Standing on $450,000

Raniere v. Microsoft and AT&T (Fed. Cir. 2018)

Chain of Title problem.  Keith Raniere is one of the listed inventors of U.S. Patent Nos. 7,215,752 and 7,844,041. Back in 1995, all the inventors, including Raniere, assigned their rights and interests to Global Technologies Inc. (GTI). However in 1996, GTI was administratively dissolved. 18 years later, in 2014 Raniere executed a document purportedly on GTI’s behalf transferring the patents from GTI to Raniere.  He then sued Microsoft and AT&T for infringement.  Unfortunately for Raniere – he could not provide sufficient evidence that he had authority to effect the transfer by GTI (he was never an officer of the company, rather it was substantially owned by his ex-gf).

Rubens’s documents showed the GTI shareholders’ consent to a transfer of shares from Raniere’s ex-girlfriend — who owned 75% of GTI’s shares — to Raniere. The documents Raniere proffered did not indicate that any such transfer was ever completed, however, and did not establish that Raniere owned the patents at issue.

The district court then dismissed the case with prejudice — finding that it was highly unlikely that Raniere would be able to cure his standing defect.  In addition, the court found that Raniere’s testimony absolutely lacked credibility and his conduct involved “a clear history of delay and contumacious conduct.”  Raniere appealed that decision, which was affirmed by the Federal Circuit without opinion (“summary affirmance”).

The district court noted that Raniere promised repeatedly that he could produce evidence that would cure the standing defect identified by Appellees and the district court. Id. Raniere failed to satisfy these promises, according to the district court, as “[d]espite numerous representations, [Raniere] failed to produce any written document or other credible evidence that he had an interest in GTI that would allow him to transfer the patents to himself.” Id. Raniere’s conduct required Appellees “to expend significant resources to oppose [Raniere]’s arguments, which the Court now finds were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal.”

The subject of this appeal is the subsequent award of attorney fees and costs under 35 U.S.C. 285. And here, the Federal Circuit found it an easy case —

Raniere challenges the district court’s decision on four grounds. First, he contends that the district court erred in finding that Appellees are prevailing parties under § 285. Second, he argues that the district court abused its discretion in finding this case “exceptional.” Third, he asserts that the district court erred in sanctioning Raniere under its inherent authority, in the alternative to a fee award under § 285. Finally, he argues that the district court abused its discretion in determining the amount of the fee award. We conclude that Appellees are prevailing parties, and that the district court did not abuse its discretion in finding this case exceptional under § 285 or in its fee award. We, thus, need not reach the district court’s sanction under its inherent authority in the alternative.

Following Octane Fitness and Highmark, we know that attorney fee awards are within the discretion of district court judges and are reviewed with deference on appeal.  Easy judgment here:

The district court specifically found that Raniere’s behavior throughout the litigation employed “a pattern of obfuscation and bad faith,” and that this behavior caused Appellees to incur significant fees and costs to oppose Raniere’s positions. These positions, in the district court’s view, “were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal”—in effect, to stall the termination of the proceedings. Fees Decision, 2016 WL 4626584, at *5. “Because the district court lives with the case over a prolonged period of time, it is in a better position to determine whether a case is exceptional and it has discretion to evaluate the facts on a case-by-case basis.” SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344 (Fed. Cir. 2015). The district court properly examined the totality of the circumstances in this case and found the case to be exceptional. We see no reason to disturb the district court’s well-reasoned determination.

Here, those costs add up — $450,000 in attorney fees for the defendants win at the ultra-preliminary stage for lack-of-standing. Let me note – this is ridiculous $450k to win on standing grounds. OMG! Note – the bill submitted was greater, but the Judge reduced it by 20%.

To put this dollar figure into perspective — excellent lawyer for the defendant Constantine Trela from Sidley argued the appeal and explained the case with the following analogy:

[This case is akin to someone] throwing together a set of documents that says ‘I own a controlling interest in Apple, I hereby name myself chairman, and hereby assign all of Apple’s patents to me.”

