CAFC Affirms Ruling that Patent Owner Engaged in Abusive Litigation Tactics Against IBM, SAP and JP Morgan Chase

The U.S. Court of Appeals for the Federal Circuit (CAFC) on March 1 affirmed a district court’s decision that a patent owner’s “scandalous and baseless allegations” against IBM, SAP America, Inc. (“SAP”) and JP Morgan Chase (“Chase”) warranted monetary sanctions. The CAFC decision also noted that patent infringement is not a predicate act for purposes of the Racketeer Influenced and Corrupt Organizations Act (RICO) and that “redundant, immaterial, impertinent or scandalous” matter may be stricken from the record as a lesser, alternate sanction to monetary sanctions.”

Allegations

Dr. Lakshmi Arunachalam (Appellant) is the owner of U.S. Patent No. 7,340,506 (“the ‘506 patent”) and filed suit against IBM and several other defendants (listed by Appellant in her complaint as “Does 1-100,” collectively “Appellees”) alleging infringement thereof in 2016. Appellant further alleged violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). In subsequent years, Appellant filed first and second amendment complaints and a variety of motions, adding SAP, Chase and even the District Judge assigned to the case as defendants.

Appellees moved to dismiss the RICO claims via a 12(b)(6) motion, which motion Appellant opposed.

At the same time, Appellant filed a motion to recuse the Judge, as well as a motion for entry of default judgement against him. The Government filed a statement of interest on behalf of the Judge which was referred to the Chief Judge for consideration. Appellant promptly filed a motion to recuse the Chief Judge.

In 2017, the District Court granted Appellee’s motion to dismiss the RICO claims, holding that because “patent infringement is not a crime,” it is necessarily not “a racketeering [predicate] act.”  Appellee’s requests for sanctions were dismissed without prejudice. Though the District Court also held that Appellant’s amended complaint failed to provide any “plausible factual allegations” that supported her claims, the Court nonetheless granted Appellant leave to file a motion to amend and amended complaint compliant with local rules.

Appellant responded with a motion to vacate the dismissal, accompanied by a proposed second amended complaint noncompliant with the local rule Appellant was specifically instructed to observe.

Later in 2017, PTAB issued a final written decision finding that claims 20 and 21 of the ‘506 patent unpatentable, after a proceeding in which claims 1-19 were cancelled. PTAB further denied Appellant’s motion to amend to add new claims. After the period for appeal of the PTAB decision had passed, IBM moved to dismiss Count I of the amended complaint, the only count left standing after dismissal of the RICO claims. Appellant opposed the dismissal arguing that “there was no need for her to appeal the PTAB’s ultra vires unconstitutional and hence void decision ‘invalidating’ the ‘506 patent”, because the PTAB judges lacked “jurisdiction and immunity.” In May of 2018, the District Court granted IBM’s motion to dismiss Count I with prejudice.

Appellant filed a motion for reconsideration, which was promptly denied, the District Court finding that none of Appellant’s arguments provided sufficient basis for reconsideration. Appellant appealed all of the District Court’s orders to the Federal Circuit in 2019. The Federal Circuit affirmed, agreeing with the District Court that i) patent infringement is not a recognized predicate “racketeering activity” for a RICO claim, and ii) Appellant’s second amended claim continued to fail to provide sufficient factual allegations to support the RICO claim. The Federal Circuit further held that Appellant’s failure to timely appeal the PTAB decision is “final and may not be collaterally attacked through a separate litigation.”

In July of 2018, Appellee’s again moved for sanctions, as well as injunctions against further filings by Appellant. Appellant responded with a sur-reply, thereby necessitating further briefing by Appellees.

In March of 2019, the District Court granted SAP and Chase’s motions for attorney’s fees, and granted IBM’s motion in part. Appellant filed an opposition, with questions in the form of “Interrogatories propounded to Defendants, their Counsel of Record and Hon. Judge Andrews.”. Appellant filed two additional motions demanding that the Judge and attorneys of record provide Appellant with copies of their oaths of office, any foreign registration statements as well as bond and insurance information.

