Federal Circuit: Absent bad faith, court cannot condition allowing patentee to supplement preliminary infringement contentions upon paying accused infringer’s fees

AntiCancer, Inc. v. Pfizer, Inc. (Newman, Auth; Reyna; Taranto) is probably not new law, but is of interest.

The District Court relied upon its inherent power to enter an order holding that the patentee could not, in accordance with local rules, supplement its preliminary infringement contentions without first agreeing to pay the accused infringer’s fees it incurred in preparing a motion for summary judgment based upon the lack of specificity of those PICs.  If the patentee chose not to supplement and pay fees, the court ordered summary judgment would be entered against it. The patentee objected; the district court entered summary judgment against it.

The panel unanimously reversed, recognizing that a court can rely on inherent power only where there is bad faith.  Further, the Ninth Circuit’s law required an express finding of bad faith.  Thus, reversal seemed pretty clearly required.

What makes the case interesting is the court tried to put the role of PICs in some context, emphasizing that they  are intended to identify the issues in need of further discovery but are not, themselves, evidence.  Further, because the PICs were due five days after filing an amended complaint, the court emphasized that doing the best that was possible did not require a whole lot where there was a method claim involved and so access to the accused infringer’s method was limited as a practical matter.  Finally, the panel emphasized that the district court should have considered the additional detail provided in the opposition to summary judgment; instead, the district court viewed the fact that additional details were present in the opposition indicated the PICs were incomplete.

My takeaway is that if you’re going to oppose summary judgment, you need to follow Rule 56 and, before discovery at least, come forward with evidence negating an element of the claim.  Local rules can’t trump rule 56.


Post-Octane: What’s Happening with Fee Awards?

My wonderful research assistant Lee Ann Hughes prepared the attached chart (link below) examining what courts are doing post-Octane.  Her research showed:

  • 39 cases – attorney’s fees not awarded
  • 23 cases – attorney’s fees awarded
  • 5 – remanded

That’s a huge shift, I suspect, from pre-Octane practice.

In the next Landslide magazine, I analyze whether section 285 can directly apply to lawyers (can I make opposing counsel jointly and severally liable with its client?) and explain how clients will be bringing malpractice claims against their lawyers when fees are awarded against them.  Those cases have already been filed, even under the old standard.

Think about how you want to address Octane in fee agreements, in discussions with clients, and other things…

Chart Cases Awarding and Not Awarding Attorneys Fees under Octane UPDATED

Another Prosecution Bar Case, but With a Twist

As I’ve pointed out elsewhere here, the adoption of the AIA has created various issues for existing prosecution bars: if you are using a pre-AIA form, consider whether it applies to the new post-grant proceedings.  Courts are splitting on whether bars that don’t mention them can, or should, apply.  My article on the broad topic of prosecution bars is here.

In this recent case, Voice Domain Techn. LLC v. Apple, Inc. (D. Mass. Oct. 8, 2014), the court faced a couple of unique circumstances, while also addressing whether post-grant proceedings were “competitive decision-making” within the meaning of prosecution bars.  Specifically, the patentee was essentially a one-man company and that one man was also the named inventor on the patents-in-suit.  Apple sought to exclude him from having access to key information, asserting that, no matter his best intentions, he would at least likely inadvertently misuse the information.  Apple asserted that his involvement in licensing, patent acquisition, and prosecution all made inadvertent disclosure possible.

The court agreed, holding that, though not doubting his integrity, “it questions whether it is possible to avoid the subconscious use of Apple’s confidential material in his future endeavors.”  Thus, as a competitive decision-maker he was subject to a bar unless Voice Domain showed that the prejudice to it of a bar outweighed any potential harm.  The court found it did not, concluding that because trial counsel and experts could have access, this outweighed the potential harm.

That aspect of the case — the sole-employee patentee — is fairly rare in my research, and this case discusses a few other similar cases.