I would hope that defendants could win that case for less than $450,000.

40 thoughts on “Standing on $450,000

  1. 10

    Come on Dennis, your condemnation of the lawyers and the amount they collected was totally unfair. It reflects your fundamental misunderstanding how patent litigation actually works, and ignorance of the procedural posture in this case. I was surprised that the fees were not substantially more than $450K.

    The key false assumption you make in your article is that the $450K in fees was solely attributable to the standing issue. But had you bothered to look through the docket before you penned your screed, you would have seen that a lot of things occurred while the case was pending for more than a year before it was dismissed. Because of the schedule the Court entered, the defendants were obligated to answer the Complaint and serve their invalidity contentions under that district’s version of Patent Rule 3-3. Invalidity contentions are real work; they require the Defendants to do all of their prior art searching, prepare and serve claim charts identifying where each element of each claim is found in the prior art, and disclose all of their 112-based defenses. Anyone who’s actually worked on a patent litigation matter knows that invalidity contentions, which limit the scope of the invalidity defenses you can present at trial, are a massive undertaking. The schedule also indicates that the parties would have already started exchanging claim terms and proposals for claim construction. All of that work was necessary to defense of the action and was properly included in the fee award.

    The docket also reveals that actual discovery was taken on the standing issue, and the district judge held an evidentiary hearing, heard witness testimony, and entertained multiple rounds of briefing. All of that takes time, and costs money, too. Patent owners have no incentive to fork over evidence that can be used to undermine their claim of standing; and when you’re dealing with an individual plaintiff, it can be like pulling teeth. Just because the issue seemed straightforward to you, from a casual reading of the Federal Circuit opinion, doesn’t mean it didn’t take time and effort at the district court level to develop the critical facts.

    The docket also reveals that although the standing issue was raised relatively early, it took the Court some time to schedule a hearing and issue a ruling on the motion to dismiss. Until the Court rules on that challenge, the Defendants were obligated to comply with the Court’s scheduling order and could not simply assume they were going to get an eventual dismissal.

    So based on all of this, Dennis, I think you’re totally off base here. Based on the work that was done in the case before it was dismissed, to be honest, I was surprised it wasn’t substantially more than $450K. Invalidity contentions alone can cost substantially more than that.

    1. 10.1

      Lode_Runner,

      Thank you for detailing the items that may have driven up costs.

      But those details do not answer some of the initial items that could have (should have) prevented the need for those costs in the first instance.

      Thus, the point about the level of costs – on what amounts to a standing issue IS fair game.

      As I noted, the internal legal department has some serious questions to answer.

      Your post does a fair job explaining then”what” of the costs but does not get to the “why these should have been allowed to happen in the first place.”

      (Maybe better advocacy to the judge to change the schedule based on rudimentary intelligence could have saved everyone – including the judge – much time and grief).

  2. 9

    Any relation to the Keith Raniere who was just arrested for starting a sex slave cult with a former actress from Smallville (Allison Mack)?

  3. 8

    You softiewafties out there will be overjoyed to hear that the office is going to try to get examiners to establish whether something is well-understood, conventional, routine etc. by presenting art, a statement of such in the spec, or official notice (then challengable).

    This in an officeeal memo.

    1. 8.1

      or official notice (then challengable).

      Except for the fact that Official notice is not proper in establishing a state of the art…. and “conventional” is exactly the type of thing of state of the art that is not allowed.

      Examiner’s taking Official Notice is DOA.

      Actual facts and evidentiary support will be required. And that evidentiary support is MORE than merely existing (not novel) or even combinable (obvious). The evidentiary support for conventional is widespread and accepted use.

      So tell me leaky office – how is the Office going to provide its examiners the ability to establish this more rigorous level of evidentiary support?

      1. 8.1.1

        “So tell me leaky office – how is the Office going to provide its examiners the ability to establish this more rigorous level of evidentiary support?”

