Unreasonable Claim Construction Arguments Can Be Basis for Attorneys’ Fees Under Rule 11

December 7, 2012

Nathan R. Speed

What This Means To You

  • When faced with objectively unreasonable claim construction positions, defendants should seek to recover attorneys’ fees and costs under Rule 11 (which, among other things, prohibits attorneys from advancing frivolous legal arguments).
  • Patent owners may be creative in construing claim terms, but must at all times advance arguments that are reasonably supported by fact and law.

Overview

In Raylon, LLC v Complus Data Innovations, Inc., the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) held that determining whether a party’s claim construction position violates Rule 11’s prohibition on frivolous legal arguments is a purely objective inquiry that does not give any weight to the party’s subjective beliefs.

Case Background

Raylon filed three patent infringement lawsuits in the Eastern District of Texas (within the Fifth Circuit) against Complus Data Innovation. The claimed device is a hand-held identification and ticket issuing system with a display pivotally mounted on the system housing. Despite the asserted claims’ requirement of a “pivotally mounted” display, Raylon asserted the claims against products with fixed displays.

The district court granted the various defendants’ motions for summary judgment of non-infringement, finding that fixed displays did not meet the “pivotally mounted” limitation of the asserted claims. The district court expressly rejected Raylon’s argument that the accused fixed displays were pivotally mounted because a user could pivot the displays by moving his or her wrist.

Nevertheless, the district court denied the defendants’ requests for attorneys’ fees under Rule 11, stating, “Raylon’s claim construction argument and infringement theory do stretch the bounds of reasonableness . . . [however] they do not cross the line.” In reaching this conclusion, the district court declared Rule 11 was appropriate when the “case lacks any credible infringement theory and has been brought only to coerce a nuisance value settlement.”

Decision Analysis

On appeal to the Federal Circuit, the defendants argued that the district court misapplied Fifth Circuit law because it injected a subjective component into its Rule 11 analysis. More specifically, whether Raylon brought the litigation to coerce a nuisance value settlement was a subjective inquiry that the district court should not have performed in light of Fifth Circuit precedent that “the standard under which an attorney is measured is an objective, not subjective standard of reasonableness under the circumstances.”

The Federal Circuit agreed. The Court found Raylon’s claim construction argument was objectively unreasonable and remanded to the district court for the limited purpose of determining what attorneys’ fees the defendants were entitled to and whether the case qualified as “exceptional”.

Takeaways

Litigants and attorneys may take aggressive positions in litigation, but both should be careful to ensure that even the most aggressive positions are not perceived as frivolous. While the facts of Raylon are extreme, it serves as a cautionary tale for those who would pursue arguments that find no support in fact or law. For defendants, the Raylon decision represents an additional arrow in the quiver to be used when patent owners pursue unreasonable claim construction or infringement positions.