On October 20, 2014, the Federal Circuit issued a decision in AntiCancer, Inc. v. Pfizer, Inc. The litigation related to patents owned by AntiCancer, Inc. on a technology related to the imaging of gene expression using a green fluorescent protein linked to a gene promoter. The fluorescent protein is derived from a species of green-glowing jellyfish named Aequorea victoria. The patented inventions are described as useful for drug discovery and evaluation in cancer control and treatment.
The appeal came to the Federal Circuit from the United States Federal District Court for the Southern District of California. The district court granted summary judgment of noninfringement. The decision of the district court was not entered on the substantive merits of any issue raised in the complaint, but instead on what the Federal Circuit characterized as a procedural aspect that occurred at the beginning of the litigation and arising from application of the Patent Local Rules of the Southern District of California.
The district court imposed a fee-shifting sanction as a condition of permitting AntiCancer to supplement the Preliminary Infringement Contentions that the district court found defective under Patent Local Rule 3.1. The district court issued an Order that would have allowed AntiCancer to supplement its infringement contentions, but only if it concurrently pay the attorney fees and costs incurred by the defendants in connection with their motion for summary judgment related to the defective infringement contentions. AntiCancer objected to this condition, and the district court entered summary judgment.
The Federal Circuit decision was authored by Judge Newman, who I almost always agree with. In this case, however, the Federal Circuit ruled the fee-shifting condition was improperly imposed and, as a result thereof, the judgment of the district court was vacated. In this case I believe Judge Newman and her colleagues Judges Reyna and Taranto, are incorrect.
It seems fundamentally unfair for a defendant to have to pay for a filing that becomes nullified by amended infringement contentions, whether they appear in an Amended Complaint or in a filing required by a local rule. Trial by moving target is a real problem in the Federal Courts and it seems eminently reasonable that if the district court is to extend a courtesy for defective filings it should not cost the defendant a penny.
In this case the defendant did nothing wrong and nothing at all other than respond in a legally appropriate manner. It would have been malpractice not to raise the issue. I understand that on an issue like this the Federal Circuit must apply the law of the Circuit where the case is brought, and that the Ninth Circuit requires a determination of bad faith for a sanction such as this. I suppose technically filing defective papers with the district court is not in and of itself bad faith, but why isn’t it bad faith? I understand that bad faith requires some level of mens rea, but what about the defendant? Should the defendant just be expected to pay to respond to defective papers and then have the plaintiff say “oops, our bad, we will fix it thereby mooting your earlier filing.” I know we don’t have a “fairness system,” but instead have a “justice system,” but I don’t see any reason why parties should be given a free pass to fix defective papers.
In this case AntiCancer argued that their infringement contentions were enough at this stage of the litigation prior to discovery. If you ask me that sounds a lot like they don’t really know whether there is infringement, they have a suspicion that there may be infringement, and they will sue on patent claims using a vague theory that discovery may or may not ultimately support. That is the very problem with the current patent litigation controversy. Thanks to the propaganda of the Silicon Valley elite the public, media and Congress believe the patent system is broken, when in fact what is broken is the litigation system. Exhibit #1 that the litigation system is broken is this case where the defendants have to pay to file a summary judgment motion which they should win except for the second chance the Federal Circuit gives to the patent owner.
While I see no evidence in this case that AntiCancer is a nefarious actor or abuser of the patent litigation process, this type of infringement complaint by supposition is all too common and is the very hallmark of the nefarious actors who engage in patent litigation abuse. I am in favor of patent owners being required to bring infringement contentions earlier rather than later, and if those contentions do not rise to the level of a legitimate belief that there is infringement there is no reason for the defendant to be subjected to the lawsuit. I personally think the district court struck the perfect balance between allowing a plaintiff patent owner to essentially change infringement contentions provided they pay the defendants for the unnecessary legal work incurred by their attorneys. Therefore, I would have found the district court’s sanction completely appropriate.
Generally speaking I am not a fan of fee-shifting on a global basis. I think all fees and costs being shifted to the loser should be reserved for extraordinary cases. Having said that, I do think district courts should be given much greater latitude to order fee-shifting on an event-by-event basis. It seems to me that the Supreme Court’s recent decision in Highmark demands greater latitude be given to district court’s, and I think this is one of those circumstances where fees should have been shifted relative to the defendant’s now mooted summary judgment motion.