        One can only ho pe that they won’t, and thus the “floo dgates” shall be op en on ce more! Thus lea ding to even more p ost gra nt oppos ition opportu nities for the da stardly infr ingers across all ar ts for the s ins of but a few.

        1. 8.1.1.1

          Hoping that they won’t wont help.

          We are talking about a prima facie position on 101 eligibility. Examiners failing to establish the prima facie position create a case inwhich applicants merely have to contest the lack of that prima facie case and need not do any more.

          Like it or not (especially you examiners), your 101 rejections won’t stand.

          As I pointed out a long time ago, courts may get away playing fast and loose, but administrative agencies simply do not have the same power as the courts.

          1. 8.1.1.1.1

            “Like it or not (especially you examiners), your 101 rejections won’t stand.”

            That’s what I said, the flood gates shall be reopened!

            1. 8.1.1.1.1.1

              Ah – got you – I had misunderstood your comment (I guess that it is a matter of perspective: “floodgates” has a negative connotation, and I view the proper examination including appropriate levels of evidentiary support to be a positive connotation).

              1. 8.1.1.1.1.1.1

                ““floodgates” has a negative connotation”

                Well it’s only “negative” if you don’t like what happens when the flood gates are opened, a lot of harrassment followed by increasing the rate of post grant invalidations and ease of obtaining those invalidations. If you like those things then the floodgates being opened is a good thing!

                1. Well it’s only “negative” if you don’t like”

                  No.

                  It has a negative connotation no matter what. No good comes to mind with a “gee, let’s just open the floodgates.”

                  As I also stated, perspective matters here: my perspective is that proper examination occurs – there is NO “floodgates” metaphor involved with making sure that proper examination occurs.

                  You are equating the need for IMPROPER examination with some “good” that comes down the road.

                  THAT is a logical fallacy.

                  That is a “End justify the Means” type of mental deficiency that should be eliminated.

      2. 8.1.2

        “how is the Office going to provide its examiners the ability to establish this more rigorous level of evidentiary support?”

        Management will very likely do nothing useful. They’ll probably say that the possibility of additional work will be considered by the people working on the new expectancies. Maybe they’ll allocate a handful of hours to be distributed at SPE discretion.

        Expect for what always happens when you increase job requirements without increasing time allocations.

        1. 8.1.2.1

          …except, doing the job right is NOT an increase in job requirements. Just because a “slack way” was snuck in does not mean that any such “slack way” was correct or should have set the “tone” for proper examination.

          1. 8.1.2.1.1

            “…except, doing the job right is NOT an increase in job requirements. Just because a “slack way” was snuck in does not mean that any such “slack way” was correct or should have set the “tone” for proper examination.”

            Courts arbitrarily impose new “evidenciary” requirement on a pure question o lawl (probably illegally) anon declares it “herp nothing new here”.

            Also, all the fact findings that followed Graham were also herp “nothing new”.

            1. 8.1.2.1.1.1

              As I pointed out to you directly before 6, this “pure” question of law has factual underpinnings and the treatment thereof is NOT new.

              Your prior inability to accept my wisdom does not change the fact that you were in error on this matter previously.

              1. 8.1.2.1.1.1.1

                It’s very pure tho. Very rarely will there be appreciable “muh factual underpinnings” as has been noted by many a court. Most certainly not every single determination.

                TIS ILLEGAL!

                Why must the federal circuit always be doing things illegally?

                1. It’s very pure tho

                  LOL – no matter how “pure” – you do not get to dismiss the factual predicates. – and there is NOTHING “ILLEGAL” about it.

                  You seem to not be able to grasp this.

                2. ” you do not get to dismiss the factual predicates. – and there is NOTHING “ILLEGAL” about it.

                  You seem to not be able to grasp this.”

                  Not only do “I”, it is literally required of anyone charged with making a 101 determination where failing to “dismiss” the “muh factural predicates hurp” would result in the patenting of judicially excepted subjeeeet matter.

                3. making a 101 determination where failing to “dismiss” the “muh factural predicates hurp” would result in the patenting of judicially excepted subjeeeet matter.