The case addresses various other issues, but whether reexamination and other post-grant proceedings should be covered was a key issue. The court held that although courts had usually held reexamination proceedings were not subject to a prosecution bar, “a newer line of cases recognizes that even in a reexamination proceeding, a patent owner can use confidential information to restructure or amend its claims so as to improve its litigation position against alleged infringers.” (citing several cases from 2013 and 2014). The court adopted the approach of these more recent cases, but entered an order that allowed for court permission for counsel to participate.

Takeaways:  (1)  don’t assume post-grant proceedings are covered, or not, by a bar and make it clear; (2) be sure that any of your lawyers who are subject to a bar comply with it and (3) figure out who on the other side needs to be barred.  As my paper points out, with respect to that last point, some courts hold that the party seeking the bar has to show that a lawyer on the other side is likely engaged in competitive decision-making; that is not practicable.  Finally, and again, double-check any old form and be sure you update it, as appropriate.

Update: Using IPR to Manipulate the Stock Price of Patentees Which Won in District Court

The creativity of American lawyers never ceases to amaze.  I’ve heard of variations on this theme:  using an IPR to coerce payment, a license, or something from the patentee.  Variation on the theme:

A third party sees that a patentee has won a big judgment, defending its patent against a charge of invalidity.  The third party then cobbles together an IPR petition based upon the arguments that failed in the district court, relying upon the lower burden of proof and broader claim construction that will apply in IPR, and sends it to the patentee with a note:  “pay us or we’ll file this.”  This was discussed a few months back here.

A third party uses IPR as a tool to manipulate stock price:  sell the stock short and then file the IPR.  Or, it sees the patentee is in litigation and says, “give us a license (which we’ll turn around and use to license the defendants) or we’ll file an IPR.”  A story about that allegedly happening is here.

Gotta love America.

The ethics of this are fascinating:  it may be that the OED could be brought in to show that the IPR was filed for an improper purpose and nip it in the bud.  But that’s probably a long shot, given the right to petition and what-not.  Perhaps Congress limiting standing in IPRs to competitors?  It’s too early for me to think in depth about a creative solution to this creative problem.

Judge Gilstrap Holds Firm has Only Partial Lien on Proceeds from Representing NPE Patentee

There’s a fee dispute in the Eastern District of Texas over, it’s alleged, $25m owed to Mount Spelman & Fingerman, P.C. by its former client, Geotag, Inc.  I’ve uploaded a copy of the judge’s decision from October 2, 2014, here:  show_temp

Boiled down, the client retained the firm to sue 350 or so defendants but after just over a year, fired the lawyer.  The fee agreement purportedly gave the firm the right for any reason on termination to get either its full hourly fees or a contingent fee, whichever was greater.  (Which is insane, but I digress.)  But that issue was not what the court addressed.

Instead, the firm moved for a preliminary injunction, asserting that it had a lien over the money and that the patentee was going to send the money out of the country.  The court first held that a contractual lien was not prohibited by Texas’ ethical rules, even though there were two opinions which the court viewed as irreconcilable on that point.  So, firm wins that round.

But, the court reasoned that the fee agreement was not clear as to which cases it applied to, and under what circumstances.  Because of the lack of clarity, it ultimately concluded that the lawyer had a lien only as to cases fully settled/adjudicated prior to termination, and even those it put limitations on.  So, firm loses that round.

This is the second Texas case in just the last few months to raise up these “I get paid even if you fire me no matter what” clauses, the other invoking Parallel Networks and Jenner & Block, which you can read about here.  I’ve written an article about these purportedly ethical provisions, and if you email me I’ll shoot it to you. Ask for “Dear Lawyer.”

If you have and can forward a copy of this fee agreement to me, I’d love to see it. It did not seem to be on Pacer and may, of course, be under a protective order. Please don’t send it if it is! :-)

BPCIA Ethical Issues?

Hi, all,

I’m in the midst of preparing a paper on ethical issues arising from biologics practice, and figured I’d ask:  you have any issues that arise?  I’ve thought of some regarding prosecution bars/competitive decision-making type issues, but would love your input, particular as to in-house counsel issues.

