Some thoughts on Best Mode

As you know, a US application must still disclose the best mode.  The statute’s language and its legislative history (and the fact that the statute still says best mode!) demonstrate that beyond doubt.  However, the AIA made it so that a best mode violation cannot lead to invalidity or unenforceability (among other things).

I’ve been repeatedly told that practitioners are being asked by clients to omit the best mode, particularly in bio/chem areas where it may be best. That is, claim around the best mode, etc.

The PTO’s position is that best mode is required to issue a patent; as a result, leaving it out leaves out information material to patentability.  So you must include it.

How do you get a client’s interest to align with your own?  You candidly have to advise them that the patent will not be invalid/unenforceable if they leave it out. So what downside?

My thoughts have always been that, though by itself its omission cannot now lead to invalidity or unenforceability, perhaps evidence of its omission could be used to bolster intent to deceive, or affirmative egregious misconduct.

Yesterday, while speaking at the PRG program in Orlando (for six hours, just me, on ethics and professionalism — we had a great time, really!), someone suggested that it could also be used in the ITC; you have to be practicing your invention to have a domestic industry. If you’re not…

Any other thoughts?

Leaving Something off the Final Pre-Trial Order?

I teach, in addition to ethics and patent law, federal civil procedure.  So, I enjoyed and sent to my students this case, Insite Vision Inc. v. Sandoz, Inc., (Fed. Cir. Apr. 9, 2015) (Linn-auth; Prost; Newman).  The district court’s order denying the defendant’s motion to amend the final pretrial order was affirmed.  Apparently, the defendant had left off of the final pretrial exhibit list a file history from counterpart EPO patents that would have assisted its obviousness defense.

Now, of course, there are plenty of reasons things are left off of exhibit lists, but I teach my students that if you leave something off the list, or a witness or depo degs off of it, the odds of it getting changed are slim to none in many instances.  “Manifest injustice” is the standard, and it’s higher than “good cause” to amend a scheduling order and is further subject to an abuse of discretion standard of review.

Curious to see if there’s anything else that happens.

(Sorry for the long time between posts.  Buying a house and teaching an extra IP course this semester!)

Paul Vapnek Passes Away

Had the pleasure of providing CLE to Townsend Townsend & Crew back in the day and sparring (occasionally) with Mr. Vapnek.  He brought a lot to IP ethics, particularly in California.

There’s a story here, with links.

Nothing happening at the OED.

The OED publishes its public decisions in the “FOIA Reading Room,” here.  Although I’m sure you look there regularly, in case you miss a day I check every week or so for new cases.

There hasn’t been one since the end of December.

A two month ‘gap’ hasn’t happened since August-October 2012.

So, you all must be being more ethical?  I hope so. But it also probably has something to do with the switch from Director Moatz to Director Covey.

But I’ve been an expert for the OED, and I’ve been an expert against it, and I’ve represented lawyers against it, and I’ll tell you: stay away from the OED.  I refer to it as a gila monster: slow moving and sorta cute, but once it bites it hangs on.

(Revised) Akin Gump Found to Have Breached Duty of Loyalty to Client: Important Lesson for Fee Agreements

The opinion from the district court in the breach of fiduciary duty suit of SAS Institute, Inc. v Akin Gump Straus Hauer & Feld, LLP (W.D.N.C. Feb. 6, 2015),  is here.  This post discusses only part of the 55-page decision.

Beginning in 2006, AG began representing SAS in federal lobbying activities.  Six months later, it worked to get JuxtaComm, a patent monetization entity out of Canada, as a client.  JuxtaComm owned the ‘662 patent.

During the due diligence period on whether AG could take on JuxtaComm’s enforcement of the ‘662 patent, AG did due diligence, determining (a) who were participants in the market the ‘662 affected; (b) ran a conflicts checks; and (c] made a determination as to whether a good faith infringement claim could be brought.  In this regard, it hired an outside consultant, Precedia to do a patent study.

AG soon learned that (you guessed it) SAS was the largest target.  Learned that fact twice, as a matter of fact.  AG went so far as to learn the identity of specific SAS products that “may have been infringing” the ‘662 patent.  Thus, AG knew SAS was a current client; was the leader in this field; and made products that “potentially infringed” the ‘662.  (The district court noted that, in a later suit by JuxtaComm against SAS — in which AG did not participate — one of these products in fact was the subject of a claim by JuxtaComm.)

AG then told JuxtaComm that it believed SAS was an infringer!  (The court’s words: not “potential” or “theoretical” but “an infringer.”)

