$16.8 Million Sanction Upheld Under 35 U.S.C. § 285 and Inherent Power of the Court

The overwhelming bulk of the $16.8 million in sanctions imposed in Takeda Chem. Indus. v. Mylan Labs., Inc., 2008 U.S. App. LEXIS 24743 (Fed. Cir. Dec. 8, 2008), was awarded under 35 U.S.C. § 285, which provides that, in a patent case, a trial court "in exceptional cases may award reasonable attorney fees to the prevailing party." However, expert witness fees are not awardable under § 285, so the trial judge awarded those pursuant to the inherent power of the court. The majority affirmed the award of expert fees on the ground that:

a district court may invoke its inherent power to impose sanctions in the form of reasonable expert fees in excess of what is provided for by statute. See Chambers v. NASCO, Inc., 501 U.S. 32, 50 (1991); Mathis, 857 F.2d at 759 (noting that "full expert witness fees have been awarded, without specific statutory authorization, upon a finding of bad faith"). The use of this inherent power is reserved for cases with "a finding of fraud or abuse of the judicial process." Amsted, 23 F.3d at 378. While it is true that the appellants' conduct did not amount to fraud, courts may use sanctions in cases involving bad faith that cannot be otherwise reached by rules or statutes.... Here, the court below could not award expert fees under § 285, but it was entitled to use its inherent powers to award Takeda the expert fees. Because of the court's numerous articulations of appellants' bad faith and vexatious litigation conduct, we cannot say that the decision to do so was an abuse of discretion.

The concurring opinion stressed that the standard for “exceptional cases” is not as strict as that governing inherent power sanctions, so the two should not be equated:

While we have recognized that district courts can award expert fees in patent cases under their inherent authority, we have made clear that "not every case qualifying as exceptional under section 285 will qualify for sanctions under the court's inherent power." Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 378 (Fed. Cir. 1994). To the contrary, a district court may resort to its inherent power to impose sanctions only in those highly unusual cases in which the pertinent statutory remedies are plainly inadequate to address the misconduct at issue. Amsted, 23 F.3d at 379 ("The court should resort to its inherent power only where the rules or statutes do not reach the acts which degrade the judicial system. . . . [C]ourts should only resort to further sanctions when misconduct remains unremedied by those initial tools."); see also Martin v. Brown, 63 F.3d 1252, 1265 (3d Cir. 1995) ("inherent power should be reserved for those cases in which the conduct of a party or an attorney is egregious and no other basis for sanctions exists"); In re Rimsat, Ltd., 212 F.3d 1039, 1048 (7th Cir. 2000). Routine use of inherent authority to impose sanctions in addition to those authorized by applicable statutes risks contravening Congress's judgment as to what sanctions are appropriate for particular misconduct. See, e.g., Corley v. Rosewood Care Ctr., Inc., 142 F.3d 1041, 1059 (7th Cir. 1998); Klein v. Stahl GMBH & Co. Maschinefabrik, 185 F.3d 98, 110 n.10 (3d Cir. 1999). Where, as here, the district court's award of attorney fees under section 285 and expert witness fees under its inherent authority are predicated on the same conduct, the district court must offer a reasoned explanation for why the award of attorney fees and expenses under section 285 is not a sufficient sanction for the conduct in question. See Corley, 142 F.3d at 1058-59 ("The court also should have explained why Rule 11 was inadequate to serve the court's purposes . . . .").

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