                  Can you translate this?

              2. 8.1.2.1.1.1.2

                To be clear, no amount of “herp failure” to find published art available under 35 U.S.C 102 as “prior art” or any other types of evidences needed to “establish factually” what was “herp conventional derp” should ever be an excuse to allow for the patenting of judicially excepted subject matter when it is plain to see that is the intent of the claim is to do so (as it so often is). Perhaps the rare border case can be allowed into the blessed embrace of the categories and subject matter not excepted. But it certainly is no excuse to throw open the flood gates of old by requiring some kind of super-evidence as to what is “conventional”.

                The inquiry for 101 is 100% backwards from the inquiry in 102/103. The inquiry is whether your claim is even in the category of things that you may obtain a patent for, and is not something excepted. The inquiry is not, as it would be under 102 or 103 whether you’re entitled to a patent under 102’s sections or whether you otherwise may not obain a patent under 103’s sections.

                1. You cannot dismiss the factual predicates as you attempt to do.

                  Hey – it wasn’t me that conflated the 103-like “conventional” into the discussion. But once there – you have to abide by it.

                  Do you have some alternative in which the “conventional” is left out of the equation? Love to hear it.

  4. 7

    The insane costs of patent case defense never bother the maximalists a bit. Trees of liberty or something…..

    Who did pay the maintenance fees on these patents, and who did own them? Don’t we assume someone had to own ’em?

    Also if the transfers did not include an explicit right to sue for past infringement (“all right, title, and interest” don’t get it done) that would be fatal to standing too, even if the plaintiff could somehow have laundered themselves into owning the patents.

  5. 6

    Dennis, why are you so surprised at this bill? Remember, Jenner & Block claimed it had billed more than $10 million and expended more than 24,000 hours in representing Parallel Networks for 18 months.

    That was the case where the lowlifes at Jenner sued Parallel for fees (first hourly then contingency) under a contingency fee agreement after they lost Parallel’s case against Oracle on summary judgment (Professor Hricik blogged about this case).

    And I’ll save you from doing the math: $10.2 million in billables or 24,000 hours in 18 months would mean that Jenner was billing more than $550,000 per month or approximately 44 hours per day (including Saturdays and Sundays) in attorney time for the entire duration of its 18-month representation of Parallel.

    Any wonder why the legal profession is so despised?

    1. 6.1

      Who at Microsoft is in control of outside counsel and would permit this type of billing?

      We are not talking about some “nube” here, and I can only imagine that there will be some uncomfortable people in Mcrosoft’s legal department (even if the court here ‘reimbursed ‘ them – good luck collecting that reimbursement).

    2. 6.2

      What on earth do they do for all that time?

  6. 5

    Geez, no link to the decision? Thanks for nothing.

  7. 4

    1995…
    1996…

    Who – if anyone – paid the maintenance fees?

    1. 4.1

      Yes, I wondered about that also, but does it make a difference? I.e., is there any such thing as patent assignment by [unwritten] “adverse possession”. much less solely by evidence of “property tax” payments? I think not.
      [I cannot believe any competent defense firm would not promptly check for patent maintenance fee payments, as non-payment past the grace period equals a dead patent.]

      1. 4.1.1

        It should make a difference.

        A case cannot be brought on a lapsed patent.

        The judge should have thrown this out WELL before the attorney meter hit $1,000.

      2. 4.1.2

        ps – I find humor in your referral of maintenance fee payments as “property tax” payments.

  8. 3

    Thank you for teaching me the word “contumacious.”

    1. 3.1

      Dittos.

      #ShePersisted #SheWasContumacious

  9. 2

    Is there a possible ethics violation here (along the lines of usury?)

  10. 1

    Yes, it would be nice if patent suits could be won inexpensively. But a defendant’s law firm cannot easily avoid discovery costs, or safely rely on a single defense when, as here, the alleged patent owner plaintiff insists that it has evidence to overcome that defense and drags the suit on.
    [If an alleged patent owner offers to settle for low six figures, many defendant companies would haves settled just to avoid legal expenses, which, BTW, here additionally includes all the Fed. Cir. appeal expenses, which are NOT being potentially reimbursed.]