Many thanks.  I’ll post the paper when it’s done.

Hearing on Ohio Bill to Protect Against Frivolous Patent Suits.

The story here explains that the bill got a hearing and that, if passed, Ohio would join ten other states with these bills. The story states:  “HB 573 outlines information in patent infringement claim letters that can be used against senders in legal proceedings and enables targets of such letters to file civil suits if claims have no merit.”

I’ve got an article coming out showing how 285 can be used against lawyers of patentees…

K&L Gates says no conflict but withdraws anyway

The story, hopefully not behind a paywall is here.  It’s not quite clear from the story, but it seems that the patentee had several lengthy meetings with one set of K&L Gates lawyers about some of its patents, but, for whatever reason, did not retain the firm.  The, after the patentee filed suit, K&L Gates showed up representing the defendant.  After the firm filed a response to the motion to disqualify, it announced it would withdrawn to avoid the cost and delay of the motion on its client.

This implicates (in many federal courts) Model Rule 1.18, or its state analogs, a rule that is not on a lot of lawyers’ radar.  Essentially, it provides that a law firm owes duties to a client who in good faith seeks to retain the law firm.  The firm can obtain consent, set up screens, and take other steps to avoid a conflict under the rule, and it may be that’s what K&L Gates did here.

If you do “beauty pageants” or “dog and pony shows,” read Model Rule 1.18 and take advantage of some of its safe harbors, to protect yourself, your prospective client, and later potential clients.


Your turn to vent: what do you see in written communication that bugs you?

For years now, my colleague Karen Sneddon and I have written a column, “Writing Matters,” for the Georgia Bar Journal.  We try to make it meaningful to lawyers and think we’ve accomplished that goal.  What I’d like to know is what bugs you?  I don’t want to even suggest ideas so fire away.  We’re going to put together future columns that address those that we haven’t, yet, covered.

Rant away!

Speeches this week

Speaking Monday in D.C. at the Association of Intellectual Property Firm meeting, details here.  Then speaking Tuesday in Wilmington at the duPont-Widener CLE, details here.  I’ve not spoken to the former group before, I don’t believe, and have for several  years in a row now spoken at the duPont event, which is wonderful if you can make it.

11th Circuit: Because Client Loses Faith in Lawyer, and so Lawyer Quits, Lawyer Still gets Contingent Fee

Lewis v. Haskell Slaughter Young & Rediker (11th Cir. Sept. 11, 2014) is definitely going to be on my speaking agenda this year.  I love it, as a speaker, when courts give me decisions like this, though I regret that they exist.

The plaintiff hires a lawyer (“Lawyer A”) on a 45% contingent fee basis to bring a discrimination claim.  After 13 months of litigation, during which Lawyer A had sought five continuance,  had submitted no dispositive motions, had taken no depositions, and had submitted no expert reports.  The judge said there would be no more continuances.

Understandably, the client wrote a somewhat pointed email to an associate of Lawyer A, writing in part that it was “unacceptable for you to be uninformed on these things.  Has there been no progress…?”  Lawyer A immediately wrote back and said that she was “immediately” terminating the case and “your file has been boxed and is in the lobby with the receptionist.”  Lawyer A also wrote that she’d file a motion to withdraw with the court three weeks later.

Lawyer A didn’t withdraw.  A settlement offer came from the other side to Lawyer A, which she forwarded to the plaintiff, who had by then secured separate counsel.  Through separate counsel plaintiff accepted the $85,000 settlement offer.

Lawyer A then shows up demanding fees.  The district court awarded Lawyer A $38,250.

On appeal, the panel split 2-1.  The majority reasoned (and I am not making this up) that because the client no longer trusted the work of Lawyer A, Lawyer A had “just cause” to withdraw, and so was entitled to quantum meruit, which was supposedly $38,250.

