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IP, Patent

Punishment For Frivolous Patent Lawsuits

As the typically reluctant “participants” in NPE* patent litigation rejoice, Law.com proclaims “Federal Circuit Upholds $631,000 in Fees, Sanctions Against Patent Lawyer, Company.”  According to Sheri Qualters,

The U.S. Court of Appeals for the Federal Circuit has upheld a lower court’s order that patent lawyer Jean-Marc Zimmerman and patent holding company Eon-Net pay $631,135.18 in sanctions and fees.  In the lower court case, the trial judge found “indicia of extortion” in patent lawsuits filed by Zimmerman.

Indeed, this would seem like quite  a victory, since sanctions for filing meritless lawsuits (known to civil litigators as Rule 11 sanctions) tend to be hard to come by.  Unfortunately, it may not be time to pop the champagne just yet, as both the headline and article are incredibly misleading.  This case actually has quite a history, and its one that I’ve often used when training young attorneys eager to learn about representing patent owners in court.  Ultimately, what Zimmerman and Eon-Net’s case teaches us, more than anything else, is that professionalism is key to providing adequate representation.  But more on that later.

Qualters is most likely reporting on this order, which is the most recent in a string of orders from the Federal Circuit on this case.  In sum, the district court ordered Zimmerman and Eon-Net to pay more than half a million dollars in sanctions to Flagstar.  Understandably, they are appealing the sanctions award.  However, the most recent order from the court of appeals only deals with a motion filed by Zimmerman to stop Flagstar from attempting to collect its award until after the appeal is heard.  The Federal Circuit is notably unsympathetic to Zimmerman, and has refused to grant the motion.  In effect, Flagstar can proceed with any lawful collection attempts even while the court decides whether the award was proper in the first place.

Of course, you might think that the refusal to prevent execution of the award somehow foreshadows the court’s opinion on the merits of the appeal, but recall what I mentioned earlier about sanctions being hard to come by.  In fact, back in 2007, these same two parties were in front of the Federal Circuit appealing a similar sanction.  Then, as now, Zimmerman asked that enforcement of the sanction award be stayed until the appeal could be heard.  Then, as now, the Federal Circuit refused to grant the stay … right before it vacated the district court’s sanction and ordered it to proceed with the case.

Of course, the main problem the Federal Circuit had with the sanctions back in 2007 was that it was very premature.  The court had yet to even dive in and interpret the claims, which it has now done.

Having glanced at the claims of the patent, they might plausibly be read to encompass some specific usages of webforms.  However, what may have colored the judge against Eon-Net’s position in the first place, however, was its counsel’s inability to effectively communicate its infringement theory to the court.  In a portion of an argument transcript excerpted by the district judge, Eon-Net’s counsel was asked a direct question about the infringing product:

What judges need to help make decisions about patents are specific theories of infringement, coupled with representative examples that educate the district court, and give the defendant fair notice of the technology being accused.  Anything less than that, and a judge can quickly become convinced that you lacked any plausible infringement theory in the first place.

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Discussion

5 thoughts on “Punishment For Frivolous Patent Lawsuits

  1. Very interesting. I have noticed that there has been a rash of Rule 11 filings here in the Middle District of Florida.

    Posted by Mark Malek | December 25, 2010, 7:12 pm

Trackbacks/Pingbacks

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