Texas Lawyer: Federal Circuit Reverses EDTX Judge on Sanctions in Patent Case

12/17/2012

In a rare decision, the U.S. Court of Appeals for the Federal Circuit reversed an Eastern District of Texas federal judge on a sanctions issue, finding that the trial judge used the wrong standard in deciding to deny the defendants' Rule 11 sanction motions in a patent case.

The background to the Dec. 7 decision in Raylon v. Complus Data Innovations Inc., et al., is as follows, according to the Federal Circuit's opinion: Raylon filed complaints against three defendants, alleging they infringed on a patent for a hand-held ticket-issuing system. The defendants later sent several letters to Raylon expressing concerns that Raylon's complaints violated Federal Rule of Civil Procedure 11(b)(2) and 11(b)(3) because, they argued, the plaintiff's claim construction positions were unsupportable by intrinsic evidence and the asserted claims were unreasonable. Rule 11 generally requires attorneys filing pleadings to conduct a reasonable inquiry so they can verify that the pleadings are "not being presented for an improper purpose," "the claims . . . are warranted by existing law or a nonfrivolous argument" and the "factual contentions have evidentiary support..."

Russ Emerson, a partner in Dallas' Haynes and Boone, LLP who argued for defendant Complus Data Innovations Inc. on appeal, is pleased with the decision — one he says is rare for the Federal Circuit.

"Sanctions cases are pretty rare all the way around. And as far as I know the Federal Circuit has never reversed a refusal to grant sanctions" before, Emerson says.

Excerpted from Texas Lawyer, December 17, 2012. To view full article, click here.

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