In the fee agreement, AG got $10m as an up-front retainer and would get 20% of all future proceeds AG secured.  The fee agreement carved out SAS (and others) from the scope of potential defendants that AG would sue.

But, the fee agreement went further. It stated that the litigation AG was bringing would be the “foundation and framework upon which JuxtaComm [could]” start enforcing the patents against other infringers.  In consideration of this work, the fee agreement also provided that AG would get 20% of the value received… (wait for it) even if AG was not involved in obtaining that value.

And..  what happens next is a little disturbing to me.  After its representation of SAS had ended, Akin Gump went ahead and represented the patentee against SAS.  SAS moved to disqualify.  In sworn testimony in that disqualification motion, Akin Gump lawyers apparently persuaded the court that they hadn’t targeted SAS before long after the representation had ended.  Here’s a quote from the district court decision denying the motion to disqualify:

JuxtaComm first contemplated suing SAS in the fall of 2009. Kiklis Declaration, Docket No. 163-1 at ¶20. Indeed, in its motion SAS argued that JuxtaComm’s pre-suit investigation and contemplation of suit occurred in the fall of 2009. Based on Kiklis’s declaration, the conflict arose in the fall of 2009.

The conflict between JuxtaComm and SAS arose in the fall of 2009, when JuxtaComm began contemplating bringing this suit. This was more than twelve months after Kiklis’s representation of SAS ended. Accordingly, the conflict did not arise while JuxtaComm and SAS were concurrent clients, and the rules for concurrent conflicts of interest do not apply.

Juxtacomm-Texas Software, LLC v. Axway (E.D. Tex. Nov. 29, 2010).  Apparently, the engagement letter — which showed this fact finding was, in my view, was wrong — was not provided to the court.  By successfully persuading the court that Akin Gump had not become adverse to SAS until after its representation of SAS had ended, Akin Gump was able to use the former client rules and, as a result, dodge disqualification.

Then what you’d expect to happen happened:  SAS sued Akin Gump for breaching its fiduciary duty to SAS.  At the bench trial, AG testified that, despite the provision in the fee agreement giving it 20% of all funds (and, apparently, despite the fact that it actually sued SAS for the patentee???), Akin Gump would “never have taken any money from SAS.”  But, AG also testified that that part of the fee agreement “mean exactly what they say, nothing more, nothing less.”

From this, the district court concluded that AG had taken a pecuniary interest adverse to SAS, in violation of D.C. Rule 1.8, which requires disclosure and consent under such circumstances. It also found that because AG hadn’t told SAS of this deal, SAS did not give informed consent for AG to continue to represent it in the lobbying efforts.

I’d be surprised if this is the last word on this one. If I’m not understanding the timeline, I’d appreciate Akin Gump correcting me, since it seems pretty straightforward what happened here.

I’ve seen a lot of contingent fee agreements over the years, and a lot them avoided this problem by carving out any monies the patentee receives from the firm’s clients.  I’m not sure that solves the problem — in fact, it probably doesn’t or might not depending on how smart the parties are.

They didn’t do that here… and they did more.

CAFC Reverses Award of 285 Fees: Biax Corp. v. Nvidia Corp.

In a non-prec opinion in Biax Corp. v. Nvidia Corp., the panel (Dyk-auth; Lourie; Taranto) reversed the district court’s award of section 285 fees and affirmed its denial of sanctions under section 1927.  The case was decided before Octane and so had a fun procedural path to get to this point.

The district court had found that the patentee had asserted objectively baseless infringement claims after the district court had construed the claims.  Thus, under Brooktree, it awarded fees under Section 285.

There are many cases where courts have awarded fees when, after claim construction, a party has no reasonable basis to contest, or assert, infringement, yet continues to do so.  Here, however, the Federal Circuit found there was such a basis, and it reversed the fee award.

What is odd, however, is the panel’s decision not to remand.  In its concluding paragraph the court wrote:

Because neither the expert testimony nor the claim construction orders foreclosed Biax’s position and there was nothing unreasonable about Biax’s infringement position, the basis for the district court’s award of fees no longer exists. Thus, even applying the deferential standard of review under Highmark, the district court’s fee award must be set aside. In some cases decided under the old Brooks Furniture standard, we have remanded for the district court to consider whether the case is “exceptional” in light of the new Octane Fitness standard. See, e.g., Checkpoint Sys., Inc. v. All-Tag Sec. S.A., 572 F. App’x 988 (Fed. Cir. 2014). A remand is not necessary here because neither the defendants nor the district court has suggested any basis for awarding fees other than the lack of objective reasonableness, and the resulting bad faith from continuing to litigate an objectively baseless position. Therefore, we reverse rather than vacate the fee award.