    1. 1.1

      If an obvious standing issue like, the plaintiff doesn’t own the patent, *can’t* be resolved for less than $450k, the fault lies with the court. If it *isn’t*, the fault lies with the defense attorneys. It would shock me to learn that Judge Lynn didn’t do everything she could to get to the bottom of this issue once the defendants raised it. This wasn’t in E.D. Tex. for Pete’s sake.

      1. 1.1.1

        With respect, you’re wrong here. The fault here lied with the plaintiff, not the court.

        The key problem in these cases is that you need discovery to get to the bottom of a chain-of-title defect. Most of the contracts affecting title aren’t recorded or otherwise publicly available. So you have to ask for them in discovery, and if the plaintiff delays or refuses to fork them over, it delays when the standing issue can be raised. Without these documents, after all, the defendant doesn’t have a basis to show any defect in the chain of title.

        The docket here reveals that there was apparently some dispute over whether plaintiff had produced all of his standing-related documents, so Judge Lynn issued a one-line order in late September 2015 ordering the plaintiff to fork them over within two weeks. That was after the scheduling order was already entered, and the deadline in the court’s order was right on the eve of the defendants’ invalidity contentions deadline, so they were obviously substantially completed by then.

        The defendants actually did exactly what they should have; immediately after the deadline for plaintiff’s production, they moved to stay the case deadlines and discovery (except on standing issues), and asked for an expedited briefing schedule, which they got.

        So don’t blame defense counsel, or the Court, for this situation. It looks like both of them did exactly what they were supposed to. It was the foot-dragging of the plaintiff in discovery that resulted in the case being pending for more than a year before this issue was resolved.

        1. 1.1.1.1

          The key problem in these cases is that you need discovery to get to the bottom of a chain-of-title defect

          Not in this case: it was plainly evident (just as the lapse of the patent for lack of maintenance fee payment),

          This is a painfully easy case to lay blame on the court.

          (I am not saying that it is ONLY the court to blame – clearly, the party attempting the shenanigans must be blamed as well.)

          1. 1.1.1.1.1

            Not really, anon. If you read the opinion, it confirms that discovery was in fact taken on this, because the plaintiff had indicated he had other materials (other than the recorded USPTO documents) establishing that title to the patent had passed to him. So it’s absolutely not the same thing as a lapsed patent. As I said before, it’s very common that documents affecting title are not recorded.

            But the plaintiff didn’t turn the alleged documents over, so the judge ordered him to produce everything about standing, and surprise, surprise, he had nothing. The defendants moved immediately after that became clear.

            It would have been irresponsible for the defendants to have filed a motion based on purely the USPTO records; no doubt the Court would have been upset if they had done that, and it turned out that the plaintiff had unrecorded documents confirming proper title.

            Blaming the court here is totally irresponsible. District judges have hundreds of cases on their dockets, and you cannot blame them when a case goes on for longer than it should, because one of the litigants is concealing critical facts or outright lying to the court.

            1. 1.1.1.1.1.1

              Blaming the court here is totally irresponsible.

              Not at all.

              As I said – they are surely not the only ones to blame – but they are clearly NOT blameless.

              So it’s absolutely not the same thing as a lapsed patent.

              Here you are wrong again – as the question of “title” has NOTHING to do with whether or not the patent had lapsed for failure to pay the maintenance fee.

              THIS was a “two-minute” check that the court (or opposing counsel) could have easily done. THIS would have (could have) stopped immense other charges from occurring.

              THIS has portions to do with “ a case goes on for longer than it should, because one of the litigants is concealing critical facts or outright lying to the court.” – but critically this has OTHER portions to which no amount of litigant falsehood or stonewalling could have provided a MUCH earlier dispositive point.

              I fully grant that perhaps other cases may exist that may provide the point that you want to make.

              This is not THAT case.

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