The dissent disagreed.  It pointed out, among other things, that what the majority rule amounted to was a license to use poor service to get paid.  The dissent emphasized that the court failed to take into account the fact that it was not the client who had caused the relationship to deteriorate, but the lawyer.  The dissent also emphasized that by withdrawing immediately and putting the file in a box in the lobby, Lawyer A had violated basic precepts of the ethical rules concerning withdrawal.

This is an embarrassing case for the 11th Circuit.  Thankfully, it is unpublished.

Then the lawyer

Company sues Kilpatrick Townsend, Claiming Firm Gave its Secrets to a Client to Patent

The story is, hopefully not behind a paywall, here.  I tried to find the pleadings to post but had no luck, even on Pacer.  MV Circuit is the plaintiff, claiming Kilpatrick conspired with its client, Omnicell, to patent MV Circuit’s technology concerning some “Riocart” technology in Omnicell’s inventor’s name.  The gist of the complaint according  to the story is this:

Omnicell allegedly told MV Circuit that, in order to determine the value and patentability of MV Circuit’s intellectual property, MV Circuit needed to disclose its confidential intellectual property to William Daley, Omnicell’s attorney at Kilpatrick Townsend — even though Omnicell had already determined the technology was patentable.

Omnicell falsely represented to MV Circuit that Daley was not Omnicell’s regular patent counsel and would not be involved in developing any patent applications on Omnicell’s behalf, the complaint said. Omnicell further falsely claimed the Kilpatrick Townsend attorney would not disclose MV Circuit’s intellectual property to Omnicell, according to the complaint.

However, MV Circuit claims that neither Omnicell nor Daley told MV Circuit that the firm was in fact Omnicell’s regular patent counsel and that partners from the same Denver office of Kilpatrick Townsend as Daley were working on Omnicell’s nonpublic patent applications related to the technology in the RIO Cart, according to the complaint.

OED reprimands lawyer for unreasonable fees, improper fee division, and related issues.

In re Lehat reads like a law school final exam.  The facts are a little unclear (be sure to read the opinion) as to some issues, but the facts seem to be as follows:

The lawyer was doing trademark work for the office, but was not registered to prepare patent applications.  He acquired a client through a legal services program provider he worked for who needed a patent filed on an improvement to a hair weave system.  (If you have seen my picture, or me, you will know I am not its target audience.)  Rather than simply refer her to a patent lawyer, or get a proper fee division agreement (e.g., he would receive fees in proportion to the work, which would have not been much) he took $5,000 from the client.  He paid $3,000 to a practitioner to prepare the case, who later returned $2200 of it, saying that he had really earned $800.  The practitioner thus had $4,200.  He did not put any part of the $4,200 he kept into his trust account, but deemed it a “relationship fee” that was earned upon payment.

The client brought a state action seeking refund of the $5,000 and the lawyer took the position that the $4,200 was his.  He seemed to assert both that he was reasonably billing $1,000/hour as a “relationship attorney” and that the $5,000 was a flat fee that was predicated on 5 hours work at $1,000 per hour.

The OED did not agree.  Based upon mitigating factors, it gave him a public reprimand and ordered him to return the money.

It is interesting to me for two reasons.  One is: only a reprimand?  The second is that the opinion discusses the distinction between a general retainer — earned upon payment, and is paid simply for the lawyer to be available in the future, at which time he’ll bill his hourly rate — and a special retainer, which we usually think of as an advance on fees, which goes into the trust account and is drawn down as the money is earned.

Law Prof Ethics and Publications: a Rant

One of the many things that surprised me when I became a professor 12 years ago is the “law review game.” What happens is this: prof writes an article and sends it out to a ton of journals. Once he gets one acceptance, he then tries to “leverage it up” to “higher” journals. If he gets a higher one, then he tries again. It’s led to all sorts of things — expiring offers to publish, and so on, as well as writing that is intended to be published in journals “at the top,” which may or may not reflect what lawyers and judges want and need to read.

It’s all silly. Law students have no clue as to what is good writing, or important subjects, and so they go by labels (“ooh, a professor from harvard wrote this so it must be important” and the converse) or, imho, whether the article fits with what they’re being taught in law school (so, students at the more “theoretical” schools will think theory is what is important to “the profession,” whatever that means to them).