This strikes me as odd, since from the case, it appears that the only basis, pre-Octane to seek fee shifting was objective baseless.  To not give the defendant the right to assert that, regardless of objective reasonableness, the case was not “ordinary” under Octane seems odd.


Foley Partner Responds to SCOTUS Show Cause Order: I had no choice and you’re overreacting

The full response is here:  Shipley_Response

Foley went all out, hiring Paul Clement to write it.  Boiled (way way down – it’s 41 pages), the approach was to say that the client wanted this petition this way, and the client is in charge of the goals of the representation.  “I had no choice and you’re overreacting,” might be the headline.

Here’s the introduction:

In this case, attorney Howard Shipley had to reconcile the competing demands of the duty of loyalty that he owed his client and the duty that he owed this Court as a member of the Supreme Court Bar. Mr. Shipley’s client had deeply held views about patent law and insisted on articulating his basic argument (that the Federal Circuit was ignoring the guidance of this Court) in his own words, as he had done in prior amicus briefs filed in this Court by other counsel. The result is an unorthodoxpetition that clearly and faithfully reflects the views of the client, right down to the client’s favored locutions and acronyms employed in his other writings about the patent system. Mr. Shipley counseled the client and helped to ensure that the petition complied with this Court’s rules on matters such as format and the necessary components. The petition is not the one Mr. Shipley would have filed for a more deferential client, but the petition undoubtedly reflects his client’s wishes and instructions.

Mr. Shipley certainly had the option to withdraw from the representation, but doing so likely would have prejudiced his client’s ability to pursue the last legal option available to save his patent from invalidation. And, of course, even if Mr. Shipley had withdrawn, any substitute counsel retained by Dr. Schindler would have faced the same dilemma as Mr. Shipley. Mr. Shipley ultimately did not withdraw, and he made the arguments his client wanted this Court to hear. That decision was a good faith effort to reconcile the competing demands of the ethics rules. Other lawyers may well have made a different choice, but Mr. Shipley’s decision does not amount to sanctionable misconduct. The proper remedy for filing an unconventional or difficult to-follow certiorari petition should be denial of the petition (or rejection of the filing), not disciplining the lawyer who filed it.

And the conclusion:

In a perfect world, lawyers and their clients would always be on the same page in terms of both the goals of the representation and the means of pursuing this goals. In the world in which we actually live, lawyers will inevitably face competin demands to their clients and to the tribunals in which they practice. Here, Mr Shipley chose to hew closely to his client’s explicit instructions, while working in good faith to help ensure compliance with this Court’s rules, even though the result was an unconventional filing. In doing so, Mr. Shipley elected to file the petition rather than withdraw from the representation of a longstanding client in a manner that likely would have prejudiced the client’s ability to seek Supreme Court review at all.

Reasonable lawyers can differ over whether they would have filed this petition under their signature. But Mr. Shipley respectfully submits that his good-faith efforts to accommodate the competing ethical interests at stake do not reflect conduct unbecoming a member of this Court’s Bar, and should not result in a sanction that would have very serious consequences for his career.

I personally agree that, in this particular case, this is probably the right place to go, and the Court has, no doubt, sent a message to lawyers.  So, hopefully the matter will go away. But, I could see the court trying to say “you have a choice, but we overreacted” to try to affect things more.

We’ll see.

The WSJ on NPEs

Dennis over on the main page has an analysis of the WSJ op-ed which blames most of the patent system’s woes on NPEs.  Five years ago, I was asked to write on the legal ethics of NPE counsel, and wrote this article “Being on the Receiving End.”  This is from the intro:

The symposium invited me to speak on the legal ethical issues that face counsel who represent non-practicing entities (“NPEs”) in patent litigation as plaintiff patentees. My first reaction was that, although obviously the same common law, statutes, ethical rules, and procedural rules apply to such counsel as any other, owing to the tremendous costs of patent litigation, that counsel who represented such a “troll” necessarily would have enhanced obligations to court and opposing counsel to ensure that the suit was not brought in bad faith, nor so conducted.

Upon analysis, however, I came to the somewhat counterintuitive conclusion that, although the NPE’s counsel owes somewhat heightened duties, it is in fact the lawyer for the defendant, the accused infringer, whose duties are most implicated by the presence of an NPE in a patent suit. I arrived at that those twin conclusions based upon the following analysis and with some surprise.

Remember, I wrote that five years (probably six — published five) ago.

Interesting Ex Parte Contact Case

I’m updating my book on ethical issues in patent litigation, and found one of those “no way” cases.