The District Court granted Appellee’s motions and awarded over $57000 to Chase, over $51,000 to SAP and $40,000 to IBM and denied Appellant’s motions requesting information, as well as additional motions to recuse both the presiding and Chief Judge.

Appellant responded by filing a “M[otion] and Notice to Enforce the Mandated Prohibition from Repudiating Government-Issued Contract Grants of Any Kind as Declared by Chief Justice Marshall in Fletcher [v.] Peck (1810) and Trustees of Dartmouth College [v.] Woodward (1819) Which Have Never Been Repudiated and Stand as the Law of the Land and Case, of Which this Courts Solemn Oath Duty Compels this Court to Enforce above All Else, with All Due Respect” as well as a “Motion for the Court to Vacate Its Unconstitutional Order…and Enter a New and Different Order.”  The District Court dismissed both in January of 2020. Appellant, of course, appealed.

CAFC Says No Abuse of Discretion

After setting forth the standard that “federal courts may assess attorney[s’] fees when a party has acted in bad faith, vexatiously, wantonly or for oppressive reasons,” the Federal Circuit held that the record amply supported the award of sanctions. The Court noted with particularity the fact although Appellant had alleged three counts of RICO violations, the only factual allegations concerned personal jurisdiction, infringement and/or lack of a license under the ‘506 patent. The Court was particularly sensitive to the fact that each of Appellant’s “repetitive, frivolous and often bizarre oppositions and motions” had required responsive filings on the part of Appellee’s: “As of the date of this opinion, these allegations have embroiled [Appellees] in baseless litigation for over four and a half years.”

Appellant’s opposition to the fee award was based upon the arguments that “[n]ot one dollar is reasonable” and that affirmance of the District Court award was an offense to the Constitution, and in particular, her rights under the First, Fifth, Eighth and Fourteenth Amendments. The Court found that Appellant’s arguments were so insufficiently developed as to be deemed waived.

Scandalous and Irrelevant Statements are Stricken

Appellant’s briefing was found by the Court to be “replete with scandalous and baseless allegations…all presented without a semblance of factual support.”  Further, the Court held that Appellant had made “multiple demonstrably false statements of fact.”  As held by the Court:

Dr. Arunachalam’s bizarre and scandalous statements extend to this court, the Judiciary, and indeed the Government as a whole. She alleges that we have colluded with the District Court, the PTAB, and Appellees in a “collateral estoppel farce propagated against multiple [c]ourts,”…we have “committed treason,”…failed to apply Governing Supreme Court Precedents…that our “rulings are all void”…[that she has been injured] “through a treasonous breach of solemn oaths of office by Judges and officers of the court and the corruption of fraud of the court…This is far from an exhaustive list…

And yet, the Court found that the most damaging impact of Appellant’s actions had been to her own claims:

Further, Dr. Arunachalam’s scandalous and unsupported statements are largely irrelevant to the issues on appeal and take up the vast majority of her briefing, hindering our ability to review her pertinent arguments…Dr. Arunachalam’s scandalous and irrelevant statements impede meaningful review of her arguments…(“Judges are not like pigs, hunting for truffles buried in briefs.” (quoting United States v. Dunkel, 927 F.2d 955,956 (7^th Circuit. 1991))

The Court thus concluded that striking the comments from the record was a more appropriate punishment than additional monetary sanctions:

Even according Dr. Arunachalam wider latitude in view of her pro se status, her baseless, outlandish and irrelevant invective degrades the dignity and decorum of the court and hampers “the orderly and expeditious disposition of cases”…In view of the fact that monetary sanctions have already been assessed in the underlying case, as well as the form of Dr. Arunachalam’s misconduct, we conclude that a lesser sanction is appropriate. Accordingly, the scandalous and irrelevant statements in Dr. Arunachalam’s briefs…are stricken.

On March 5, the court separately issued an order denying Dr. Arunachalam’s petition for interlocutory appeal and request to proceed in forma pauperis before the CAFC.

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