Federal Circuit Awards Sanctions for Frivolous Appeal

E-Pass v. 3Com, Palm, Visa, et al. (Fed. Cir. 2009)

This litigation began in 2000 when E-Pass sued for infringement of its electronic credit card patent. Patent No. 5,276,311. The district court granted summary judgment of non-infringement, which was affirmed on appeal. The district court then found the case exceptional under 35 U.S.C. § 285 and awarded attorneys’ fees to the defendants. E-Pass appealed that judgment. In a counter-motion, PalmSource also asked for attorneys fees for the appeal – arguing that the appeal was frivolous as well. The Federal Circuit affirmed the trial court without opinion, but wrote an extensive opinion finding a frivolous appeal.

Frivolous Appeal: An appeal is frivolous if the appellant fails “to present cogent or clear arguments for reversal.” In addition, the court may award sanctions based on misconduct or misrepresentations to the appellate court.

Here, the court found that E-Pass did not present any specific argument relating to the attorney fees for one of the defendants – PalmSource. Instead, the plaintiff-appellant focused on its case against the other defendants. E-Pass did not “challenge any finding of the district court relating to litigation misconduct in the case against PalmSource.” Furthermore, E-Pass did not change its strategy even after being notified of PalmSource’s frivolous appeal argument. Adding to E-Pass’s problems are “multiple misrepresentations” to the Federal Circuit – primarily in referring to the defendants collectively when each stood in different situations. Perhaps the straw-that-broke-the-camel’s-back was E-Pass’s use of the quote that “a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless.” With the help of PalmSource and the CAFC clerks, the court easily found that a critical exception to the sanctions rule had been left off. Notably, the full quote reads: “Absent misconduct in the litigation or in securing the patent, a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless.”

Sanctions and attorney fees granted against E-Past and its counsel, jointly and severally.

In dissent, Judge Bryson saw serious misconduct, but would not have imposed sanctions.

Accepting that in those regards E-Pass’s briefs on appeal fell short of the standards we expect of counsel in this court, I nonetheless conclude that the shortfall is not so egregious as to call for the imposition of sanctions.

15 thoughts on “Federal Circuit Awards Sanctions for Frivolous Appeal

  1. [Regarding the "Quality Client Care" trademark.]

    > Based on this case they couldn’t be rejected as merely descriptive of the services, maybe should have been rejected as deceptively misdescriptive of the services?

    You have things backwards. Clearly the mark should be considered *fanciful* in this context and given a higher level of protection! [/sarcasm]

  2. My goodness. Big time sanctions; client sues you while case is still on appeal; the specter of potential disciplinary proceedings…

    I’m sure glad I haven’t experienced such excitement thus far in my practice.

  3. Oooops. Next step: the defendant’s table. (Then bar sanctions.)

    The affirmative defense/counter-claim will be 1. They lied to us, and 2) We were only being zealous.

  4. And now E-Pass is sueing its attorneys for malpractice:

    link to law.com

    “In advising E-Pass to file and maintain their patent infringement claim, they spent $10 million in legal fees and costs without a sound basis to make the elemental case of patent infringement,” said James Rosen of Rosen Saba, which filed the suit for E-Pass against its former lawyers at Moses & Singer and Squire Sanders.

    The suit against the law firms (.pdf) was filed in San Francisco Superior Court in January, but Rosen Saba didn’t serve it then because it was waiting for a decision on E-Pass’ appeal of the underlying case, Rosen said. On Friday the U.S. Circuit Court of Federal Appeals affirmed Jensen’s decision, and Rosen said the law firms will now be served.

    The suit names E-Pass’ primary trial counsel, Moses & Singer, and a partner at the New York firm, Stephen Weiss. It also targets Squire Sanders and San Francisco partner Mark Dosker, who served as local counsel.

    Moses & Singer’s Weiss said Monday that he hadn’t been served and couldn’t comment, and didn’t reply to requests for comment once the suit was e-mailed to him. Dosker and a firm spokeswoman didn’t respond to requests for comment Monday afternoon.

    E-Pass alleges that the lawyers pursued claims without a legal basis, misrepresented evidence and overbilled. Rosen said the firms charged E-Pass $7.6 million and then cost the tiny patent holding company $2.3 million in attorney fees awarded by Jensen.
    —————————

    Awww, the “tiny patent holding company” is throwing a tantrum now that its scheme to achieve fame and fortune failed miserably. Boo hoo.

  5. “The plaintiff’s attorneys at Cislo and Thomas appear to have taken quite the drumming by the appeals court. However, they can’t be all that bad as they were able to register the trademark of “Quality Client Care” as well as the Abbreviation of that “QCC” with the US Trademark office. That, in and of itself, is quite impressive.”

    Based on this case they couldn’t be rejected as merely descriptive of the services, maybe should have been rejected as deceptively misdescriptive of the services?

  6. “In dissent, Judge Bryson saw serious misconduct, but would not have imposed sanctions.”

    The elites do fall over themselves sometimes trying to rub each others’ backs. Wake up, Judge Bryson. We’re watching.

  7. The plaintiff’s attorneys at Cislo and Thomas appear to have taken quite the drumming by the appeals court. However, they can’t be all that bad as they were able to register the trademark of “Quality Client Care” as well as the Abbreviation of that “QCC” with the US Trademark office. That, in and of itself, is quite impressive.

  8. We need more of these sanctions, especially Rule 11 sanctions BEFORE discovery orders in troll cases.

  9. I’ve seen similar misrepresentations of case holdings at least three times at the CAFC. It’s very poor advocacy, since opposing counsel and/or the court will catch it (I did, as did the court). Still, there was never any talk of sanctions. I suspect that this was a pile-on item here, due to the court’s low regard for the overall merits of the appeal.

  10. Dennis–

    What happened to the most recent post, I believe on the 23rd, about IC??

    DDC: It was a technical glitch caused by (my) human error.

  11. IO have hammered the Fed Cir alot over inequitable conduct, where they seem to always get it wrong, but if you actually read this case the actions of these atorneys are pretty stunning and I can’t tell how infuriated I would have been to be on the other side in this litigation – thus – I agree with the Fed Cir here and hope it stops completely frivilous games like this and the ones in the E.D.Texas. Fed Cir, have you looked at the litigation actions in those Texas cases?

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