Articles Posted in Sanctions

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In this patent infringement action brought by plaintiff Trustees of Boston University (“BU”) , BU alleged that defendants infringed U.S. Patent No. 5,686,738 (the “‘738 Patent”), which pertains to light emitting diodes (“LEDs”). BU moved for sanctions against Defendants and their counsel for overdesignating documents as “Confidential-Outside Counsel Eyes Only.”

After BU served document requests for emails, Defendants ran search terms that produced over 3.5 million pages of emails. The Defendants then designated every document of that production as Outside Counsel Only, but the Defendants did not review each document to determine whether it in fact contained confidential information. As explained by the district court, “[b]ecause there was not enough time to review each document and meet [the 30-day] deadline, Defendants reviewed the documents quickly and determined that the emails generally met the requirement of the Global Protective Order, and marked them “CONFIDENTIAL-OUTSIDE COUNSEL EYES ONLY.”‘
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In Gaymar Industries, Inc. v. Cincinnati Sub-Zero Products, Inc. et al, 1-08-cv-00299 (NYWD July 3, 2014, Order) (McCarthy, M.J.), the magistrate judge recommended denial of defendant’s request for reconsideration of its failed motion for attorneys’ fees under 35 U.S.C. §285 in light of Defendant’s unclean hands.

After the court’s denial of its motion for attorneys’ fees as an “exceptional case” pursuant to 35 U.S.C. §285, Defendant Cincinnati Sub-Zero Products, Inc. (“CSZ”) moved for reconsideration in light of new case authority, i.e. Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014) and Highmark, Inc. v. Allcare Health Management System, Inc., 134 S.Ct. 1744 (2014). The court noted that Octane Fitness lowered the burden of proof for proving an “exceptional case” by rejecting the “clear and convincing” standard in favor of the “preponderance of the evidence” and relaxed the underlying test by holding that “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances . . . . There is no precise rule or formula for making these determinations.” Citing 134 S.Ct. at 1756; Highmark, 134 S.Ct. at 1748.

The court found that neither of the submitted authorities called for a different result than previously reached. In doing so, the court noted these cases did not alter the long-standing rule that “[e]ven for an exceptional case, the decision to award attorney fees . . . [is] within the district court’s sound discretion.” Citing Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378, 1382 (Fed. Cir. 2005). This discretion allows the judge to consider factors, including closeness of the case, the tactics of counsel, the conduct of the parties, and any other factors that may contribute to a fair allocation of the litigation burdens of litigation between winner and loser.

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Digital-Vending Services International, LLC (“Digital-Vending”) filed a patent infringement action against The University of Phoenix, Inc. and Apollo Group, Inc. (“Defendants”). During the course of the litigation, the Magistrate Judge granted Defendants’ motion for sanctions for Digital-Vending’s spoliation.

After the matter settled, Digital-Vending and the Defendants filed a consent motion to vacate the Magistrate Judge’s opinion and order granting Defendants’ motion for sanctions for spoliation. As part of the consent motion, the parties informed the court that the Defendants had withdrawn their motion for sanction and that Digital-Vending and the Defendants had settled the case. The parties also informed the court that as part of the settlement Defendants had agree to join the consent motion and that Digital-Vending had dismissed its appeal to the Federal Circuit with prejudice.

The court then proceeded to reject the consent motion, finding that it was inappropriate and the court would not hide Digital-Vending discovery abuse. “The Court will not agree to hide the discovery abuse of the plaintiff in this case by withdrawing the October 3, 2013” order.

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To resolve Apple and Nokia’s request for sanctions against Samsung from Samsung’s violation of a protective order, the court ordered written discovery and depositions to determine the extent of the violation. After discovery and several hearing, the court began its analysis by noting that “[a] junior associate missing one redaction among many in an expert report is not exactly a historical event in the annals of big-ticket patent litigation. Even if regrettable, these things can happen, and almost certainly do happen each and every day. But when such an inadvertent mistake is permitted to go unchecked, unaddressed, and propagated hundreds and hundreds of times by conscious – and indeed strategic – choices by that associate’s firm and client alike, more significant and blameworthy flaws are revealed.”

