Holding:
The claimed terms “document,” “file,” “extract,” and “template” are properly construed by the district court as limited to information originating from a hard copy document as the specification “unequivocally compels” the import of such limitation. Slip op. at 15-16.
The district court did not clearly err in its exceptional case finding under § 285 as the record below establishes Eon-Net’s litigation misconduct, the written description clearly refuting Eon-Net’s claim construction warrants the finding of a baseless infringement action, slip op. at 17-18, and the action was brought in bad faith for an improper purpose to extract a nuisance value settlement. Id. at 22.
The district court did not abuse its discretion imposing Rule 11 sanctions against both Eon-Net and its counsel under Ninth Circuit law on the ground that the alleged infringements were legally baseless and Eon-Net’s counsel failed to perform a reasonable pre-suit investigation. Slip op. at 25-26.
Relevant Facts:
Eon-Net appeals the district court’s finding of non-infringement of Eon-Net’s patents, an exceptional case under § 285, and violation of Federal Rule of Civil Procedure 11. Slip op. at 2. Alleging infringement of the patent-portfolio-in-suit, Eon-Net’s counsel had filed over 100 lawsuits on behalf of Eon-Net or its related entities, with almost all of these cases resulting in early settlements or dismissals. Id. at 7. Earlier in the case, Eon-Net appealed the district court’s grant of defendant’s motion of summary judgment of non-infringement and motion for sanctions under Rule 11, both of which were remanded by the Federal Circuit on the ground that the district court failed to afford Eon-Net notice and the opportunity to argue infringement and claim construction during the briefing on the motions. Id. at 8.
Eon-Net did not appeal the determination of the amount of attorney fees and costs awarded pursuant to § 285. Id. at 17.
Comments:
Note that, in addressing Eon-Net’s claim differentiation argument regarding claim construction, the Federal Circuit applied the rationale that “claim differentiation is a rule of thumb that does not trump the clear import of the specification.” Edwards Lifesciences, LLC v. Cook Inc., 582 F.3d 1322, 1331 (Fed. Cir. 2009). Slip op. at 15.
Also note that the Federal Circuit reiterated the different standards of review with respect to a district court’s finding of an exceptional case:
A determination whether to award attorney fees under § 285 involves a two-step process. First, a district court must determine whether the prevailing party has proved by clear and convincing evidence that the case is exceptional. Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1327 (Fed. Cir. 2003). We review de novo whether the district court applied the proper legal standard, and we review the court’s exceptional case finding for clear error. Id. at 1328. Second, if the district court finds the case to be exceptional, the court must then determine whether an award of attorney fees is appropriate and, if fees are appropriate, the amount of the award. Cybor, 138 F.3d at 1460. We review that determination for an abuse of discretion. Id.
Slip op. at 16.
Further note that the Federal Circuit stated the general test for finding an exceptional case under 35 U.S.C. § 285:
Indeed, “[l]itigation misconduct and unprofessional behavior may suffice, by themselves, to make a case exceptional under § 285.” Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081, 1106 (Fed. Cir. 2003). Absent litigation misconduct or misconduct in securing the patent, sanctions under § 285 may be imposed against the patentee only if both (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailer Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).
Slip op. at 17.
Finally, a claim construction position of a patent holding company, once found by the court as meritless, not only would lead to summary judgment of non-infringement, but also an automatically triggered finding of an objectively baseless lawsuit under the first prong of the Brooks Furniture test pursuant to § 285. Moreover, such an unwarranted claim construction would also most likely trigger the language of “legally and factually baseless” together with the absence of “reasonable and competent inquiry prior to the filing,” regardless of the wording difference of Rule 11.
Accordingly, it is imperative for a patent holding company and its counsel to conduct good faith pre-suit due diligence, including reviewing patent file histories and creating preliminary infringement claim charts, in order to fight off any later Rule 11 accusations. A low settlement offer dos not, by itself, establish a Rule 11 violation, as long as the patentee and its counsel take necessary steps to perform thorough pre-suit due diligence.
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