Jones Day lawyer is representing a defendant in patent litigation.  The plaintiff designates its expert.  Lawyer gets on the Internet and, through email sent through that expert’s company’s web page, asks him some general questions by email, through a fake gmail address, not his Jones Day address.

For various reasons, the district court denies the motion for disqualification and sanctions.  One of the reasons was that the information provided was the same sort of information the expert would have provided to any customer contacting him.

Interesting one. It’s IPatt Group, Inc. v. Scotts Miracle-Gro Co., 2013 WL 3043677 (D. Nev. June 17, 2013).

Guess the date of this quote

The ‘invention requirement’ leaves “every judge practically scot-free to decide this often controlling factor according to his personally philosophy of what inventions should be patented, whether or not he had any competence to do so or any knowledge of the patent system as an operative socioeconomic force.”

No cheating.

PTO seeks input on scope of privilege between applicants and U.S. Patent Agents or foreign patent agents

The PTO has announced that it is seeking “input on issues regarding protections from disclosure for communications between patent applicants and Their advisors. The issues include: Whether and to what extent U.S. courts should recognize privilege for communications between foreign patent practitioners and their clients; the extent to which communications between U.S. patent applicants and their non-attorney U.S. patent agents should be privileged in U.S. courts; and whether and to what extent communications between U.S. patent practitioners and their clients should receive privilege in foreign jurisdictions.”  More specifically:


1. Please explain the impact, if any, resulting from inconsistent treatment of privilege rules among U.S. federal courts. In your answer, please identify
if the impact is on communications with foreign, domestic, or both types of patent practitioners.

2. Please explain how U.S. stakeholders would be impacted by a national standard for U.S. courts to recognize privilege for communications with U.S. patent agents, including potential benefits and costs. If you believe such a standard would be beneficial, please explain what the scope of a national standard should cover.

3. Please explain how U.S. stakeholders would be impacted by a national standard for U.S. courts to recognize privilege for communications with foreign patent practitioners, including potential benefits and costs. If you believe such a standard would be beneficial, please explain what the scope of a standard should cover.

4. Please explain how U.S. stakeholders would be impacted by an international framework establishing minimum privilege standards in the courts of member countries for communications with patent practitioners in other jurisdictions, including potential benefits and costs. If you believe such a framework would be beneficial, please also address the following issues:

a. Please identify which jurisdictions have potential problems and explain the

exact nature of the problem in each of those jurisdictions.

b. Please explain what the scope of an international framework for privilege standards should cover. An example of such a framework can be found in Appendix 5 of the following document: Publications/Attachment1Submissionto WIPODecember182013_SCP.pdf.

5. If a national standard for U.S. courts to recognize privilege for U.S. patent agents or foreign practitioners would be beneficial, please explain how that standard should be established.

a. If Federal legislation would be appropriate, what should such legislation encompass? Please consider whether the Federal tax preparer-client privilege legislation, which statutorily extended attorney-client privilege to non-lawyer practitioners (e.g., certified public accountants) under 26 U.S.C. 7525(a), is an appropriate model and explain why or why not. Are there any noteworthy parallels or differences between Federally-registered accountants and Federally-registered patent agents in either policy or operation?

On February 18, the the USPTO is hosting a roundtable and is also soliciting written comments to gather information and views on these questions. The notice of roundtable is here.

Octane as Creating Conflicts Between Lawyers and Clients and Undermining the Duty of Zeal

Curious what you all think.

Under Rule 11, of course, a lawyer is entitled to argue anything that is non-frivolous. Under the ethics rules, lawyers are to represent their clients competently and within the law, subject to many limitations but, at the outside, also this same barrier:  a lawyer can’t make frivolous claims or arguments.

Prior to Octane, a lawyer could push to the limits of Rule 11 and the ethical rules without risking (in the abstract, of course) fee shifting under Section 285.  This is because Section 285 had been interpreted (wrongly, I think) to require proof by clear and convincing evidence of both subjective and objective frivolousness.

Now, fees can be shifted if the case is merely out of the ordinary — even if it complies with Rule 11.  This could have a remarkable chilling effect on litigation:  we want lawyers to challenge bad patents, for example.

In thinking about this, it seems to me that lawyers should be regularly counseling their clients about important developments in litigation that, while not risking Rule 11 sanctions (or under 1927, inherent power, etc.) nonetheless risk fee shifting.  “I can do this, and I may have a duty to do this, but it creates risk for you.”


