Advertisement

April 18, 2014

Rare Federal Circuit Order to Impose Sanctions Against Patentee for Frivolous Claim Construction

In a rare decision reversing a lower court’s denial of sanctions, the U.S. Court of Appeals for the Federal Circuit concluded that the patentee’s proposed claim construction was objectively baseless as a matter of law, warranting Rule 11 sanctions and a potential fee award under 35 U.S.C. § 285.  Raylon, LLC v. Complus Data Innovations, Inc. et al., Case Nos. 11-1355 through 11-1359 (Fed. Cir., Dec. 7, 2012) (Prost, J.) (Reyna, J., concurring).

The patentee, Raylon, brought three separate suits in the district court alleging infringement of a patent directed to a hand-held ticket issuing system.  The patent claimed a “housing” with two relevant limitations: a “display being pivotally mounted on said housing” and a “printer assembly being mounted in said interior of said housing.”  The accused infringing devices had a fixed-mounted display and external printer connection capabilities.  Raylon argued that the fixed-mounted display met the first limitation because it could be pivoted “relative to the viewer’s or user’s angle of visual orientation.”  It contended that the second limitation requiring a printer in “said housing” encompassed a printer in any housing, including the housing of an externally connected printer.

At the conclusion of a consolidated hearing, the district court rejected Raylon’s claim construction and granted summary judgment of non-infringement in favor of the defendants.  The defendants moved for Rule 11 sanctions and attorneys’ fees and costs under § 285.  The district court weighed the reasonableness of Raylon’s settlement negotiations against its proffered damages model to conclude that Raylon subjectively brought suit in good faith.  Based on this subjective standard, the district court denied Rule 11 sanctions.  Relying on the same analysis, the district court also denied § 285 fees and costs.  The defendants appealed. 

In a rare reversal on this issue, the Federal Circuit held that the district court’s denial of Rule 11 sanctions was an abuse of discretion.  Under the correct, objective standard, Raylon’s claim construction was “a clear instance where no objectively reasonable litigant . . . would believe it […] could succeed.”  Moreover, the Federal Circuit found that the district court’s conclusion that “Raylon’s claim construction arguments and infringement theory do stretch the bounds of reasonableness . . . they do not cross the line” was not supported by any analysis or explanation.  The Court concluded that Raylon’s claim construction was frivolous, a Rule 11 violation and sanctionable.  The Court also vacated the district court’s § 285 holding, as it was based on the flawed Rule 11 analysis.  The case was remanded for determination of a proper Rule 11 sanction and full consideration of the defendants’ § 285 motion in light of the Rule 11 violation.

Concurring, Judge Reyna argued that a finding of a Rule 11 violation should compel the Court, if it is so moved by a party, to engage in a thorough § 285 analysis.  Judge Reyna would have declared the case exceptional under § 285 and limited the § 285 remand to a determination of appropriate sanctions.

Practice Note:  The Federal Circuit suggested that even though the district court’s denial of Rule 11 sanctions was predicated on a subjective standard, had the district court articulated reasoning as to why Raylon’s claim construction was also objectively reasonable, it may have left the denial undisturbed.  Nevertheless, the Court maintained that there is a threshold below which a claim construction is so objectively unreasonable that Rule 11 sanctions are warranted.

© 2014 McDermott Will & Emery

About the Author

Associate

Donna M. Haynes is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Houston office. She is a member of the IP Litigation Practice Group.

713-653-1708

Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.