The court then addressed three separate questions. “First, has its protective order been violated? Second, if the protective order has been violated, does the court have the authority to issue sanctions for those violations? Finally, if the court has the authority to issue sanctions, what factors should it consider in determining whether sanctions are warranted?”
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In this patent infringement action that was originally filed against a number of defendants, plaintiff Alexsam, Inc. (“Alexsam”) moved for a continuance of the impending trial date set for October 2013. To support the motion, plaintiff notified the district court that it had terminated its relationship with its counsel of record and suggested that it anticipates litigation between itself and its counsel of record. Alexsam requested a delay in the trial setting so that it could secure new counsel.

The district court had previously conducted a consolidated trial on Defendants’ invalidity claims in May 2013. The jury found each of the asserted claims valid. As explained by the district court, “Shortly after the invalidity trial, Plaintiff and Best Buy, Inc. settled the remaining issues between them (Doc. No. 270 in 2:13-cv-2). The Court then tried the infringement issues in Alexsam, Inc. v. Barnes & Noble, Inc. (2:13-cv-3) and Alexsam, Inc. v. The Gap, Inc. (2:13-cv-4) in June 2013. The Barnes & Noble trial was conducted June 3-7, 2013, and the Gap trial was conducted June 24-28, 2013. Both juries found no infringement (Doc. No. 219 in 6:13-cv-3 and Doc. No. 243 in 6:13-cv-4).”
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As Apple and Samsung head toward yet another trial, Apple filed a motion for sanctions, accusing Samsung of violating the protective order in the case. Apple’s motion asserted that Samsung’s counsel had improperly shared information under the protective order with executives at Samsung.

The court began its analysis with a discussion of the importance of protective orders: “Time and again in competitor patent cases, parties resist producing confidential information to their adversaries’ lawyers. They fear, among other things, that the lawyers will insufficiently shield the information from the competitors that they represent. Yet time and again, the court assuages these fears with assurances that a protective order will keep the information out of the competitors’ hands. A casual observer might reasonably wonder what magic a protective order works that allows outside counsel access to confidential information to advance the case without countenancing untoward uses by the client. The answer is not a magical one at all: confidential information remains confidential because counsel and clients alike follow court orders. If parties breach this basic rule, the court’s assurances become meaningless. There is reason to believe the rule has been breached in the present case.”
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Plaintiff Vasudevan Software, Inc. (“VSi”) filed a motion for sanctions against defendant MicroStrategy (“MS”). The sanctions motion was based on statements that VSi characterized as threats against both VSi and its counsel by an outside counsel and a principal of MS, in conjunction with MS’s filing of a request for reexamination of four of VSi’s patents and another patent held by Zillow, a client of VSi’s outside counsel. Rather than deny that the statements were made, MS asserted that even if the statements were made they could not be sanctioned for making them because of the First Amendment.

The district court explained the background facts as follows: “Sean Pak, a partner at Quinn, Emanuel, Urquhart & Sullivan, LLP, counsel for MS, contacted Brooke Taylor, a partner at Susman Godfrey, counsel for VSi. He requested a meeting include the principals of VSi and MS. Pak said MS was planning to be “aggressive” in defending against VSi’s claims in this case and would take “initiatives” toward that end, including filing reexamination petitions with the USPTO to reexamine VSi’s patents. Pak proposed flying to Seattle (where the Susman Godfrey office in which Taylor works is located) to discuss these “initiatives” with VSi and its counsel. Taylor agreed and Pak, Taylor and Jordan Conners (a Susman Godfrey associate also representing VSi) met in person at Susman Godfrey’s Seattle offices on September 10, 2012. Additional VSi counsel Les Payne and Eric Enger of Heim, Payne, & Chorush, LLP, VSi principals Mark and Helen Vasudevan, and MS Executive Vice President and General Counsel Jonathan Klein participated in the meeting over the phone. Klein stated that he would not pay VSi anything to settle VSi’s patent infringement claims against MS and, if VSi did not immediately dismiss the case, threatened to make the litigation as painful as possible for VSi, file reexamination petitions with the USPTO for all of VSi’s patents in suit, and take action against Susman Godfrey. When Payne specifically asked Klein what he meant by taking action against Susman Godfrey, he refused to answer and suggested that Susman Godfrey would have to wait and see. ”
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In Smart Options, LLC v. Jump Rope, Inc., Case No. 12-C-2498 (N.D. Ill. March 25, 2013), plaintiff Smart Options brought suit for infringement of U.S. Patent No. 7,313,539 against Jump Rope. The ‘539 Patent relates to a method for purchasing an “option” to buy a good or service (e.g., concert ticket) at a “reservation price” within a designated time period. If the option to buy is not exercised then it expires and there is no refund of the “option fee.” Smart Options utilizes the patent in the operation of its website www.optionit.com. Jump Rope operated a smart phone application that allows users to bypass entrance lines at events by purchasing a “Jump” which allows immediate access to the event without any additional purchase required.