Interesting, Problematic Prosecution Bar Case

I can’t find this case, Velocity Patent LLC v. Audi of Am., Inc (N.D. Ill. Jan. 21, 2015) online (other than Pacer), but this is the essential analysis:

Audi argues that there is a significant risk of disclosure because Thomas C. Mavrakakis is Velocity’s sole member and the named partner at the law firm representing Velocity in the investigation, Mavrakakis Law Group LLP. Audi further argues that Velocity’s attorneys are involved in Velocity’s patent licensing and business decisionmaking.

Audi has not met its burden to show good cause for its proposed modification of the Protective Order. Mavrakakis is the sole manager of Velocity, but he is not one of the prosecuting attorneys in the case. James Shimota, one of the actual prosecuting attorneys, was involved in a related entity in the past but is not alleged to be a current member or manager of Velocity. Audi has not shown that Mavrakakis is involved in patent prosecution or that Shimota is involved in competitive decisionmaking.

Audi points to a prior decision of this court that found litigation attorneys to be competitive decisionmakers when they were “deeply involved in a [patentee’s] business decisionmaking in the area of intellectual property” and “involved in representing the client in multiple, related infringement cases.” Interactive Coupon Mktg. Grp., Inc. v. H.O.T.! Coupons, LLC., Case No. 98–CV–7408, 1999 WL 618969, at *3–4 (N.D.111.Aug. 9, 1999). However, in that case, the law firm was likely to represent the patent holder “in the prosecution of numerous related patents … in the context of a fluid, developing technology.” Id. at *3. Here there is only one patent at issue; and this area is not a fluid, developing technology. And as previously stated, Audi has not shown that the litigation attorneys are involved in business decisionmaking.

Why do I think it’s troubling? First, it puts the burden on the party seeking the bar to show what the other lawyers are doing.  How’s that practicable?  Second, in these one-owner entities, unless the sole “business” of the entity is suing his particular defendant, how can there not be involvement in competitive decision-making?

Using 35 USC 285 to Impose Fees on Patentee’s Counsel

When Dreams Come True? Using Section 285 to Impose Fees against a Losing Patentee’s Lawyers

By David Hricik

[This article first appeared in Landslide Magazine.]


A patentee can use the extraordinary costs of defense to extract settlements that far exceed the value of the technology to the defendant. Further, if the patentee’s business is asserting patents, it likely will have, compared to a manufacturer-defendant, fewer documents, fewer employees, and less to lose in a patent case.[1] These asymmetrical costs can lead to frivolous claims being made solely to extract unreasonable settlements.

Defense counsel has some tools, imperfect as they are, to shift those costs, including Federal Rule of Civil Procedure 11, 28 U.S.C. § 1927, and a court’s inherent power.[2] But only one tool generally allows for all fees to be shifted from a prevailing defendant to a losing patentee: 35 U.S.C. § 285. Section 285 authorizes fee shifting only in an “exceptional case.” Earlier this year, the Supreme Court in Octane Fitness, LLC v. Icon Health & Fitness, Inc., made it easier to recover fees, holding that an “exceptional case” was simply that: unusual, in that it “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”[3] Presumably, Octane will result in awards of fees in a greater number of cases, because the Court rejected interpreting the statute to allow fee shifting only upon clear and convincing evidence of both objective and subjective bad faith.[4]

Yet, particularly where the patentee is an asset-less “troll,” shifting fees is a hollow victory. An uncollectible judgment is literally not worth the paper it is printed on. But often trolls are represented by plaintiffs’ counsel, who may have deep, if not the only, pockets. No court has rigorously analyzed whether fees under § 285 may be imposed on the loser’s attorneys (either singly or jointly with the patentee), though motions to shift fees onto lawyers post-Octane are already being filed.[5]

This article shows that whether § 285 authorizes a prevailing accused infringer to have fees awarded against the patentee’s lawyer, either alone or jointly with the client, is an open question with strong arguments that it does. The article concludes by explaining why, even if lawyers are not directly liable to the opposing party, ultimately much of the increase in § 285 fee awards will be borne by lawyers, not their clients.


