the prevailing party in a patent infringement litigation upon determining that the case is “exceptional.” A finding that a case is exceptional is appropriate when there has been material and inappropriate conduct related to the matter in litigation. Examples of activities that can result in the finding that a case is exceptional include situations where there is willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, or conduct that violates Fed. R. Civ. P. 11.


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When there is no misconduct either during litigation or in securing the patent a finding that a case is exceptional is appropriate only when the prevailing party can show by clear and convincing evidence both that the litigation was brought in subjective bad faith and the litigation was objectively baseless. Where there is an absence of litigation misconduct or misconduct at the Patent Office the defendant must establish that the plaintiff’s case has no objective foundation, and the plaintiff knew that the case had no objective foundation. The awarding of attorneys’ fees based on there being no objective foundation to bring a lawsuit is rare.

In this case, the Defendants argued that the district court should find the case to be exceptional because the Plaintiff’s claim interpretation and infringement theory were objectively baseless, and because this litigation was brought and pursued in subjective bad faith. Additionally, the Defendants argue that Plaintiff’s litigation misconduct justified the imposition of an attorneys’ fee award. The Plaintiff countered that its proposed claim construction was supported by a plausible reading of the intrinsic evidence. The Defendant further denied the existence of any bad faith in bringing the litigation, arguing that it had conducted an appropriate pre-suit investigation and obtained an opinion of counsel as to infringement prior to filing suit. Finally, the Plaintiff denies engaging in any litigation misconduct, arguing that much of the expense claimed by the Defendants is attributable to their unreasonable impatience and to the combative nature of their litigation strategy.

Central to the issue of infringement was the construction of the phrase “dimensioned for the passage therethrough,” a phrase which appears in each of the independent claims ( Claims 1, 6, and 8 ) to describe the openings of the claimed strap. The Plaintiff maintained throughout this litigation that the phrase meant that each of the openings are large enough to allow the main body portion of another strap to pass through them, even if some deformation of the first strap must occur as the main body portion of the second strap passes through. The district court rejected this proposed interpretation at the preliminary injunction phase and again at the Markman phase, finding there was no support in the specification for the Plaintiff’s offered construction.

The fact that the Plaintiff’s claim construction was not adopted does not mean, however, that the claim construction was offered in bad faith. The district court pointed out that in determining whether a party’s claim interpretation constitutes evidence of bad faith the issue is whether it was frivolous. The court went further to explain that a claim interpretation is not frivolous where it follows the standard canons of claim construction and is reasonably supported by the intrinsic record. Unfortunately for the Plaintiff, the district court determined that their offered claim interpretation found no support either in the plain language of the claims or the intrinsic record of the patent at issue and, therefore, was frivolous.

The Plaintiff’s litigation misconduct did not end with a frivolous claim construction. There was also evidence that the Plaintiff’s claim was objectively without foundation. Even before the lawsuit was initiated there was inadequate investigation according to the district court.

Prior to filing the lawsuit the Plaintiff sought the opinion of patent counsel to evaluate the prospect of a patent infringement suit against the Defendants, and received such an opinion in the form of a letter from opinion counsel. A claims chart was attached to the opinion letter, which identified the limitations of the claims, the opinion counsel’s interpretation of each of the limitations, and an opinion as to whether each limitation is present in the accused product. Neither the letter nor the chart contained explanation of counsel’s claim construction and his application of the claim limitations to the accused product. There were no citations to the specification or prosecution history, and no analysis provided to explain why counsel construed the patent terms the way in which he did.

A defective opinion letter during a due diligence investigation prior to filing a lawsuit does not necessarily create problems for a Plaintiff. As the Federal Circuit has ruled in Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005), although incorrect the presence of an opinion that is “reasonable, comprehensive, and competent” insulates the Plaintiff against allegations of bringing a patent infringement lawsuit in bad faith. In this case, however, the district court determined that opinion counsel’s letter failed to adhere to the standard canons of claim construction and is so lacking in any fundamental analysis or evidentiary support that the Plaintiff’s reliance upon this opinion as a basis for alleging infringement of was simply unreasonable. In fact, the district court determined that the opinion letter was so utterly lacking in substance that no reasonable litigant could believe that an infringement claim could succeed based on this opinion. Reading between the lines it would seem the district court was of the opinion that the Plaintiff merely received the opinion they asked for, without any analysis or rationale, but rather merely conclusions.