After the suit was filed, Jump Rope served Smart Options with a Rule 11 motion and cover letter stating that Jump Rope would seek its attorneys’ fees and costs if Smart Options proceeded with the suit and the Court entered a finding of non-infringement. Jump Rope explained why it considered the suit to be meritless:

Plaintiff alleges violation of a patent that covers providing options on the right to purchase goods or services at a future time. Defendant’s software application, however, does not provide options or charge option fees. Rather, it allows someone to buy the service provided – a right to “jump the line” at an event or facility. Plaintiff and its counsel could have and easily should have discovered this, as the iPhone/Android application they accuse is free to download.

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In Arrival Star S.A.., et al. -v- Meitek Inc., et al., Defendant Meitek Inc. (“Meitek”) moved for Rule 11 sanctions against the Plaintiff Arrival Star S.A. (“Arrival Star”) based on Meitek’s contentions that “ArrivalStar’s counsel (1) failed to prepare any claim construction before filing suit, (2) made a “tactical decision” to sue Meitek instead of its Chinese parent company due to the difficulties of retaining service and recovering judgment against the latter, and (3) improperly relied on the views of a patent practitioner to opine on the issue of infringement.” Meitek sought at least three times its attorneys’ fees of $110,000 and preferably 5 to 10 times this amount, or $550,000 to $1,100,000 in sanctions.

The Court recited the standard under Rule 11 that sanctions may be imposed “when a filing is frivolous, legally unreasonable, or without factual foundation, or is brought for an improper purpose. The standard governing both the ‘improper purpose’ and ‘frivolous’ inquiries is objective.” (internal citations omitted). The Court further stated that Local Rule 11-9 further provides that the presentation to the Court of frivolous motions subjects the offender at the discretion of the Court to sanctions.
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In the running battle between Apple and Samsung that is playing out in courts and agencies around the world, Apple filed a motion seeking sanctions against Samsung for the alleged spoliation of evidence. Apple alleged that Samsung should be sanctioned for spoliation because Samsung deliberately failed to take institutional steps to retain or back up emails sent or received using its computer email system. Apple also alleged that Samsung had no systematic or company-wide oversight procedures in place to ensure that its employees make appropriate decisions as to which emails are relevant and responsive or to ensure that relevant and responsive emails are in fact saved to employee hard drives.

Samsung denied Apple’s allegations and asserted that it began preserving documents when Apple filed its complaint and that Apple had not shown that Samsung or any of its employees destroyed relevant data after that date. Samsung also stated that even if Apple could establish that evidence was destroyed after the complaint was filed, Apple could not show that Samsung acted in bad faith or with any intent to impair Apple in its case. Samsung also noted that the majority of the accused products were released after the complaint was filed and therefore “[a]ny emails relating to Apple’s claims against these products (design, copying, etc.) would have to predate their release, meaning that any documents not kept would have been deleted pursuant to Samsung’s standard email retention policy. Hence, there is no basis for Apple’s claim that evidence of design and development, copying, or design around has been destroyed.”
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