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Federal Rule of Civil Procedure No. 11 Applies to every paper filed in federal court.

Federal Rule of Civil Procedure No. 11 Presenter makes the following representations: • Not filed for an improper purpose • Not frivolous • Factual allegations are, or will be, adequately supported

Federal Rule of Civil Procedure No. 11 Representations are made to the best of the presenter’s knowledge and belief after a inquiry reasonable under the circumstances Rule 11 violations may be placed on the attorney, law firm, or parties… whoever is responsible for the violation.

Pre-filing Investigation As with any lawsuit, in a patent case, a pre-filing investigation must meet certain minimum requirements to avoid sanctions.

Pre-filing Investigation Recently, one court fined a patent owner and its counsel $1,000,000 for filing a patent infringement action without conducting a proper pre-filing investigation. In the Matter of: Certain point of Sale terminals and Components Thereof, Inv. No. 337-TA-524, Hon. Robert L. Barton, Jr., A.L.J., Order No. 48: Imposing Sanctions, Jointly and Severally, on Complainant Verve; Simon, Galasso and Frantz; and Raymond Galasso and Kevin Imes, June 7, 2005, (public version).

Why the Large Fine?

Why the Large Fine? The court found that the client and their attorneys failed to conduct a proper “infringement analysis” before filing suit. Key reasons included: •

counsel did not conduct the analysis independent of its client

•

the patent claims were not construed in a reasonable manner

•

the patent claims were not compared to the accused device

Why So Much Attention to Prefiling Inquiry in Patent Cases?

Why So Much Attention to Prefiling Inquiry in Patent Cases? Patent cases are EXPENSIVE! •

Large patent cases – total fees may be as high as $20 million

•

Moderately sized cases – total fees typically run in the $1-3 million range

•

Expert fees are typically in the $100,000 range, same for document services fees

Why So Much Attention to Prefiling Inquiry in Patent Cases? The Federal Circuit sums it up: “A patent suit can be an expensive proposition. Defending against baseless claims of infringement subjects the alleged infringer to undue costs – precisely the scenario Rule 11 contemplates. Performing a pre-filing assessment of the basis of each infringement claim is, therefore, extremely important. View Engineering Inc., v. Robotic Vision Systems, Inc., 208 F.3d 981, 986 (Fed. Cir. 2000).

What to Do Before Filing Suit? Step 1. CONDUCT AN INFRINGEMENT ANALYSIS “Rule 11, we think must be interpreted to require the law firm to, at a bare minimum, apply the claims of each and every patent that is being brought into the lawsuit to an accused device and conclude that there is a reasonable basis for a finding of infringement of at least one claim of each patent so asserted. The

presence of an infringement analysis plays the key role in determining the reasonableness of the pre-filing inquiry made in a patent infringement case under Rule 11. View Engineering, 208 F.3d at 986

What Constitutes an Adequate Infringement Analysis?

What Constitutes an Adequate Infringement Analysis? Step 1. Counsel must independently interpret the patent claims and; Step 2. Counsel must compare the patent claims to the accused device.

What Constitutes an Adequate Infringement Analysis? Step 1. Interpreting the

Patent Claims

Counsel’s interpretation of the claims is subject to the Rule 11(b)(2) requirement that all legal arguments not be frivolous. Reasonable attorney standard - claim interpretation is unjustified if a reasonable attorney would recognize it as frivolous.

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11?

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11? Counsel’s claim construction was not frivolous where it was supported by two recognized sources of evidence. Antonious v. Spalding & Evenflo Cos., Inc., 275 F.3d 1066, 1073 (Fed. Cir. 2002)

1. Dictionary definition, i.e. plain meaning of the claim terms; and 2. written description of the patent.

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11?

Counsel’s claim construction was not frivolous where it: 1.

was reasonably supported by the intrinsic record and;

2.

was not inconsistent with the patent’s written description and prosecution history.

See Q-Pharma, Inc., v. Andrew Jergens Co., 360 F3d 1295 (Fed. Cir. 2004)

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11? Bottom Line: When interpreting the patent claims, counsel should proceed as if they are preparing for a Markman hearing: 1. Utilize the plain meaning of each claim term, if applicable; 2. Utilize the specification and drawings of the patent itself; and 3. Apply any guidance and/or limitations provided in the prosecution history.

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11? Recommendation: A claim interpretation contrary to these factors is more likely to be found frivolous. If you can show support from these evidentiary sources for your claim interpretation in response to a Rule 11 challenge, you’ll be a step ahead.

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11? Question: Can in-house counsel conduct an “independent” infringement analysis?

Answer: Of course, but…

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11? Cf. Business Guides, Inc., v. Chromatic Comm. Enter., Inc., 498 U.S. 533, 550 (1991)(Many corporate clients have in-house counsel who are fully competent to make the necessary Rule 11 inquiry). An opinion by in-house counsel is not “inherently wrong” in the context of an attempt to rely on such an opinion to defeat a charge of willful infringement. See Studiengesellschaft Kohle v. Dart Industries, Inc., 862 F.2d 1564, 1573-75 (Fed. Cir. 1988). However, the Federal Circuit has recognized that the fact that in-house counsel rendered the opinion as a factor to be weighed in determining whether the analysis is sufficiently independent. See Underwater Devices, Inc. v. Morrison-Knudsen Co., Inc., 717 F.2d 1380, 1390 (Fed. Cir. 1983).

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11?

