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Today's Federal Circuit practice tip: don't misrepresent the record or the law

March 31, 2009
Post by Blog Staff

In a recent decision, the Federal Circuit awarded sanctions against the plaintiff-appellant for filing and pursuing a frivolous appeal against one of four defendant-appellees. The court observed the plaintiff-appellant failed to explain how the district court erred in its determination that this defendant did not infringe and also made misrepresentations of the record and law in its briefing on appeal.In a separate decision under Rule 36, the court affirmed the district court's determination that the cases against each of the defendants were exceptional under 35 U.S.C. § 285 and the associated award of attorney fees against the plaintiff. More details of E-Pass Techs., Inc. v. 3Com Corp. after the jump.

E-Pass is the assignee of a patent directed to a "method and device for simplifying the use of a plurality of credit cards, or the like." In 2000, E-Pass filed suit against 3Com and Palm alleging infringement. The district court granted summary judgment of noninfringement. In a previous appeal, the Federal Circuit reversed this finding based on a revised claim construction. E-Pass then filed additional infringement suits, one against Visa International and Visa U.S.A. and a second against PalmSource. These cases were grouped together by the district court as related. The district court then granted summary judgment of noninfringement as to all defendants based on the Federal Circuit's claim construction from the first appeal. The Federal Circuit affirmed this decision in a second appeal (more detail of that appeal in this post).While the second appeal was pending, district court deemed each of the cases exceptional under 35 U.S.C. § 285 and awarded attorney's fees. This finding was based on the inadequacy of E-Pass's pre-filing investigation and "repeated misconduct throughout the litigation." E-Pass appealed this finding. The Federal Circuit affirmed this determination under Rule 36. While on appeal, PalmSource argued that E-Pass's appeal was "frivolous as it related to PalmSource based on E-Pass's failure to identify a reversible error of the district court and its repeated misrepresentations to this court."The Federal Circuit agreed, holding E-Pass's appeal was frivolous. First, the court noted the standard for determining whether an appeal is frivolous (internal quotations omitted):

An appeal can be frivolous as filed and/or frivolous as argued. An appeal is frivolous as filed when an appellant grounds his appeal on arguments or issues that are beyond the reasonable contemplation of fair-minded people, and no basis for reversal in law or fact can be or is even arguably shown. An appeal is frivolous as argued when an appellant has not dealt fairly with the court, or has significantly misrepresented the law or facts.

The court held the appeal as to PalmSource was frivolous on both grounds. First, E-Pass did not "explain how the trial court erred or to present cogent or clear arguments for reversal." Second, E-Pass "made significant misrepresentations of the record and the law to the court."With respect to the first reason, the Federal Circuit noted "even after PalmSource put E-Pass on notice of the alleged frivolousness of E-Pass's appeal by requesting sanctions in its brief, E-Pass still failed to clearly or cogently explain in its reply brief why the district court's findings in the PalmSource litigations were clearly erroneous or an abuse of discretion." Instead, its briefing focused on the other defendants, leaving "the inescapable conclusion that its strategy is to impugn PalmSource by association." There was also no specific challenge to the district court's finding of litigation misconduct in the case against PalmSource. In sum, "E-Pass failed to challenge any of the district court's factual findings, and identified no other basis for finding an abuse of discretion in calculating fees." As such, E-Pass failed to identify any basis for reversal, making the appeal frivolous as filed as to PalmSource.E-Pass also made several significant misrepresentations to the Court. In its opening brief, E-Pass argued the district court "specifically found" E-Pass's pre-filing investigation was sufficient such as to avoid making the case against PalmSource an exceptional case. The Federal Circuit observed that this mischaracterized the record: the district court had not, in fact, made such a finding. Instead, as described by the Federal Circuit:

Notwithstanding E-Pass's representations to the contrary, the district court did not, in fact, find that E-Pass's pre-filing investigation was sufficient as to PalmSource—or for that matter, the Palm Defendants, or even Visa U.S.A. Rather, the district court found, solely with respect to Visa International (one of seven defendants-appellees), in a section of the decision entitled "Visa International," that "[w]hile E-Pass'[s] minimalist pre-filing investigation in and of itself, may not make the case exceptional, when combined with its litigation misconduct, this case becomes one which is meritorious of an award of attorney fees."This misrepresentation of the district court's decision—exacerbated by repetition—speaks for itself. It is worth observing, however, that not only does E-Pass attempt to paint the district court's finding as applying to all defendants-appellees when it clearly does not, it also mischaracterizes the finding itself. The district court did not, as E-Pass argues, "specifically f[i]nd" that E-Pass's pre-filing investigation was sufficient as to any defendant-appellee, including Visa International. Rather, the district court merely found that whether or not the "minimalist pre-filing investigation" conducted was sufficient, any question as to its sufficiency was overcome by E-Pass's numerous acts of litigation misconduct.

Further, the Court noted that E-Pass had also misrepresented the legal standard for exceptionality. Specifically, E-Pass omitted a key passage from a quote of a Federal Circuit decision. E-Pass cited the case as holding: "The standard for an exceptional case finding is whether the case was brought in subjective bad faith and the litigation was objectively baseless." The full quote from the case reads (emphasis added): "Absent misconduct in the litigation or in securing the patent, a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless." Given the district court's exceptional case finding was based in part on litigation misconduct, the Federal Circuit stated "[i]t is difficult to view E-Pass's omission of the critical portion of the legal standard applicable to it as anything other than an attempt to mislead the court."The misrepresentations as well as the failure to identify any reversible error of the district court outweighed whatever nonfrivolous arguments might be in E-Pass's briefs. The court therefore imposed a sanction equal to fees for defending the appeal, including the motion for sanctions. Further, the court held E-Pass and its counsel jointly and severally liable because the conclusion of frivolity was based on both filing and advocacy.Justice Bryson dissented, noting that there was at least one issue for which it was reasonable for E-Pass to pursue an appeal, and would not have sanctioned E-Pass.To read the full decision in E-Pass Techs., Inc. v. 3Com Corp., click here.


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