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Court Slams Frivolous & Vexatious Litigation with $4.7 MM in Fees


Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: January 5, 2012 @ 7:23 am

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In what seems to be a continuing trend, the United States Court of Appeals for the Federal Circuit is continuing to show increasingly little tolerance for abusive patent litigation tactics. In the most recent pronouncement along these lines the Federal Circuit, per Judge O’Malley (with Judges Newman and Prost joining), ruled the district court appropriately awarded the defendant $3,873,865.01 in attorney fees and expenses under § 285, as well as $809,788.02 in expert fees.  See MarcTec, LLC v. Johnson & Johnson (Jan. 3, 2012).

MarcTec originally filed suit in the Southern District of Illinois against Cordis Corporation and Johnson & Johnson, who is the parent company of Cordis Corporation, but not otherwise involved in making or selling the accused product. MarcTec alleged Cordis infringed U.S. Patent Nos. 7,128,753 and 7,217,290. After claim construction, the district court granted Cordis’s motion for summary judgment of noninfringement. On a prior appeal the Federal Circuit then affirmed the district court’s construction and the judgment of noninfringement based on that construction.  See the non-precedential opinion in MarcTec v. Johnson & Johnson 2009-1457.

So why didn’t this matter of the awarding of fees get resolved back in August of 2010 when the underlying substantive decision of the district court was affirmed?  In something of a procedural anomaly the Federal Circuit bifurcated the appeal.  MarcTec requested, without opposition, the staying of briefing relative to the issue of the appropriateness of the awarding of fees.  See Order in 2010-1285, dated April 19, 2010.  Thus setting up two appeals to the Federal Circuit despite the fact that the award of fees by the district court occurred prior to the initial Federal Circuit decision in August 2010.

That procedural anomaly disposed of, let us return to the district court’s determination relative to fees.  On February 23, 2010, the district court granted Cordis’s motion to declare the case exceptional under 35 U.S.C. § 285 and further awarded Cordis its reasonable attorney and expert witness fees. MarcTec then appealed only from the district court’s final judgment declaring the case exceptional and awarding attorney and expert fees to Cordis, but it did not otherwise challenge the reasonableness of the amount of fees awarded.

To understand the district court’s award of attorneys fees and expert fees one must really reach back to the district court’s claim construction order, which was issued on March 31, 2009. Consistent with what is required by Federal Circuit precedent the district court considered the language of the claims, the specification, and statements made during the prosecution history in reaching its conclusions regarding the proper construction of the claims. The district court rejected MarcTec’s attempts to minimize the role of the specification, correctly noting that the specification is the single best guide to the meaning of a disputed term.

Based on the specification and prosecution history, the district court construed the term “bonded” to mean bonded by the application of heat. Next, the court construed the terms “surgical device” (’753 Patent) and “implant” (’290 Patent) to exclude stents. The district court further found that stents were specifically disclaimed during prosecution in order to obtain allowance.

After the claims construction order was issued Cordis moved for summary judgment arguing that they did not infringe. Cordis’ argument was two-fold: (1) the patents-in-suit require heat to bond a polymeric material to the implant, while the drug/polymer coating on their stent adheres at room temperature; and (2) it is undisputed that the their device is a stent, not a surgical device within the meaning of the claims, particularly since stents were specifically disclaimed during prosecution.

As bad as continuing to fight in the face of a claim construction loss may seem, it happens all the time, particularly where the losing party has decided they think the district court is wrong and has already decided to appeal. Setting aside for a moment that the prosecution history seemed to disclaim any possibility of infringement, MarcTec sought to offer dubious scientific testimony on the issue of heat bonding. Specifically, they offered an expert that actually said that the spraying of droplets approaching the speed of sound would increase the temperature of the droplets in ways that could not be measured. This was, apparently, supposed to somehow be proof that there was a heating characteristic to the bonding of the accused product. The district court correctly observed that this ridiculous theory “is an untested and untestable theory that is neither reliable nor relevant…”

In its motion to have the case declared exceptional, thus allowing the possibility of the awarding of fees, Cordis argued that MarcTec engaged in litigation misconduct by, among other things: (1) misrepresenting claim construction law to avoid intrinsic evidence; (2) mischaracterizing the district court’s claim construc- tion; and (3) offering “junk science” that was unreliable, untestable, and had no relevance to this case. Cordis further argued that MarcTec filed a frivolous and baseless lawsuit and acted in bad faith by continuing to pursue its claims without any evidence of infringement.

The district court agreed with Cordis and declared this case exceptional under § 285. Specifically, the court found that MarcTec’s allegations of infringement were “baseless” and “frivolous,” and that MarcTec acted in “bad faith” in bringing and maintaining this litigation. The district court also criticized MarcTec for ignoring the specification and prosecution history in its claim construction argument, both of which were fatal to MarcTec’s proposed construction of the term “bonded.” The district court also found that, even after it had evidence that the defendant’s stent coating was applied at room temperature and did not bond using heat, MarcTec contin- ued to pursue its frivolous case.  This fact in and of itself wouldn’t likely have lead to an exceptional case finding if you ask me, but what seemed to seal the fate for the plaintiff-patentee was that they offered ridiculous expert testimony that did not meet the requirements for scientific reliability or relevance required by the Federal Rules of Evidence and the Supreme Court’s ruling in Daubert.  The fact that there were mischaracterizations galore by the plaintiff-patentee were just icing on the cake it seems.

