Federal Circuit in Kilopass: Section 285 is not as rigid as Brooks Furniture Suggests

Kilopass  is an important case, given the pending case on 285 before the Supreme Court, and in my view is a big step toward a proper interpretation of Section 285.  However, what drives me nuts is that the majority opinion, by Judge O'Malley who I respect enormously, talks about "chaning the standard" for imposing fees.  The Court can't do that:  Only Congress can.  The question should be:  what standard did Congress set in 1952?  For the reasons that follow, I believe Chief Judge Rader's concurrence is ultimately correct.  (Disclaimer:  I clerked for Chief until a few months ago.)

 

Down in the comments I explain there is no constitutional right implicated by fee shifting, so the PRE standard is irrelevant, and the statute means what it says.  Here is a clip from a California case, quoted in a comment below:

 

Hundreds of California statutes provide for an award of attorney fees to the prevailing party. (See Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2001) § 2.1, p. 12; see also id., ch. 17 [charting many such statutes].) Fee shifting simply requires the party that creates the costs to bear them. (Premier Elec. Const. Co. v. N.E.C.A., Inc. (7th Cir. 1987) 814 F.2d 358, 373.) It does not make a party “liable” for filing a lawsuit. This distinguishes Professional Real Estate Investors, supra, 508 U.S. 49, Equilon’s central authority, which concerns not fee shifting but the scope of antitrust liability for engaging in litigation. There, when movie studios challenging the rental of videodiscs to hotel guests brought a copyright infringement action against certain hotel operators, the operators filed counterclaims alleging the studios’ action was intended illegally to restrain trade. The high court held that one who initiates litigation is immune from antitrust liability for doing so unless the litigation is a “sham.” (Id. at pp. 60-61.) The case did not involve a fee-shifting provision nor did the court anywhere suggest that its “sham” litigation rationale might apply in the fee-shifting context. Equilon cites no case in which a fee-shifting provision has been held unconstitutional under Professional Real Estate Investors or its rationale. (See generally Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, 262, 44 L. Ed. 2d 141, 95 S. Ct. 1612 [finding it "apparent that the circumstances under which attorneys' fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine"].)

 

Another Fight Over The Procedure for 103: Galderma v. Tolmar

This isn't ethics, except that you need as a litigator to be ready for the continuing disagreement at the Federal Circuit over how to address 103 in the context of litigation.  Judge Prost, and others, are advocating the view that the same analysis that applies in prosecution applies in litigation:  if the accused infringer shows a "prima facie case" of obviousness, the burden of production — not persuasion — shifts to the patentee to come forward with objective evidence of non-obviousness, or what judges who don't like patents call "secondary considerations."  Today's split decision is here.

To me, this approach — "well, it would have been obvious, if you just look at the art, to make this" — inherently uses hindsight, becuase "to make this" is part of the equation.  This could matter a lot in summary judgment or, here, bench trials…

More of my Rant about the CAFC’s Interpretation of Section 285

Y'all know I think that requiring subjective/objective bad faith to get fees is not a correct interpretation of 285.

I've been updating my book, reading about the liability standards the CAFC has imposed for, e.g., making frivolous claims to a customer of X that X's products infringe and so the customer needs a license.

The standard?  Objective and subjective baselessness, because of the right to petition.  This one they've got right.  See Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1336–37 (Fed. Cir. 1998), overruled on other grounds, Midwest Industries, Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999) (requiring plaintiff to plead and prove bad faith to prevail on state law tort claims based upon statements of infringement in the marketplace); In re Innovatio IP Ventures, LLC Patent Litig., 921 F. Supp.2d 903 (N.D. Ill. 2013) (same and providing a lengthy discussion); Clearplay, Inc. v. Nissim Corp., 2011 WL 3878363 (S.D. Fla. Sept. 2, 2011) (same); Contech Stormwater Solutions, Inc. v. Baysaver Tech., Inc.,534 F. Supp. 2d 616(D. Md. 2008) (requiring bad faith and other elements of state law tort claims for pre-suit letters);Zenith Electronics Corp. v. Exzec, Inc., 182 F.3d 1340, 1353–54 (Fed. Cir. 1999) (adopting the bad-faith requirement for Lanham Act claims).

But does it make one whit of sense to intepret a fee shifting statute to require the same proof that the First Amendment requires before imposing liability for suing?  If that is a correct reading of the First Amendment, then NO fee shifting statute is constitutional unless it meets this objective/subjective requirement.

Okay, back to the book.  The IP Ventures case is, by the way, really interesting.

Ethics and Using Undercover Investigators to Ferret Out IP Infringement

There's a wonderful little body of law trying to harmonize the ethical rules — which say a lawyer can't use someone to (a) have an ex parte contact with a person who is "represented by counsel" (which is WAY broader than you might think; (b) have contact with a person who is not "represented by counsel" by appearing disinterested when he is not; or (c) engaging in deceit — with the use of undercover investigators to find out, e.g., if the target sells knock-off goods.

Boiled down, the rule seems to be developing that, if the contact is made pre-suit and without knowing that the person is "represented by counsel" (again, very broad counter-intuitive meaning), and if the private investigator only acts like an ordinary consumer, then the contact is okay.  A recent case so holding is Turfgrass Group, Inc. v. Northeast La. Turf Farms, LLC 2013 WL 6145294 (W.D. La. Nov. 20, 2013).

Court Strikes Answer of Accused Infringer Which, Among Other Things, Said it had not been a Real Party in Interest to an IPR Proceeding (to avoid estoppel) But Was Seemingly One

On a follow up to the post below about this issue, a district judge struck the answer of a defendant after concluding that the defendant had misrepresented its involvement in an IPR proceeding that had turned out favorably to the patentee, in order to avoid the estoppel effect.  The decision in Bortex Indus. Co. Ltd. v. Fiber Optic Designs Inc. is here.

An Aside: The Relationship Between Negligent Misrepresentation and the Economic Loss Doctrine

This issue drives me nuts:  section 552 of the Restatement was designed to impose tort liability under narrow circumstances for economic loss caused by negligent misrepresentation and, by its terms, applies even when there is privity of contract between plaintiff and defendant.  (Indeed, some states hold there HAS to be privity for a 552 claim!).  Yet, some courts say that a 552 claim is barred by the economic loss doctrine, which is intended to police the boundary between contract and tort law.

The problem with this is that (a) 552 and (b) fraud and (c) other torts are narrowly crafted to be, in a sense, exceptions to ELD.  If ELD bars a 552 claim, it bars a fraudulent inducement claim.  That, of course, is silly, but why this issue persists, I don't know.  I wrote a paper about this years ago, never published. I wish I would have..

Rant done.

Interesting Malicious Prosecution Suit Based on Suit Over Filing of ANDA

I love stuff like this…

Watson files an ANDA; Bayer sues, triggering an automatic 30 month stay of the ANDA.  Judge grants judgment on the pleadings to Watson, which is affirmed on appeal.  District judge later denies request by Watson for "exceptional case" under 285.

Later, Watson sues Bayer in state court, alleging malicious prosecution and other state law claims.  Boiled down, it asserts Bayer filed the infringement suit for an improper purpose — to trigger the 30 month stay.  Bayer removes the case to federal court.  Judge denies the motion to remand, though honestly I'm not quite sure why!