History, Text, and Purpose of Section 285

Fee shifting became available in patent cases for the first time in 1946 under 35 U.S.C. § 70, which permitted a court “in its discretion” to award fees “to the prevailing party.”[6] Congress made § 70 applicable to both accused infringers and patentees. Fee shifting in favor of a patentee was deemed necessary not only to ensure that a patentee who was forced to file a suit to protect its patent would not merely receive a reasonable royalty—what it would have received had the accused infringer taken a license in the first place—but also to prevent “a gross injustice.”[7]

Of course, the primary “gross injustice” a prevailing accused infringer faces in this statute’s context is paying its defense costs. Thus, with respect to the issue here, the statute’s purpose is to compensate a prevailing accused infringer to achieve justice. Consistent with this, courts soon emphasized that the statute focused on equity, fairness, and justice, stating for example that a fee award should be “bottomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which makes it grossly unjust that the winner . . . be left to bear the burden of his own counsel fees.”[8]

Congress recodified § 70 into what is now § 285. Rather than effecting substantive change, Congress added the phrase “exceptional case” to § 285 to codify the approach of those cases that had applied § 70 between 1946 and 1952.[9] Thus, § 285 focuses on achieving fairness, justice, and equity. With respect to accused infringers, § 285 is intended to avoid the injustice of a prevailing accused infringer having to bear the cost of defense in an exceptional case.

No one doubts that an award of fees in favor of a prevailing accused infringer can be entered against the patentee. But can an award be entered against the patentee’s lawyers, either alone or jointly with the patentee? In related cases and without rigorously analyzing the statute, the Federal Circuit gave mixed signals. In a nonprecedential opinion, the court reversed a district court’s award of fees under § 285 against the patentee’s counsel, but in a later precedential opinion, over a dissent, it apparently affirmed an award jointly and severally against the patentee and its counsel.[10]


Arguments that Section 285 Permits Shifting Fees onto Loser’s Counsel

The text is the starting point: nothing in § 285 indicates who must pay. Instead, the statute only states that fees may be awarded to a prevailing party. Congress could have but did not specify that the losing party must pay the prevailing party its fees, only that a party must prevail to receive a fee award. When Congress has wanted to limit statutes in that way, it has done so. Foremost, the Copyright Act allows the court to award “the recovery of full costs by or against any party.”[11] Congress’s decision not to limit § 285 in this same way confirms § 285’s plain meaning: it only specifies who can win, not who must pay.

Further, rules with similar structures have been interpreted in this way. For example, Federal Rule of Appellate Procedure 38 allows an award of fees for frivolous appeals “to the appellee.” That rule has been interpreted to permit an award against counsel, the appellee, or both.[12] Section 285 is likewise open-ended with respect to who must pay.

Moving beyond the text, the purpose of § 285 and congressional intent each suggests that an award against attorneys might be proper: an uncollectible award of fees does nothing to avoid the injustice of a wrongfully accused infringer paying the cost of defense in an exceptional case. The intent of Congress and the purpose of § 285 would be frustrated by a construction that does not permit awards against attorneys, at least where they are the only real recourse for compensation.

Further, construing § 285 to not permit fee awards against counsel results in some absurdities. Foremost, that interpretation would impose costs on the patentee for decisions that it may be incapable of making and, in fact, did not make. For example, many patentees cannot assess what a claim means; yet, courts have found cases “exceptional” for unreasonable infringement claims.[13] In that circumstance, imposing costs on patentees, not lawyers, punishes the wrong party and does not deter the offensive conduct. It may in fact result in punishing the innocent patentee, and yet awarding nothing in substance to the victim, the accused infringer.

Illustrating that point further, Rule 11 does not permit sanctions to be awarded against a client where the basis for the sanction is a frivolous legal argument.[14] Where the basis of a fee is a frivolous legal argument, interpreting § 285 to not permit awards against lawyers would result in clients being on the hook for fees, which is clearly against public policy. Further, unless a lawyer can be liable under § 285, the lawyer’s interest is to characterize any legal arguments as being solely the basis for an award under that statute, rather than Rule 11. In this regard, some courts have refused to permit a client to indemnify an attorney for sanctions imposed against the lawyer, recognizing that the deterrent effect of sanctions would be diminished.[15]

Finally as a matter of policy, sanctions are generally not insurable, but damages for malpractice are.[16] Thus, by imposing fees only on the patentee, courts may indirectly allow lawyers to insure themselves for damages that otherwise would not be insurable.


Arguments against Interpreting Section 285 to Permit Shifting Fees onto Counsel

Some statutes do permit awards expressly against attorneys. Foremost, 28 U.S.C. § 1927 permits sanctions against “[a]ny attorney or other person admitted” to practice. The existence of these statutes suggests that when Congress wants to permit an award of fees against a lawyer, it knows how to do so, and it did not do so in § 285. Where a fee shifting statute does not mention attorneys, some courts infer that awards against counsel are improper.[17]

In addition, at least after Octane, imposing liability directly onto attorneys may chill advocacy. Specifically, an attorney may not make an argument permitted by Rule 11 in light of the potential for liability under the much lower, and amorphous, standard in Octane.

