Lippert Components Mfg., Inc. v. Ryan Matthew Fountain v. MORryde Int’l. (Fed. Cir. 2020)
In this case, Lippert sued MORryde for patent infringement and the defendant hired Ryan Fountain as litigation counsel. As part of its defense, the MORryde argued that the PTO had failed to properly conduct its examination and that, therefore, the presumption of validity should not apply. The pleading alleges:
35 U.S.C. §282 is inherently and necessarily dependent upon the USPTO complying with 35 U.S.C. §131. If, instead, the USPTO issued a patent without the required examination for compliance with the patent laws, then enforcement 35 U.S.C. §282’s presumption of validity would be a violation of the accused infringer’s rights under the United States Constitution. For example, as a matter of procedural due process, a defendant in patent litigation is entitled to an impartial tribunal. However, if the burden of proof has shifted and been elevated merely because the plaintiff paid a filing fee to the USPTO, then the litigation is not impartial. Similarly, a competitor is entitled to equal protection under the laws, and its property rights and rights to compete in the market shall not be abridged with respect to another party who merely paid a fee to the USPTO.
The district court quickly dismissed that defense finding it “squarely foreclosed by recent Supreme Court precedent. See Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238, 2241 (2011). MORryde then amended its complaint to add a counterclaim to the same effect. Having none of that, the district court granted sanctions against attorney Fountain (but not MORryde) with an accounting of $16,000. Fountain immediately appealed the sanction to the Federal Circuit, but that appeal was dismissed for lack of final judgment in the case. By that time, Fountain had withdrawn from representing MORryde (on request of the client). Meanwhile as the case moved forward Fountain filed additional papers in the court including documents allegedly protected by attorney-client privilege in order to protect himself from potential further sanctions (even though his former client was not seeking sanctions). That filing was stricken from the record by the district court judge.
Fountain filed this appeal once the parties finally settled the case in 2019. On appeal, the Federal Circuit affirmed in a 2-paragraph per curiam decision — finding no abuse of discretion in the sanction award. In addition, the appellate panel held that Fountain did not have any right to appeal the district court’s striking of his filing from the record — since that striking did not constitute a sanction. [Fed. Cir. Decision]. The appeal was interesting because it was Fountain against both parties in the lawsuit–the plaintiff who sued his former client and his former client.
Undeterred by the Federal Circuit rejection, Fountain then petitioned for rehearing, which has now been denied. In the petition he raised two points of contention:
- Mr. Fountain was sanctioned by the District Court because the argument he presented was considered to be “squarely foreclosed by recent Supreme Court precedent,” However, after Mr. Fountain’s defense of that argument to the District Court, two other district courts based their decisions on that same argument. Thus, a lack of uniformity in the patent law has been created. This Court has a special obligation to clarify its decision in this case so as to remove that lack of uniformity.
- “Per Curiam” decisions are typically reserved for uncontroversial cases. The present case is highly controversial, both in substantive issues of law, and in its procedural application. Additional clarification in the opinion is needed.
On the first point, Fountain points to two cases that each “support limitation of the presumption of validity and the clear and convincing standard of proof to disputed factual issues, and not issues of how the law is applied to the facts.”
- Technology Development and Licensing, LLC v. Comcast Corp., 258 F. Supp. 3d 884, 887-888 (N.D. Ill. 2017)
- Communique Laboratory, Inc. v. Citrix Systems, Inc., 151 F. Supp. 3d 778, 787 (N.D. Ohio 2015).
The problem with Fountain’s argument here is that these cases go to the issue of when questions of law require clear and convincing evidence. The sanctioned pleadings did not attempt to make any kind of law/fact distinction but instead argued the constitutional question.
[Update – Mr. Fountain has provided some additional commentary in the comments section.]