The Federal Circuit, per Judge O’Malley, seemed to have little difficulty in finding the district court acted appropriately, saying that when you read the findings of the district court in their entirety it shows that “MarcTec: (1) acted in bad faith in filing a baseless infringement action and continuing to pursue it despite no evidence of infringement; and (2) engaged in vexatious and unjustified litiga- tion conduct that unnecessarily prolonged the proceedings and forced Cordis to incur substantial expenses.”

So what was MarcTec’s argument on appeal to try and convince the Federal Circuit otherwise?  Semantic arguments really.  Truthfully, the district court could have used an extra word here or there to more neatly tie up its legal statements and conclusions to perfectly match the case law, but with all the findings of fact the Federal Circuit was not about to find that a missing adjective here and there would render what was truly an exceptional case as something that was undeserving of fees.

For example, MarcTec argued that the district court did not apply the proper standard, explaining that there must be a finding of subjective bad faith.  The Federal Circuit explained:

Although the district court used the term “bad faith,” and did not specifically state that the bad faith found was “subjective,” the court’s language, and its express findings of fact, are consistent with and fully support a finding of subjective bad faith. (citation omitted)  And, importantly, at oral argument, counsel for both parties agreed that courts normally use the term “bad faith” to mean subjective bad faith.

With respect to litigation misconduct, the Federal Circuit explained: “This vexatious conduct is, by definition, litigation misconduct, and provides a separate and independent basis supporting the district court’s determination that this case is exceptional.”

Reigning in abusive patent litigation tactics and frivolous lawsuits is certainly a laudable development.  Here a large enterprise was the target, but increasingly abusive litigation tactics are being used against truly small businesses who do not have the ability to spend $4.7 million to prevail with respect to a nonsensical lawsuit and abusive and vexatious litigation tactics.  Hopefully district courts will become emboldened to look at what is going on in the litigation ever earlier to see if there is either the indicia or extortion (see Federal Circuit Slams Patent Troll) and whether frivolous claims and abusive tactics are forcing those who don’t infringe to either fight at great expense or settle.

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Posted in: Federal Circuit, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patents

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

6 comments
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  1. Gene,

    Good analysis.

  2. […] IPWatchdog: Court Slams Frivolous & Vexatious Litigation with $4.7 MM in Fees – This post discusses the recent developments within the Federal Circuit in regards to no […]

  3. Gene – thanks for the round-up on this case. I thoroughly agree – sometimes we can argue black is white with a straight face, but I am glad to see that the CAFC has ruled that reason should prevail over fiction. I have no patience for junk “science.”

  4. Gene:

    Nice analysis. I read the opinions and wonder why the law firm walked away unscathed with the attorney fees awarded only against the filing entity. It would seem it takes two to Tango. The law firm supposedly did its diligence before filing the complaint and obviously knew what was going on after the Markman ruling. It also worked with the expert. Was Marctec knowledgeable of the scope of its own patents? If this is a solo inventor or smaller entitly that asked a law firm if their patents had any value and the law firm subsequently filed suit on, for example, a contingency basis, the ruling seems grossly unfair. Think of your own clients that are inventors and truly do not understand the scope of their own claims, file wrapper estoppel, etc. They rely on you, the attorney, to guide them. I wonder who was actually driving this litigation and whether the right entity was actually punished?

  5. rr-

    You raise a very good point. The attorneys that pursue baseless claims and engage in ridiculous activities, making specious claims and arguments, should also have consequences. It most definitely takes two to tango.

    How could district courts reach actions of the attorneys themselves? Would this be relying on contempt powers? Would it be to report attorneys for investigation by the State Bar Association? For vexatious litigation the remedy is getting your attorneys fees, but I can’t think of authority really for the court to penalize an attorney directly in a financial manner unless it is for contempt. Perhaps the thinking is that if the attorney does something outrageous and was the one driving the litigation it will be between the attorney and client to sort out the particulars.

    Thoughts anyone?

    -Gene

  6. I have not dug into the legal ability of the federal courts as you suggest, but it would seem the court has the ability under Rule 11 to issue sanctions against the law firm that could mirror the grant of attorneys fees. I think this would be very appropriate where the plaintiff is a small entity that lacked the funds to pursue the case, but for the contingency fee arrangement in the first place. The defendant may never collect from the plaintiff while the law firm that was potentially driving the litigation walks away without a scratch. I guess the alternative is for the company to sue the law firm for malpractice – they allegedly investigated and subsequently drafted and signed a complaint that the court said was objectively baseless.