Proposed Amendments to Rule 11 Will Adversely Impact Patent Owners

By Jianqing Wu, Ph.D.
September 26, 2017

Civil proceedings in federal courts are governed by Federal Rules of Civil Procedure. One of the rules, Rule 11, is intended to curtail bad behavior of litigators. Rule 11 requires that an attorney or party sign each paper filed in court and certify that the paper is not interposed for delay and that there is “good ground to support it”. While a violation of any of these requirements theoretically was sanctionable in the court’s discretion, the rule was rarely used to sanction litigants and attorneys from its adoption between 1937 to 1983.

The current Rule 11, however, was amended in 1993. Under the current rule, sanctions are discretionary and a “safe harbor” provision is provided to litigants, whereby a party seeking Rule 11 sanctions was required to give the adverse party notice and the opportunity to withdraw the objectionable paper without penalty. This safe harbor provision makes most rule 11 disputes disappear.

The Chairman of House Technological and Science Committee, Congressman Lamar Smith (R-TX), has sponsored a bill to amend Rule 11H.R. 720. The changes are made to remove the safe harbor provision and make sanctions mandatory. This bill has passed the House. A companion bill — S. 237 — has been introduced in the Senate with no action yet being taken.

The proposed changes to Rule 11, if enacted, will have an impact of keeping unrepresented parties out of courts, and make the U.S. courts even more inefficient. It will have an adverse impact on patent owners in patent cases.

A Brief History of Rule 11

The pending amendments reflect a questionable approach to fixing the problems that are inherent in the U.S. court system. Perhaps, lawmakers prefer the idea of getting rid of judicial discretion, as in civil code nations where judges have generally no power to make case law. However, civil code systems have institutional methods to fill in gaps in statutes. For example, they have one or more special bodies or ways to publish codified enforcement examples for statutes. Such codified examples can instruct judges to make case decisions without creating binding precedents. However, the U.S. legal system does not have such a mechanism. Most statutes contain only thumbnail sketches of the legal requirements with expectations that judges will address whatever problems arise in context of the statutory text.

Before adopted the proposed changed Congress should remember how Rule 11 performed after it was amended in 1983. The amendments were intended to reduce unnecessary costs and quell perceived litigation abuses. The amendments include two major modifications. First, it broadened the import of the filer’s signature, which certified that the paper was being filed in good faith for a proper purpose; and that the claims and defenses were supported by existing law or a non-frivolous argument for modifying the law and by existing evidence or the likelihood that such evidence would be forthcoming in discovery, as applicable. Second, if a court found a violation, sanctions, usually in the form of attorney fees and expenses, were made mandatory. Aggressive lawyers used the rule as a tool for fee shifting. Tactical Rule 11 motions became widespread, whether warranted or not. In less than 10 years, the 1983 rule generated over 7,000 reported decisions. Courts spent a great deal of judicial resources on what I call a secondary cause of action.

The history of Rule 11 shows that the best rule is the one giving discretion to courts without commanding they impose fines against litigants. Common law courts cannot run efficiently when judges do not have discretion.

When courts are commanded to impose sanctions for abusive litigation conduct that is not defined in in great detail, the courts will gain unlimited power to impose penalties. This is problematic because what constitutes abusive litigation conduct cannot be accurately measured like weighting goods on a scale or balance, but must be litigated in the court. Ironically, while the pending rule will take discretion away from judges, it also gives the same judges much more power: the power to award large sums of money on a secondary cause action for procedural conduct. Judges must decide, among various potential abusive scenarios, what are abusive and what are not.  Even more ironically, judges may have to decide whether a motion for Rule 11 sanctions itself is abusive or for an improper purpose of shifting fees.

The pending Rule 11 amendment will encourage litigants and parties to use it as a fee-shifting mechanism. Powerful parties can use the rule as a special cause of action to harass unrepresented parties. To appraise the impact, one should note the poor performance of U.S. courts with respect to adjudication of matters dealing with unrepresented litigants – who have zero (worse than flipping a coin) chances to get justice in cases where opposing parties are represented.  In such a court system, the threat of sanctions will further affect delivery of justice. Because a sanction order can involve large amounts of money, the pending rule will provide a strongest incentive for forum shopping. Judicial decisions on abusive litigation conduct will be made by nearly a thousand of federal judges or judicial officers. Neither appeal courts nor the U.S. Supreme Court will have time to resolve a large number of conflicting decisions. Conflicting decisions will torment future litigants for decades.