Finally, although the purpose of § 285 was to avoid an injustice to prevailing accused infringers, Congress no doubt understood that normal limitations of liability that benefit corporations would apply. What matters is what Congress intended in 1952, and nothing suggests that it was concerned about asset-less trolls enforcing patents but leaving accused infringers actually uncompensated for their loss.



It is an open question whether § 285 allows fee awards against losing counsel. Given the statute’s open-ended language and broad equitable purpose of avoiding the injustice of an accused infringer paying its own fees, the text would seem to permit such awards when justice so requires. Those circumstances may include where counsel has assisted the patentee to structure its operations to avoid having assets to pay any award of fees, or where the lawyer’s conduct causes the exceptional nature of the case. In making any award, however, courts should carefully consider any chilling effect that an award may have on advocacy.

Lawyers should carefully consider several things in the post-Octane world:

The patentee’s counsel faces different issues than the accused infringer’s. First, to some extent it may be unethical to seek indemnity or reimbursement of such claims.[18] Second, suppose the lawyer of a patentee who loses faces the motion of the prevailing accused infringer asserting that the lawyer is liable to the accused infringer for its fees. That lawyer must face the fact that the patentee’s interest is that the lawyer bears those costs, while the lawyer’s interest is the opposite. As a result, it may be necessary for the lawyer, at a minimum, to obtain the client’s informed consent to continue the representation.

Counsel for an accused infringer must determine whether to attempt to shift fees onto the patentee’s counsel, rather than the patentee. Even if the patentee has assets, an order holding the patentee and its counsel jointly liable may best serve the accused infringer.

Finally, fee awards are going to be borne largely by lawyers, not clients. A client ordered to pay the other side’s fees will often contend that the lawyer’s incompetence caused the client to bring, or defend, an exceptional case. A lawyer should consider insurance, indemnification, revisions to engagement letters to permit withdrawal, and other ways to protect the lawyer and to make the risks clear to the client.

All lawyers should analyze § 285 carefully. It may be a dream come true, or a dark nightmare.


BIO: David Hricik is a professor at Mercer University School of Law and of counsel at Taylor English Duma LLP in Atlanta, Georgia. He clerked for Chief Judge Rader in 2012, has written on statutory interpretation, and is nationally recognized as an expert in legal ethics in patent practice. The title is from “When Dreams Come True,” by John Wesley Harding on the CD Garden of Eden (2003).


[1]. See David Hricik, Legal Ethics and Non-Practicing Entities: Being on the Receiving End Matters Too, 27 Santa Clara Computer & High Tech. L.J. 793 (2010); Randall R. Rader, Colleen V. Chien & David Hricik, Make Patent Trolls Pay in Court, N.Y. Times, June 4, 2013,

[2]. See David Hricik, Patent Ethics: Litigation § 5.01 (LexisNexis 2014).

[3]. 134 S. Ct. 1749, 1756 (2014).

[4]. Id. at 1756–57.

[5]. See, e.g., Opinion and Order, Rates Tech. Inc. v. Broadvox Holding Co., LLC, No. 13 Civ. 0152 (S.D.N.Y. Oct. 7, 2014) (concluding without rigorous analysis that § 285 did not authorize awards against lawyers).

[6]. See Octane, 134 S. Ct. at 1753.

[7]. See S. Rep. No. 79-1503 (1946).

[8]. Park-in-Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (9th Cir. 1951) (emphasis added). Courts considered all facts, including whether the patentee could have simplified the case, made unreasonable infringement claims, or delayed in suing or in dropping customer-defendants. E.g., Merrill v. Builders Ornamental Iron Co., 197 F.2d 16 (10th Cir. 1952); Aeration Processes, Inc. v. Walter Kidde & Co., 170 F.2d 437 (2d Cir. 1948); Brennan v. Hawley Prods. Co., 98 F. Supp. 369 (N.D. Ill. 1951).

[9]. See Mach. Corp. of Am. v. Gullfiber AB, 774 F.2d 467 (Fed. Cir. 1985) (explaining addition of the “exceptional case” language).

[10]. Compare Phonometrics, Inc. v. ITT Sheraton Corp., 64 F. App’x 219 (Fed. Cir. 2003) (reversing § 285 award against lawyer), with Phonometrics, Inc. v. Westin Hotel Co., 350 F.3d 1242, 1253 (Fed. Cir. 2003) (affirming an apparent award of joint and several liability against client and lawyer over the dissent of Judge Newman, who argued that awards against counsel under § 285 were permissible only for egregious conduct). See also Stillman v. Edmund Scientific Co., 522 F.2d 798, 800 (4th Cir. 1975) (opining that “it is not the purpose of [§ 285] to discipline uncooperative or overzealous counsel”).

