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IP: 3 simple steps to avoiding sanctions under 35 U.S.C. § 285.

Think a pre-suit investigation is costly? Try paying your opponent’s attorneys’ fees

“Close only counts in horseshoes and hand grenades,” the saying goes. The point is that there are few endeavors where “close enough is good enough.” Suing someone for patent infringement is not one of them. Indeed, the consequences can be more along the lines of throwing the pin at the defendant instead of the grenade: you might just hand the defendant a victory on a motion for attorneys’ fees under 35 U.S.C. § 285, as a recent decision from the Southern District of Ohio shows.

The decision, R&L Carriers, Inc. v. Pitt Ohio Express, Inc., is part of a multidistrict litigation as reported in In re Bill of Lading Transmission & Processing Sys. Patent Litig. These cases involve U.S. Pat. No. 6,401,078, which claims a method for improving operational efficiency for less-than-a-load freight carriers.

After Pitt Ohio won summary judgment of non-infringement (for reasons discussed below), it sought fees under 35 U.S.C. § 285, which provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” Winning fees under this statute is exceptionally difficult.

First, the movant must prove the case is “exceptional” (e.g., involves misconduct or vexatious/unjustified litigation) by clear and convincing evidence, a very high standard of proof. Where the prevailing party is the accused infringer, other relevant factors include “the closeness of the question, the plaintiff’s pre-filing investigation and discussions with the defendant.” Litigation misconduct can include “filing an infringement lawsuit that the patentee knew, or by conducting a reasonable investigation, should have known, was baseless or frivolous.” Even for exceptional cases, courts only award attorneys’ fees when necessary to prevent “gross injustice.”

Despite this heavy burden, the court’s decision to award Pitt Ohio its attorneys’ fees was not even hand grenade-close. The court held that “counsel for R&L engaged in litigation misconduct by: conducting a wholly inadequate pre-suit investigation, maintaining a patently baseless and frivolous infringement claim, drawing objectively unreasonable inferences from [and relying on] inadmissible or non-probative evidence, and exaggerating or mischaracterizing the record and failing to cite controlling authority.” What should a plaintiff do to avoid sanctions?

Conduct an adequate pre-suit investigation An accused product or method only infringes if it practices every element of the claimed invention, either literally or by equivalence, so make a good-faith effort to verify that this is the case before you sue.

According to the court, R&L entirely failed to investigate whether Pitt Ohio practiced each step of the claimed six-step method, where the sixth step involved preparing a loading manifest using data from scanned and transmitted images of a bill of lading. In fact, Pitt Ohio did not perform the sixth step: Instead, it prepared loading manifests using data from a typed message, which was outside R&L’s own claim construction.

Nor could R&L make up for the deficiency of its pre-suit investigation by relying on an expert’s opinion that was developed post-filing or on publicly available information, which did not fairly suggest the missing limitation. As the court stated in a footnote: “This is not horseshoes . . . and suing Pitt Ohio because it practiced most of the steps of the claimed method is not good enough.”

Do not maintain a lawsuit without a reasonable basis It’s better to drop the suit if discovery reveals an insurmountable flaw in the facts developed during your pre-suit investigation than risk facing the court’s wrath and paying your opponent’s attorneys’ fees.

Yet R&L, even when it should have known its proof of Pitt Ohio’s infringement of the six-step method ran out at step five, doggedly refused to accept reasonable assurances (in the form of affidavits and other evidence) that Pitt Ohio had never practiced the sixth step of the asserted method. Instead, the court held, it “unreasonably and vexatiously … persisted in prosecuting a claim that lacked a realistic chance of success,” concluding that doing so “was unreasonable and tantamount to litigating in bad faith.”

Do not mischaracterize or ignore evidence or controlling authority Zealous advocacy is laudable, but drawing unreasonable inferences from the evidence, misrepresenting the court’s holdings, and misciting or failing to cite controlling authority can be sanctionable.

R&L’s serial mischaracterization of its evidence also infuriated the court. For example, the court condemned as “fanciful” R&L’s argument that clip art from a PowerPoint presentation was actually a photo of Pitt Ohio’s Mobile Data Terminal. Similarly, the court found R&L’s reliance on an expert’s opinion that “completely left open” whether the defendant practiced the method’s sixth step was unreasonable. Moreover, since R&L’s infringement evidence was “practically non-existent,” R&L’s mischaracterization of its “sheer volume” and “overwhelming” strength also amounted to misconduct.

Never mischaracterize the court’s own holdings, or ignore controlling legal authority: the court is almost certain to notice. For instance, R&L’s argument that the court “agreed with its expert … and concluded that [the defendant had performed the last step of the claimed method]” was irreconcilable with the court’s grant of summary judgment.

In light of the foregoing, the court found, unsurprisingly, that it would be grossly unjust to deny Pitt Ohio the substantial attorneys’ fees it had incurred, and it’s hard to disagree. To avoid a similar fate, plaintiffs would do well to avoid similar mistakes.

The views in this article are those of the author, and not of Marshall, Gerstein & Borun LLP or its clients. The contents of this article are not intended as, and should not be taken as, legal advice, legal opinion, or any other advice. Please contact an attorney for advice on specific legal problems.

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Cullen Pendleton

Cullen Pendleton, Ph.D., is a litigation partner at Marshall, Gerstein & Borun LLP. He is an alumnus of the University of Houston, the University...

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