Congress fails to see the diverse subjects of civil cases and the need for litigants to access to federal courts. The thrust of the pending Rule 11 amendments seems to be enactment of a threatening effect: When litigants are threatened with mandatory monetary sanctions they will be discouraged from engaging in abusive litigation conduct. Rule 11 governs a wide range of civil cases and, thus has different impacts on different cases. The impacts of the rule do not end with a payment of money by sanctioned litigants. Some intermediate impacts will be on how people conduct their personal, social and commercial activities. When delivery of justice is realized by the threat of sanctions, chances of a miscarriage of justice will increase. The final impact of such a pending rule will be to force people to cease certain voluntary and avoidable activities.

The American Bar has expressed an opinion that the pending rule will create more problems than it fixes. After a modified Rule 11 has resulted in a great number of precedents to punish unrepresented litigants, the final impact will be closing court doors to unrepresented litigants. A nation with court doors being closed to unrepresented persons can never be a strong nation.

The pending Rule 11, if enacted, is applicable to all civil cases that are heard in federal courts, which means it will control all patent infringement cases.

Changes will Impact Patent Owners

The proposed changes to Rule 11 will have adverse impacts on patent owners for several reasons. First, since patent litigation is very expensive, the pending rule will provide a huge incentive to shift litigation fees and costs. This will be the most powerful tool for corporations to use in creating and perpetuating the culture of using for free patented inventions. Even a relatively simple patent case can consume $1 to $3 millions in attorneys fees and costs, it will have a sufficient incentive for corporations to try anything to create precedents for shifting litigation fees to patent owners. Second, the merits of patent infringement claims are difficult to assess for various reasons. Claims construction is complicated, and different courts can and do reach different results even for the same claim. Uncertainty may arise from inherent difficulties in evaluating infringing devices. For product inventions, one cannot find all internal components from exposed views, and may have difficulty to see internal working mechanism in the pleading stage. For process inventions, it is even more difficult to determine process steps. Third, factual investigation is complicated further by the corporate culture of refusing to cooperate with patent owners. When a patent owner believes that a corporation infringes a patent, the patent owner cannot see all details, but must make a determination based upon indirect evidence or even a reasonable guess.  Fourth, the merit of a claim cannot be accurately determined because an infringing device borders between prior art and a claimed invention. Finally, courts allow a battery of defenses such as anticipation, non-obviousness, laches, inequitable conduct and more, any one of which could be grounds for a sanctions motion in various situations.

Given the nature of patent litigation, experience teaches that it is inevitable that whenever a case is disposed of the winner will almost certainly try to shift litigation fees by any means possible, including by invoking Rule 11 sanctions. The parties with strong financial powers will have better chances to get sanction awards.

For all of the above reasons, the pending Rule 11 will have a great threat to patent owners in protecting patent rights, further eroding patent rights for individual inventors and start-ups. It has most seriously adverse impacts on patent owners in enforcing patent rights in inventions in production methods, service methods, and products with invisible or hidden parts. Such a rule will encourage infringers to hide information about infringing devices or methods before the filing of lawsuit, and then creating precedents on sanctioning patent owners.

UP NEXT: Discussion about how the proposed changes to Rule 11 will impact the patent system overall.

The Author

Jianqing Wu, Ph.D.

Jianqing Wu, Ph.D. (John Wu), Ph.D., is a registered patent attorney and an independent inventor having 8 U.S. patents in legal process, file storage security, open public computing systems, and online databases for the consumer market. His research interests touched sciences, engineering, law, and medicine. He earned B.S. in China, and received M.S. and Ph.D. (in Physical Chemistry) from North Carolina State University. He did postdoctoral research in Medicinal Chemistry in University of Illinois at Chicago and the National Institutes of Health. He learned methods and knowledge for characterizing whole complex systems. After he acquired J.D., he systematically studied the performance of the common law model and its adverse impacts on productivity. Being able to access multiple cultures, he conveniently used first-hand data in evaluating trade performance for different production cultures. Recently, he has developed a new interest in preventive medicine with his focuses on methods for preventing heart diseases, stroke and cancer. He was a member of four honorary societies: Phi Lambda Upsilon, Sigma Xi, Phi Tau Sigma, and Gamma Sigma Delta.

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