As a result, the district court ruled that the Defendants showed by clear and convincing evidence that the Plaintiff instituted the patent infringement litigation based on an inadequate and unreasonable pre-filing opinion of counsel, and persisted in relying upon a construction of the claim terms that was both contrary to the plain meaning of those terms and entirely devoid of support in the intrinsic record. Thus, there was both litigation misconduct and proof that the claims of the Plaintiff were objectively without foundation.

As if this wasn’t enough, the district court also found that the Plaintiff unnecessarily extended this litigation by filing an untimely notice of appeal with the Federal Circuit and, when it became evident that the Defendants sought to dismiss the appeal due to its untimeliness, in an effort to salvage the untimely appeal the Plaintiff filed a motion asking the district court to recharacterize its summary judgment response brief as a notice of appeal or, in the alternative, to otherwise treat its filing of a Notice of Appeal as a motion to extend the time for filing an appeal. The request for this extraordinary relief contained no citation to support the request, but still the Defendants had to respond.

Ultimately the district court concluded that the case was, indeed, “exceptional” within the meaning of 35 U.S.C. § 285 and granted the Defendants’ motion for attorneys’ fees and cost. The Defendants’ now have until July 27, 2011, to submit a properly supported fee petition.

This case is obviously a lesson in what not to do and how to get on the bad side of a district court judge. While this is but one case, for those who are defendants in frivolous patent infringement litigations this decision provides hope. Increasingly I am seeing patent litigations filed where there could not possibly be any appropriate due diligence, because if there was no infringement action could have been brought. The bought-and-paid-for opinions that there is infringement are dealt a setback by this decision, and hope for those facing frivolous claims at the hands of bad actors should spring eternal.

The issues raised in this case are of great importance because it has become all too easy to bring a patent infringement case against multiple defendants who have a good business, but simply do not have the resources to fight frivolous claims. They are offered licensing deals that are quite cheap, and unfortunately have to fold and pay rather than fight what is truly an injustice. Hopefully this case will be appealed to the Federal Circuit and we will once and for all get an authoritative pronouncement relating to the type of due diligence that is required prior to bringing nearly extortion-based claims with the aim of forcing a settlement when absolutely no liability exists.

This Post Sponsored by Birch Stewart Kolasch & Birch

Birch Stewart Kolasch & Birch is a highly respected international intellectual property law firm committed to obtaining and enforcing intellectual property rights for our clients. BSKB has been providing a full range of intellectual property services for over 30 years. We specialize in chemistry, medical devices, biotechnology, pharmaceuticals, diagnostics, healthcare, computer science and mechanical and electrical technologies, the practice of reissue and reexamination, as well as in obtaining and enforcing trademark and copyright protection for our clients in the United States and internationally. The views expressed in this article are the views of the author and not necessarily the views of Birch Stewart Kolasch & Birch or its attorneys.

9 comments
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  1. Gene, thanks for a most informative post.

  2. Well written and quite amusing post.

    In particular, “and is so lacking in any fundamental analysis or evidentiary support… so utterly lacking in substance that no reasonable litigant could believe… without any analysis or rationale, but rather merely conclusions” made me laugh so hard I hurt.

    I can only believe that this particular client had gauged his level of appropriate legal analysis from the likes of the folks over at Patently-O, where mere conclusions, hawked often enough, are believed to take the place of analysis and rationale.

    One follow up question lingers in my mind: What happened to the counsel who presented that opinion which failed to adhere to the standard canons of claim construction and was so lacking in any fundamental analysis or evidentiary support?

  3. Bill-

    Glad you liked the post. Thanks for reading.

    Anon-

    I didn’t see any information about what happened, if anything, to the opinion counsel. My guess is little or nothing. He probably provided the opinion the client wanted, but that was unclear.

    It seems this was considered a good post by the criminal copyright infringers out there! It has already been cut and pasted onto one website. I just sent a DMCA take down notice. It seems that practically every day one goes out, sometimes as many as 10 DMCA take down notices go out a day any more!

