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IP, Patent

Warrior Wounded, But The Fight Rages On

The latest chapter in the ongoing saga that is Warrior Sports v Dickinson Wright was written this week, as the Court of Appeals sent the case back down to the Eastern District of Michigan. As if the legal issues in this case weren’t fascinating enough, the entire circumstance is worth reporting as it takes its place as Exhibit A for why parties strive to litigate in places like East Texas. In most parts of the United States, it’s common knowledge that federal judges hate patent cases. The hatred stems from the complexity and litigiousness of the parties, which itself stems from the high stakes usually in play. When tens, and sometimes hundreds of millions are on the line, every disagreement over a protective order or discovery request becomes a major injustice in the mind of the aggrieved party, and matters that would, in other cases, just be resolved through compromise are instead submitted to the court for a decision. You don’t have to be a federal judge to understand this frustration, just spend some time arbitrating ownership of toys amongst single digit-aged siblings … Even my friend Jackie Hutter recently noted that her victory on a venue transfer motion may have been motivated by the judge’s desire to “clear his docket of a pain in the rear-end false marking case.”

So, yes, patent cases (of all kinds) are generally disliked to the point that judges (generally speaking) tend to look for any reason to get one off their docket. What does this have to do with Warrior? Well, to understand that, you need a little background on the case.

Warrior Sports is a company that makes lacrosse and hockey equipment. Many of their products were “protected” by a number of patents (as the saying goes), including an apparently very valuable patent covering a lacrosse head. (US Patent RE38,216). So valuable, in fact, that Warrior ended up entangled in patent litigation with competitor STX over alleged infringement of the ‘216 Patent. If you’re really interested in the details, you can find more in the various articles and the court’s decision, but suffice it to say that at some point during that litigation, it was discovered that the required maintenance fees had gone unpaid, meaning the patent rights terminated as a matter of law.

Father and Son duo John A. and John S. Artz represented Warrior during the STX litigation, at their original firm (Artz & Artz PC), and later with Detroit-based Dickinson Wright. The Artz’s were able to restore Warrior’s patent rights by successfully petitioning the patent office to excuse the delay and supplying the maintenance fee.  The Artz’s were also accused of mis-characterizing a prior art reference during prosecution of the ‘216 Patent which, if done with deceptive intent, would make the patent unenforceable due to inequitable conduct.

Ultimately, Warrior settled with STX for $275,000–a fraction of the millions they were likely expecting at trial. Warrior then sued the Artz’s and Dickinson Wright for legal malpractice in Michigan state court, but the parties agreed to having the case re-filed in the downtown Detroit federal courthouse in the Eastern District of Michigan. If you’re wondering how Warrior could bring a viable claim for malpractice against its former attorneys when it accepted a settlement in the underlying litigation, you  might be a lawyer–and you might not have heard about a doctrine known as impaired settlement value. More on that later. I promised a tie in to East Texas litigation, and I’m about to pay off.

Federal Judge Gerald Rosen got assigned the case, and recognizing it as a legal malpractice action (traditionally a state court issue), asked the parties to submit briefs to the court over whether a federal court could properly hear such a case.  Both parties submitted briefs arguing that the federal court did have jurisdiction to hear the case, but Judge Rosen still wasn’t convinced. Rosen dismissed Warrior’s lawsuit, saying that the federal court lacked proper jurisdiction over a state law malpractice claim.

Dickinson appealed to the Federal Circuit, likely knowing the appeals panel would easily recognize that not only was Federal court an appropriate jurisdiction, it was the only jurisdiction where this type of claim can be heard. Lawyers, as you know, tend to make the laws. And the laws of legal malpractice basically say that if anything other than the lawyer’s misconduct contributed to your injury, then the lawyer owes you nothing. Thus, the impaired settlement value claim means if Warrior can prove that, but for the Artz’s alleged misconduct, it would have won its infringement trial against STX, then it will be entitled to damages for legal malpractice.

The key in that sentence is infringement trial. In order to win its case, Warrior will need to prove that STX did, in fact, infringe its ‘216 Patent. On the other hand, if the Artz’s can show that the STX lacrosse heads did not infringe (ironically the exact opposite of what they were originally hired to prove) then Warrior loses. The law on this issue is more or less crystal clear, having been reaffirmed just a few short years ago in a case involving Akin Gump. If any part of your malpractice claim requires the court to “to resolve a substantive issue of patent law” then Federal court has exclusive jurisdiction over the claim. The infringement/non-infringement question is about as substantive it gets.

In dismissing the case originally, Judge Rosen stated that the patent issues (i.e. whether the patent was infringed by STX) was tangential to the case. The fact that a judge would characterize patent infringement as tangential to a cause of action requiring a party to prove infringement demonstrates how undesirable a patent-related case is to most judges. As a result, Dickinson (and Warrior) were forced to spend considerable sums to appeal an issue and obtain an order forcing the district court to do what it was obligated to do in the first place. On top of that, presiding over the parties’ dispute is a judge who so clearly wanted no part of it to begin with. Patent cases, along with their kissing-cousins the false marking cases, are procedural hot potatoes, with judges normally eager to pitch a case off their lap and onto a colleague’s, as evidenced by the increased rate at which false marking cases are being transferred.

So, with judges so eager to get rid of patent cases, imagine the shock the first time a defendant moved to transfer a patent case away from Marshall, Texas, and the judge actually said, “No.” What’s that? A judge who actually wants to keep patent cases in his court? A judge who enjoys the challenge and is willing to settle the fights? Any patent owner who wants their day in court ideally wants it to be in front of someone who will take them seriously, and is willing and (god forbid) eager to do the hard work necessary to understand the case to reach a fair decision.

More than anything else, patent owners want their cases to be heard in a timely and organized fashion, rather than treated as red-headed step-children, having their files shoved to the bottom of the pile. And they’ll flock to any court that will grant them such treatment (even if it means putting up with a summer in Marshall, Texas).

P.S. I would be remiss if I didn’t mention the inspiration for this blog posts title. The Wounded Warrior Project provides programs and services to severely injured service members, including employment services.

UPDATE: Additional coverage at IPBiz: CAFC deals with patent law malpractice in Warrior Sports v. Dickinson Wright

UPDATE 2: Now reported at PatentlyO: Legal Malpractice in Federal Courts

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Discussion

One thought on “Warrior Wounded, But The Fight Rages On

  1. Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? It is extremely helpful for me.

    Posted by John Dale | January 14, 2011, 10:54 pm

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