by Dennis Crouch
In PS Products, the Federal Circuit has affirmed that district courts may impose deterrence sanctions under their inherent powers even after (or in addition to) awarding attorney fees under 35 U.S.C. § 285. PS Prods. Inc. v. Panther Trading Co., No. 2023-1665 (Fed. Cir. Dec. 6, 2024).
Design Patent Case with Fundamental Flaws: The case began when PS Products (PSP) filed a design patent infringement suit against Panther Trading in the Eastern District of Arkansas. The suit alleged infringement of U.S. Design Patent No. D680,188, directed to a long-spiked electrode for a stun device. From the outset, the case faced serious challenges that would ultimately lead to both fee-shifting and additional sanctions.
PSP’s infringement theory was facially implausible. As the Federal Circuit noted, “no ordinary observer would be deceived into believing Panther’s accused product is the same as the D’188 patented design.” This failed to meet the basic test for design patent infringement established in Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665 (Fed. Cir. 2008) (en banc), which asks whether an ordinary observer would find the designs “substantially the same.”
The Venue Question and Historical Context: PSP filed in an improper venue, citing the general venue statute (28 U.S.C. § 1391) rather than the patent-specific venue provisions of 28 U.S.C. § 1400(b). The courts have repeatedly emphasized that § 1400(b) is the exclusive venue statute for patent cases, requiring the case to be filed in either (1) the defendant’s residence (state of incorporation for domestic corporations) or (2) a place where the defendant both committed acts of infringement and maintains a “regular and established place of business.” TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 581 U.S. 258 (2017). Panther, incorporated in Maryland with no physical presence in Arkansas, did not satisfy either prong.
However, some important historical context is needed here. Prior to the Supreme Court’s 2017 TC Heartland decision, the Federal Circuit had interpreted § 1400(b) to incorporate § 1391’s broader definition of corporate residence, effectively making § 1391 the controlling venue statute for patent cases. This context becomes particularly relevant when evaluating PSP’s litigation history.
A Pattern of Problematic Filings: The court found one element quite troubling — that this case was not an isolated incident. Of the twenty-five patent infringement suits PSP had filed in the Eastern District of Arkansas since 2010, thirteen were dismissed before or immediately after answers were filed, three were voluntarily dismissed after motions to dismiss but before court rulings, and two were dismissed by the court for failure to state a claim or lack of personal jurisdiction. While the opinion notes all 25 cases cited § 1391 instead of § 1400(b) for venue, it does not specify how many were filed 2010-2017, before TC Heartland fundamentally changed the patent venue landscape. Based upon the overall pattern, the court found it proper to infer “bad faith from PSP’s history of filing meritless lawsuits.” If I were on the court, I would have probed a bit deeper — asking the defendants how many of these bad suits were filed pre-TC Heartland?
Sanctions: After PSP voluntarily dismissed the case with prejudice, the district court deemed the case “exceptional” under § 285 and awarded Panther $43,344.88 in attorney fees and costs. The court then imposed an additional $25,000 in deterrence sanctions under its inherent powers, to be paid directly to the court. Those sanctions were awarded jointly against both PSP and its attorney Chris Stewart. PSP appealed only the $25,000 deterrence sanction.
Three Key Holdings by the Federal Circuit
1. The Federal Circuit unequivocally held that § 285 does not preclude a district court from separately imposing sanctions under another authority. The court cited precedent where it had affirmed combinations of § 285 fees plus Rule 11 sanctions (Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1317 (Fed. Cir. 2011)) and § 285 fees plus inherent power expert fee awards (Takeda Chem. Indus., Ltd. v. Mylan Lab’ys, Inc., 549 F.3d 1381, 1391 (Fed. Cir. 2008)).
2. The court found the district court properly inferred bad faith from the complete lack of merit in the infringement claims, the facially improper venue allegations, and PSP’s pattern of filing similar meritless suits. While noting that simply filing many lawsuits is not inherently sanctionable (citing SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1349-50 (Fed. Cir. 2015)), the court distinguished this case as involving repeated filings that were demonstrably meritless.
3. Finally, the Federal Circuit endorsed the district court’s use of inherent powers where procedural rules would normally apply but were unavailable. Here, Rule 11 sanctions were technically foreclosed because PSP dismissed the case during Rule 11’s mandatory 21-day “safe harbor” period. Fed. R. Civ. P. 11(c)(2). The court cited the Supreme Court’s guidance that while courts should ordinarily rely on applicable rules rather than inherent powers, they may “safely rely on [their] inherent power” when “neither the statute nor the Rules are up to the task.” Chambers v. NASCO, Inc., 501 U.S. 32 (1991).
Looking Forward: Strategic Implications and Open Questions
Although this case provides the district courts with additional powers, the Federal Circuit’s emphasis on the particularly egregious facts suggests that dual sanctions will still be reserved for cases showing clear bad faith rather than mere losing positions. The court’s treatment of the “safe harbor” issue may also influence strategic decisions about voluntary dismissals – parties considering dismissal to avoid Rule 11 sanctions should recognize that courts retain inherent authority to impose similar sanctions even after dismissal.
Note: This is yet another opinion where Chief Judge Moore cornered a litigant during oral arguments to force an admission and then cited that admission in the opinion.
Opinion by Chief Judge Moore and joined by Judges Stoll and Cunningham. Chris Stewart of Chris Stewart, PLLC argued for plaintiffs-appellants; Stephen Zinda of Cabello Hall Zinda argued for defendant-appellee.