Inherent Power — Bad Faith of Counsel in Flagrantly Violating In Limine Order Attributed to Client — Exclusion of Expert Testimony as Sanction Upheld
O2 Micro Int’l Ltd. v. Beyond Innovation Tech. Co., Ltd., 2011 U.S. App. LEXIS 23125 (Fed. Cir. Nov. 18, 2011) (Background: The defense violated an in limine order that it not refer to the fact that the plaintiff was headquartered in the Cayman Islands. On voir dire, defense counsel asked: “Now, are there any of you who have a problem with a company that puts its headquarters offshore on a Caribbean island in order to avoid paying U.S. taxes?”):
B. Precluding BiTEK's Noninfringement Expert's Testimony
BiTEK ... challenges the district court's sanction of precluding BiTEK from presenting expert testimony on the issue of infringement. BiTEK argues that while the sanction was not an outright dismissal of the case, the sanction nonetheless imposed the "death penalty" on BiTEK's infringement defense. BiTEK argues that the district court abused its discretion, citing a number of reasons: the sanction punished BiTEK for its attorney's misconduct of which BiTEK was not culpable; the other sanctions imposed by the district court were sufficient to compensate O2 Micro; and the other sanctions were sufficient to deter future violations of the district court's orders.
We disagree. Chambers v. NASCO, Inc., 501 U.S. 32, 55, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991). Because a district court's invocation of its inherent powers is not an issue unique to patent law, we apply the law of the regional circuit, here the Fifth Circuit. See ClearValue, Inc. v. Pearl River Polymers, Inc., 560 F.3d 1291, 1308-09 (Fed. Cir. 2009).
The Fifth Circuit has noted that a court's inherent powers include "the authority to punish for contempt in order to maintain obedience to court orders and the authority to impose reasonable and appropriate sanctions on errant lawyers practicing before the court." Natural Gas Pipeline Co. v. Energy Gathering, Inc., 86 F.3d 464, 467 (5th Cir. 1996). However, because of the severity of the inherent powers possessed by a court and the possibilities of their misuse, a court must exercise "great restraint and caution" when invoking its inherent powers. Id. When imposing sanctions pursuant to its inherent power, a court must make a specific finding of bad faith. Goldin v. Bartholow, 166 F.3d 710, 722 (5th Cir.1999); Chambers, 501 U.S. at 50 ("A court must, of course, exercise caution in invoking its inherent power, and it must comply with the mandates of due process, both in determining that the requisite bad faith exists and in assessing fees.") (internal citation omitted). In addition, a court may exercise its inherent power only if essential to preserve the authority of the court. Natural Gas Pipeline, 86 F.3d at 467. As a corollary, the sanction chosen must employ "the least possible power adequate to the end proposed." Id. (quoting Spallone v. United States, 493 U.S. 265, 280, 110 S. Ct. 625, 107 L. Ed. 2d 644 (1990)).
We conclude that the district court did not abuse its discretion in precluding BiTEK from presenting expert testimony on the issue of infringement. BiTEK does not challenge the district court's finding that BiTEK's counsel willfully violated the in limine order in bad faith, but instead argues that the district court failed to find bad faith on the part of BiTEK. That argument is without merit. The district court, after finding that BiTEK's counsel acted in bad faith, specifically found that "BiTEK, through its counsel, has undermined the parties' expectations to a trial by a jury selected from the panel summoned according to the regular process of the court." Sanctions Order, 2009 U.S. Dist. LEXIS 58860, 2009 WL 2047617, at *2. While BiTEK argues that the sanctions were imposed for conduct that was attributable solely to its attorney, the finding that BiTEK was acting through its counsel comports with the well-settled principle that a client is responsible for its attorney's conduct in the courtroom. Link v. Wabash R.R., 370 U.S. 626, 633-34, 82 S. Ct. 1386, 8 L. Ed. 2d 734 (1962).
Similarly, BiTEK's argument that excluding its expert's testimony amounted to a "death penalty sanction" lacks merit. Under Fifth Circuit law, a district court imposes "death penalty" sanctions if the sanctions constitute dismissal of the sanctioned party's pleading and entry of judgment against the sanctioned party. EEOC v. Gen. Dynamics Corp., 999 F.2d 113, 118-19 (5th Cir. 1993); see also CQ, Inc. v. TXU Mining Co., 565 F.3d 268, 280 n.7 (5th Cir. 2009) (upholding the district court's exclusion of the plaintiffs damages evidence where the evidence, while important, was not essential to the underlying recovery and noting that "this is not a case in which the district court's exclusion of the evidence constituted dismissal of the plaintiffs claims").
The district court did not impose "death penalty sanctions." It did not dismiss BiTEK's case. As an initial matter, O2 Micro, not BiTEK, had the burden of proof on the issue of infringement. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1467 (Fed. Cir. 1998) (en banc). As part of its defense to O2 Micro's infringement allegations, expert testimony was not the only evidence that BiTEK could employ. BiTEK had the ability to advance its noninfringement defense through documentary evidence, testimony from its technical fact witnesses, and testimony from O2 Micro's technical expert on cross-examination, each of which BiTEK presented at trial. Those classes of evidence may support a judgment of no literal infringement. See Johns Hopkins Univ. v. Datascope Corp., 543 F.3d 1342, 1345-49 (Fed. Cir. 2008) (entering judgment of noninfringement as a matter of law based on testimony by the patentee's technical expert). Thus, the district court's exclusion of the expert testimony on noninfringement was not the equivalent of entering judgment against BiTEK on the issue of literal infringement.
The exclusion of expert testimony, however, did hamper BiTEK's ability to present its noninfringement theory through the witness it desired. Otherwise, there would be no deterrent effect of the sanction. But that prejudice to BiTEK's ability to choose the form or presentation order of its supporting evidence does not recast the district court's exclusion of BiTEK's noninfringement expert into a "death penalty sanction."
With the exclusion of BiTEK's expert testimony properly characterized, we cannot conclude that the district court abused its discretion by imposing that sanction. BiTEK asserts on appeal that the other sanctions imposed by the district court were sufficient to compensate O2 Micro and deter future violations of the court's orders, but we conclude that the district court acted within its discretion. The district court found that monetary sanctions alone were inappropriate because "[t]o hold otherwise would effectively allow a litigant to buy a new jury panel by intentionally violating the court's orders in limine." Sanctions Order, 2009 U.S. Dist. LEXIS 58860, 2009 WL 2047617, at *3. Regarding the non-monetary sanctions, including precluding testimony from BiTEK's noninfringement expert, we decline BiTEK's invitation to second-guess the district court's conclusion that those sanctions were necessary to deter future violations of its orders, especially after properly characterizing the effect of the exclusion of expert testimony on noninfringement. Thus, we affirm the district court's precluding testimony of BiTEK's noninfringement expert as a sanction for violating an order in limine.
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