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Sanctions — Distinctive Rationales and Intertwined Applicability of Rule 11 and 35 U.S.C. § 285 in Patent Cases

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Raylon, LLC. v. Complus Data Innovations, Inc., 700 F.3d 1361 (Fed. Cir. 2012) (Reyna, J., concurring):

II. Distinct Rule 11 and § 285 Inquiries

Rule 11 of the Federal Rules of Civil Procedure and 35 U.S.C. § 285 of the Patent Act offer courts distinct, yet overlapping, rationales for awarding an injured party relief. In asking whether a party violated Rule 11, courts in the Fifth Circuit look only to "objectively ascertainable circumstances." FDIC v. Maxxam, Inc., 523 F.3d 566, 586 (5th Cir. 2008). By contrast, our § 285 precedent asks (1) whether the litigation is brought in subjective bad faith, and (2) whether the litigation is objectively baseless. Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).

Rule 11 directs attorneys to focus on their obligations and responsibilities as officers of the court in making representations, while also operating as an enforcement mechanism to correct any "unusual circumstances" where a party "pursued an illegitimate purpose to increase costs or to harass a party regardless of the weight of that purpose in filing suit." Maxxam, 523 F.3d at 586 (explaining that Rule 11 reaches those pleadings which constitute an abuse of legal purpose by discouraging dilatory or abusive tactics); see also Jenkins v. Methodist Hosps. of Dallas, Inc., 478 F.3d 255, 265 (5th Cir. 2007) ("As stated by the Advisory Committee Note to Rule 11, a lawyer is required to 'stop-and-think' before . . . making legal or factual contentions.") (quoting Advisory Committee Notes on Fed. R. Civ. P. 11 (1993 Amendments)). Sanctionable Rule 11 conduct is distinguishable from a judgment on the merits because Rule 11 addresses the collateral issue of "whether the attorney has abused the judicial process, and, if so, what sanction would be appropriate." Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 396, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990).

Section 285 was enacted to address a patent-specific policy rationale, awarding fees in "exceptional cases" in which sanctions were necessary to deter the "improper bringing of clearly unwarranted suits." Automated Bus. Cos., v. NEC Am., Inc., 202 F.3d 1353, 1354 (Fed. Cir. 2000) (quoting Mathis v. Spears, 857 F.2d 749, 753-54 (Fed. Cir. 1988)). The purpose of the statute has been described by this court as compensation to the prevailing party for its monetary outlays in the prosecution or defense of the suit. See Cent. Soya Co. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983). Such a purpose is distinguishable from Rule 11, which addresses conduct in general, because § 285 recognizes the particular strain that meritless patent litigation bears on judicial and party resources. Eon-Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1327 (Fed. Cir. 2011) (noting the burden of unnecessarily requiring a "district court to engage in excessive claim construction before it is able to see the lack of merit of the patentee's infringement allegations"); Mathis, 857 F.2d at 758 (explaining that Congress codified § 285 to make a prevailing defendant "whole" following a gross injustice).

In non-patent contexts, a litigant is sometimes sanctioned for misleading the court, e.g., Precision Specialty Metals, Inc. v. U.S., 315 F.3d 1346, 1357 (Fed. Cir. 2003), or for exhibiting sloppiness during the course of the proceedings, Spiller v. Ella Smithers Geriatric Ctr., 919 F.2d 339, 347 (5th Cir. 1990) ("slipshod and unprofessional work"). But in patent cases invoking Rule 11, courts are often asked to weigh whether the substantive allegations are so weak that they are not grounded in fact and legally tenable. See, e.g., View Eng'g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000).

Here, notwithstanding whether sanctions are issued pursuant to Rule 11, § 285, or both, the offending conduct is intertwined with governing patent law. I believe that if the circumstances in a patent case result in finding that Rule 11 has been violated on grounds related to substantive positions taken or advanced, then the district court must also, when so moved by the parties, engage in a comprehensive § 285 inquiry. In my view, a § 285 inquiry is compelling where the case progresses beyond the pleading stages and a party's unwillingness to abide by precedent controlling claim construction lends to escalation of avoidable costs.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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