    -Gene

  4. These attorneys are infamous in the Western District —
    http://www.ncbar.com/orders/cipriani,%20glenn%20order%20of%20discipline%20ocr.pdf

  5. Gene, what’s the big deal? Imitation is the sincerest form of flattery. You should be pleased that people copy your stuff.

  6. AC-

    I am flattered, but copying is against the law you know.

    The real problem is two-fold. First, duplicative content gets punished by the search engine gods, particularly Google, which is of paramount importance. Second, there is just something fundamentally wrong about a nameless, faceless individual copying word for word an article and posting it to their website and selling advertising and using Google AdSense to derive money. That is just stealing. In many instances these folks don’t even provide a link back, taking credit for the article as if they have written it themselves. Even some news media outlets do things that are rather shocking in terms of copying an article and then only slightly rewording the article and passing it off as their own.

    -Gene

  7. Gene – Can you post a side by side picture of the main patent drawing and the purportedly infrining item. Also, please post the opinion counsel’s opinion letter if possible.

    ==========
    Quote: “The Plaintiff maintained throughout this litigation that the phrase meant that each of the openings are large enough to allow the main body portion of another strap to pass through them, even if some deformation of the first strap must occur as the main body portion of the second strap passes through.”

    Reply:

    Wow! From the published decision, the court berates the plaintiff for not doing proper claim construction and then, itself, jumps past the 1996 file patent application and subsequent prosecution history to pull a dictionary definition (merriam-webster.com definition dated 2010 – after the filing date of the patent application!) to conclude a meaning of “dimensioned” used in the patent claim. Untimely, extrinsic evidence overidding the timely intrinsic evidence of the patent application and prosecution history doesn’t seem the way to go.

    The drawing on the patent cover sheet seems to show the plaintiff’s position. The drawing shows the second strap deformed inward, but all the straps appear the same and are elastic so it seems obvious to me that the first strap could deform outward, e.g., “when the elastic main body portion defining said opening is elongated.” In fact, the upper pass-through square in the cover sheet drawing looks deformed. Logic would seem to say that if you have two equally sized rubber rectangles and one is shoved into the other, both of ‘em will deform – one deforms outward and one deforms inward. However, I didn’t read the spec.

    These straps are elastic and stretch. When you wrap the first strap around a box, those rectangles likely will stretch and the opening will shrink, or at least elongagte. If you stretch the first strap around a box to where it can be stretched no more and then cannot get a second strap through the opening, then that is an opening that is not “dimensioned for the passage therethrough of a main body portion of a second identical tie down strap.”

    Think of two rubber bands, with the second passing through the first, when the first is “elongated” and you’ll get the idea. Isolating “dimensioned” from the claimed “elastic” nature of the straps seems to be a mistake.

    Comment: The claim reads “said opening being dimensioned for the passage therethrough.” whereas the court seems to read it as “said opening being dimensioned for the unfettered passage therethrough.”

    Quote: “the district court determined that opinion counsel’s letter failed to adhere to the standard canons of claim construction and is so lacking in any fundamental analysis or evidentiary support that the Plaintiff’s reliance upon this opinion as a basis for alleging infringement of was simply unreasonable. In fact, the district court determined that the opinion letter was so utterly lacking in substance that no reasonable litigant could believe that an infringement claim could succeed based on this opinion.”

    Reply: OK, that’s bad news for the opinion counsel. However, just because the opinion counsel didn’t use dictionary definitions doesn’t mean the opinion is way off.

  8. I was interested in the content of the opinion. My initial impression was that it was quite adequate. The fact that it didnt recite the thought process for the conclusions doesnt mean that such thought was absent. I always have to make a decision about the level of detail appropriate for an opinion, and I often omit what I consider to be distracting to the core message. Its a judgement call. But on the other hand, I havent seen the documents, and the judge may have gotten it right if for example the conclusions were such a logical stretch that a rationale was needed to understand how they were arrived at.

  9. “These attorneys are infamous in the Western District”

    Anon,

    I read the Order of Discipline from your link. In my opinion, the attorney in this case got off lightly for just being censured, and should have at least been suspended for a significant period of time (disbarment wouldn’t have been too harsh either). What we’re talking about is taking confidential client information and filing the attorney’s own personal suit for “false marking” under 35 USC 292 using that confidential client information. That’s pretty egregious for an attorney to do.