Recommendation: Safest bet is to use outside counsel

How to Avoid a Frivolous Claim Interpretation Finding Under Rule 11? Counsel’s interpretation of the claims must be done independently Counsel may consult with the client but may not rely solely on the client’s lay opinion that the accused device infringes the patent. Id. See also Antonious v. Spalding & Evenflo Cos., Inc., 275 F.3d 1066 (Fed. Cir. 2002). See also S. Bravo Systems Inc., v. Containment Technologies Corp., 96 F.3d 1372, 1375 (Fed. Cir. 1996)(If the district court finds that counsel conducted no investigation of the legal merits of their patent infringement claims other than to rely on their client’s lay opinion, it would be difficult to avoid a finding of sanctions).

What Constitutes an Adequate Infringement Analysis? Step 2. After interpreting the claims, counsel must compare the claims to the accused device and determine whether the accused device reads on each element of at least one patent claim.

What Constitutes an Adequate Infringement Analysis? Counsel’s determination is subject to the Rule 11(b)(3) requirement that all allegations and factual contentions have evidentiary support. Would a reasonable attorney believe, based on some actual evidence uncovered during the prefiling investigation, that each element of at least one claim reads on the accused device either literally or under the doctrine of equivalents? Antonious, 275 F.3d at 1074.

What Constitutes an Adequate Infringement Analysis? Safest course of action is to: •

Obtain the accused device;

•

Examine and inspect the accused device(s); and

•

Compare the accused device(s) with the patent claims.

What Constitutes an Adequate Infringement Analysis? Although the Federal Circuit has not imposed an absolute requirement that a patentee purchase the accused product before filing suit, the court has taken this into account as a factor in determining sanctions under Rule 11. See Judin v. United States, 110 F.3d 780 (Fed. Cir. 1997) (Federal Circuit found district court had abused its discretion by not imposing sanctions upon patentee who only viewed the accused device from a distance at a trade show and made no attempt to obtain nor test the accused device prior to filing suit for patent infringement).

What Constitutes an Adequate Infringement Analysis? Bottom Line: If the accused device is available…

obtain it and compare it to the patent claims

What Constitutes an Adequate Infringement Analysis? What if the accused device is obtained but does not provide enough information from which to make an infringement determination? In some circumstances, it may be reasonable to rely on the accused infringer’s advertising statements, product labeling, and other in-direct evidence. See Q-Pharma, Inc., v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004) (court found pre-filing investigation to be sufficient under Rule 11 when patentee relied on accused infringer’s product labeling and advertising to determine whether accused product contained therapeutic amount of CoQ10 10).

What Constitutes an Adequate Infringement Analysis?

Counsel is not required to prepare a claim chart. See Q-Pharma, 360 F.3d at 1301

What Constitutes an Adequate Infringement Analysis?

What if you cannot “obtain” the accused device? For example, what if you are trying to enforce a process patent, i.e., a method of…

Federal Circuit: No Rule 11 Violation Where: 1) the patentee’s claims of infringement are directed to a patented process where the details of the process are uniquely in the possession of the accused infringer; and 2) the patent holder could not have practically obtained any additional information to further their infringement analysis. See Cambridge Products, Ltd v. Naremco Inc., 962 F.2d 1048 (Fed. Cir. 1992) (without the aid of discovery, no further information was practically available); see also Hoffman-La-Rouche Inc. v. Invamed Inc., 213 F.3d 1369 (Fed. Cir. 2000) (“It is difficult to imagine what else [the plaintiffs] could have done to obtain facts relating to [the defendant’s] alleged infringement.”)

What Constitutes an Adequate Infringement Analysis? If you’ve done all you can reasonably do and you’re still not sure, say so… Rule 11 permits allegations that are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery” provided they are specifically so limited. Rule 11(b)(3). “In the absence of [information on the process used to synthesize ticlopidine hydrochloride] plaintiffs resort to the judicial process and the aid of discovery to obtain under appropriate judicial safeguards such information as is required to confirm their belief and to present to the court evidence that each and every defendants infringes one or more claims of the Syntex patents.” See Hoffman-La Rouche, 213 F.3d 1362, Plaintiff’s complaint.

Affirmative Defenses Best practice is to conduct an infringement analysis (described previously) as well as a review of the file wrapper and prosecution history in order to flesh out any validity/enforceability issues.

Why Go to All This Trouble and Expense? Can’t a patentee simply rely on the presumption of validity given to each patent under 35 U.S.C. §282? A patent shall be presumed valid. Each claim of a patent…shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. Notwithstanding the preceding sentence, if a claim to a composition of matter is held invalid and that claim was the basis of a determination of nonobviousness under section 103(b)(1), the process shall no longer be considered nonobvious solely on the basis of section 103(b)(1). The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity. 35 U.S.C. §282.

Rule 11 Requires an Inquiry Reasonable Under the Circumstances According to the Federal Circuit, if the patent has been successfully licensed to third parties and the patentee has no knowledge that the patent is invalid, there is a reasonable basis to believe that the patent is valid. See Q-Pharma, 360 F.3d at 1303. BUT… The Federal Circuit applies regional circuit law to determine compliance with Rule 11!

In the Fifth Circuit: Rule 11 requires an attorney, before signing a filing, to make a “reasonable inquiry.” reasonable inquiry, however, does not create a per se rule that a party research and brief every defense potentially at issue. Such efforts would be not only timeconsuming but potentially pointless. Instead, the “reasonableness” of the rules requires a party to consider “whether any obvious affirmative defenses bar the case.” Federal Deposit Insurance Corp. v. Calhoun, 34 F.3d 1291, 1299 (5th Cir. 1994) (citations omitted).

What are Obvious Affirmative Defenses? In a patent infringement context: • Invalidity; • Non-infringement; • Laches; • Fraud upon the Patent Office; and • Equitable Estoppel.

Conclusion Best practices before filing a patent infringement lawsuit: Engage counsel outside the organization to: •

independently interpret the meaning of the patent claims;

•

compare the patent claims to the accused device and make an infringement determination; and

•

review the file wrapper and prosecution history.