[11]. 17 U.S.C. § 505 (emphasis added).

[12]. “[M]any cases under rule 38 assess sanctions against offending counsel, alone or jointly with the client . . . .” Coghlan v. Starkey, 852 F.2d 806, 818 (5th Cir. 1988) (citing cases).

[13]. See Hricik, Patent Ethics, supra note 2, § 5.03[5][b] (collecting cases).

[14]. Fed. R. Civ. P. 11(c)(5)(A).

[15]. See Young Apartments, Inc. v. Town of Jupiter, Fla., 503 F. App’x 711 (11th Cir. 2013) (collecting cases and discussing policy issues); N.Y. Cnty. Lawyers’ Ass’n Comm. on Prof’l Ethics, Op. 683 (Nov. 15, 1990) (analyzing propriety of clients reimbursing lawyers for sanctions).

[16]. If a lawyer brings a patent case and fees are shifted under § 285 and imposed on the patentee, the patentee can contend that that lawyer acted incompetently by pursuing the case at all, or continuing after some point. Courts have already entertained these suits. For example, in E-Pass Technologies v. Moses & Singer, LLP, fees had been imposed on a losing patentee who then brought a legal malpractice claim against its lawyers. No. C-09-5967, 2011 WL 5357912 (N.D. Cal. Nov. 4, 2011); see also Deutch & Shur, P.C. v. Roth, 663 A.2d 1373, 1375 (N.J. Super. Ct. 1995) (stating that “the client may seek indemnification against the attorney for sanctions”); In re S. Bay Med. Assocs., 184 B.R. 963 (C.D. Cal. 1995) (analyzing indemnity of sanctions orders). Of course, and particularly under the broader Octane standard, simply because fees are imposed under § 285 does not automatically evidence incompetence.

[17]. E.g., Neft v. Vidmark, Inc., 923 F.2d 746, 747 (9th Cir. 1991).

[18]. For a discussion of indemnification in the context of sanctions, see N.Y. Cnty. Lawyers’ Ass’n Comm. on Prof’l Ethics, Op. 683 (Nov. 15, 1990).

Subject Matter Jurisdiction in Legal Malpractice Claims: The Door Gets Slammed Shut Again

Dennis wrote up NeuroRepair v. Nath Law Grouphere.  The case to me puts another nail (probably not the last) in the coffin of the “substantial federal question” basis for asserting subject matter jurisdiction in cases based upon malpractice during patent prosecution or litigation.  Boiled down, because state law creates a malpractice claim, the fact that patent law will be an issue is not enough to convert a state law claim into one arising under federal law.

This is good, and bad. The good is that I’ve seen several of these cases bouncing around for years between state and federal systems. Having jurisdictional certainty is a good thing.  If someone files in state court, the case likely should remain there; if in federal court, it likely should be dismissed (absent independent subject matter jurisdictional grounds, obviously).

The bad news is that state judges, with no experience with patent law, are going to be deciding patent law issues.  This creates a little bit of the wild west, potentially.  I suspect overall that defense counsel would rather be in federal court, but that probably varies.


Good Faith but Mistaken Belief in Invalidity Combined with Good Faith but Mistaken Belief in Infringement…

At the biosimilars conference last week, everyone was puzzled about whether you could be liable for inducement if you had a good faith belief that a patent was invalid but the patent was valid.  That seems to be the law, right now at least, pending Commil.  (Dennis’s write up is here, along with a link to the CAFC decision.)  I think Commil’s wrong for a lot of reasons, but…

Let’s have some fun on Saturday morning and combine it with Frolow (Dennis’s post here.)  Suppose I mark a product as patented, but I’m wrong: although I in good faith marked it, it doesn’t meet the limitations of a claim.  (Obviously, this could occur for various reasons, including manufacturing tolerances.)

So, now let’s say someone is sued for inducing manufacture of the product.  If they’re wrong about infringement, under Frolow, the fact of marking, alone, is enough evidence to get to the jury on literal infringement.  Under Commil, it seems that a mistaken belief in invalidity is also enough to get to the jury, on non-infringement.

So, you could end up with someone (a) in fact not infringing (b) a valid patent, but liable for infringing it because she mistakenly thought she was infringing it.  You could also end up with someone (a) infringing by inducement (b) a valid patent, but not being liable for inducing infringement because she mistakenly thought the patent was invalid.