Of course, all scholarly work is now on line and so accessible by searching. So, placement in the sense of getting information out means absolutely nothing and, perhaps, the opposite if the “profession” includes most practicing lawyers, who read predominantly bar journals and practice-specific materials (the latter, such as “the X law school journal of law and technology” are generally not viewed by law profs as being as good as the law review of school X).

This leads to law professors trying to further their careers by openly admitting they write for a small segment of students at “high end” law reviews.  Usefulness to lawyers, judges, legislators… not much of a factor.

In my own view we ought to be writing for judges and lawyers, not each other or for second year law students at Harvard.


Practitioner’s Non-Lawyer Assistant Signs Documents, Fabricates, E-mails: OED Acts.

In the Matter of Druce, Proc. No. D2014-13 (OED Sept. 5, 2014), a practitioner admitted to neglecting matters entrusted to him by not preventing his non-lawyer assistant from cutting and pasting a digital version of the lawyer’s signature onto petitions, fabricating emails to the Office, doctoring postcards to show receipt by the Office of papers, falsifying Express Mail labels, and backdating certificates, among other things.   The lawyer did not know of the conduct, and in fact the non-lawyer assistant kept the information from the lawyer.  The lawyer agreed he had not adequately supervised the non-lawyer.

Procedure and 101: I haven’t ranted in a while.

I teach Civ Pro and have even written a book on it, so…

1.   A defendant has to plead 101 as a defense (if it is one, and you all know how I feel about the plain text of 282, but let’s not go there).

2.  The patent is entitled to a presumption of validity.

3.  If we get into “preemption” or “conventionality” or “inventiveness” the facts pop up pretty quickly (how do we know if it preempts a lot without knowing what non-infringing alternatives there are; isn’t ‘conventional’ and ‘inventiveness’ like obviousness? What time are they measured from — from just before the invention?)

4.  “Enough” and “invention” are not legal doctrines.


Rant over.

Buy Your Opponents’ Computers at Auction and then Have Fun!

In Kyko Global, Inc. v. Prithvi Info. Solutions, Ltd., (Wd. Wash. June 13, 2014), plaintiff’s attorneys in a civil fraud suit bought a computer that had been seized from one of the defendants.  The defendants figured it to and moved to disqualify the firm. The court denied the motion because the plaintiff’s lawyers had done nothing wrong., even though they went digging for meta-data mining on the hard drive.

Interestingly, the court held that privilege had not been waived by the plaintiff because he had believed that he had adequately erased the hard drive.

Lots of lessons. I remember being told the military burns computer hard drives because they can’t be truly “erased.”

Failure to Disclose Adverse Litigation Claim Constructions During Ex Parte Reexam States Inequitable Conduct Claim

Masimo Corp. v. Philips Elect. North Am. Corp. (D. Del. Sept. 2, 2014) addressed whether the accused infringer would be permitted to amend its answer to include a claim for inequitable conduct.  The district court rejected Masimo’s contention that the answer failed to state a claim and allowed amendment.

The substantive allegations of the claim were that during ex parte reexam the patentee knew of but failed to disclose a district court’s claim interpretation that contradicted its position in reexam.  Specifically, the District Court had construed the claims to not require that claimed calculators actually determined a particular ratio, but in the PTO it argued the opposite — that the claimed calculators do require calculating the two ratios.

The district court acknowledged that the broadest reasonable construction standard applied in the office, but not in court, but nonetheless found the allegations sufficient under Exergen and Rule 9(b) and allowed amendment and also discovery into the issues.

Amicus Briefs at the Supreme Court as Dubious Sources of Fact

The New York Times has an interesting piece, here, about dubious sources of factual information — information that has not gone through the adversary process.  Of course, judges are supposed to only take into account facts that are of record below or which the can take “judicial notice” of, which is a pretty narrow band of information.

Interesting stuff when you think of 101…