Fifth Circuit Reminds Litigants: Where A Witness Is Available, The Witness Must Testify At Trial Live (Not By Deposition)

Posted on July 21, 2019 by Steven Callahan

On January 11, 2019, the Fifth Circuit issued a decision (available here) in Swearingen v. Gillar Home Heath Care. The Fifth Circuit found that the district court abused its discretion when it permitted a key witness to testify by deposition—rather than in person—at trial.

In the case, the defendant obtained deposition testimony from one of its former employees that bolstered the defendant’s claim that it did not improperly terminate the plaintiff. The defendant then filed a motion seeking permission to use the former employee’s testimony at trial by reading the deposition transcript into evidence. The district court granted the defendant’s motion, while noting that the plaintiff could subpoena the former witness to testify live at trial if the plaintiff wanted to. The plaintiff appealed.

On appeal, the defendant argued that the deposition testimony was admissible, because the witness lived 95.5 miles from the courthouse, which was “close enough to the Rule’s requirement of 100 miles” (i.e., Rule 32(a)(4)(B) allows a party to use the deposition of a witness where “the witness is more than 100 miles from the place of hearing or trial or is outside the United States, unless it appears that the witness’s absence was procured by the party offering the deposition”). The defendant also argued that the witness would “miss work and travel a lengthy distance” which would pose an “undue burden” on the witness. Finally, the defendant argued that the witness (as one of the defendant’s former employees) was not within the defendant’s “control.”

The Fifth Circuit noted that (i) it is all but inevitable that witnesses who are employed will miss work, (ii) a witness not within the control of a party is not unique, and (iii) the witness being “almost 100 miles from the trial” is not good enough to invoke Rule 32(a)(4)(B). The Rules prohibit using deposition testimony at trial unless “live testimony from the deponent is impossible or highly impracticable” and “the inconvenience of traveling any distance less than 100 miles, by itself, cannot render live testimony ‘extremely difficult or virtually impossible’ to obtain.”

The Fifth Circuit further noted that it was immaterial that the plaintiff could have subpoenaed the witness to testify live at trial—it was not the plaintiff’s burden to do so and “[a] party should not be required ‘to subpoena a hostile witness.’”

Finally, because the witness provided key testimony (i.e., the only testimony contradicting the plaintiff’s testimony on the central factual issue in the case), the admission of the deposition was not harmless. “Only through live cross-examination can the jury fully appreciate the strength or weakness of the witness’[s] testimony, by closely observing the witness’[s] demeanor, expressions, and intonations.” (citations and quotations omitted). The Fifth Circuit thus reversed and remanded for a new trial.

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Texas Supreme Court: Feel Free to Deny Those Case-Dispositive Requests for Admission Without Fear of Sanctions

Posted on July 1, 2019 by Steven Callahan

As a young attorney, I loved requests for admission. Right out of the gate, I’d serve a bunch of them asking my opponent to admit that they had no case and hope that the opponent’s counsel would forget to timely respond. Because if responses to requests for admission aren’t timely served, the subjects of the requests for admission are deemed admitted. See Tex. R. Civ. P. 198.2(c); Fed. R. Civ. P. 36(a)(3). It would be just like winning the lottery (I assume).

Over time, I stopped serving such “case dispositive” RFAs, because (i) most of the time, your opponent timely responds denying them, and (ii) even if they didn’t, it’s highly unlikely that the failure to answer such RFAs would make a difference (because a judge is very unlikely to take any action based on a failure to respond to case-dispositive RFAs). Instead, I generally use RFAs to ask my opponent to admit things that should not be controversial—e.g., admit that you signed the contract, admit that the contract is authentic, etc.

A related reason to serve “case dispositive” RFAs may be that, if your opponent does timely respond, and denies the RFA, and you ultimately prove that the opponent should have admitted the RFA, you might obtain some relief. Under the Federal Rules, for example, the recovery of attorney’s fees is a possibility if “a party fails to admit what is requested under Rule 36 and if the requesting party later proves a document to be genuine or the matter true[.]” Fed. R. Civ. 37(c)(2); see also Tex. R. Civ. P. 215.4(b) (“If a party fails to admit the genuineness of any document or the truth of any matter as requested under Rule 198 and if the party requesting the admissions thereafter proves the genuineness of the document or the truth of the matter, he may apply to the court for an order requiring the other party to pay him the reasonable expenses incurred in making that proof, including reasonable attorney fees.”). I’ve never seen it happen in any of my cases, but I guess there’s always a chance . . .

This brings me to the Texas Supreme Court’s decision in Medina v. Zuniga (available here), decided on April 26, 2019. In Medina, at the outset of the litigation “the plaintiff essentially asked the defendant to concede his negligence in every possible respect and confess he was the sole cause of the accident at issue.” But “[t]he defendant predictably denied those requests.” At trial, “the defendant made the strategic decision to concede ordinary negligence but contest the plaintiff’s gross-negligence claim.” (The first time that the defendant indicated that he would not contest his negligence was in opening statements.) The defendant denied that he was negligent in response to the plaintiff’s RFA.

After prevailing at trial, the plaintiff asked the district court to award sanctions “in the form of reasonable expenses and attorney’s fees incurred in proving up the negligence issues that the defendant ultimately conceded.” The district court awarded sanctions, and the court of appeals affirmed.

The Texas Supreme Court reversed. Although the defendant had argued that, when he denied the RFA, he reasonably believed that he might ultimately prevail in showing he was not negligent, that did not matter, as sanctions cannot attach to the denial of a merits-preclusive request:

Requests for admission are a tool, not a trapdoor. They primarily serve to simplify trials by eliminating matters about which there is no real controversy, but which may be difficult or expensive to prove. When used as intended, requests for admissions are useful in addressing uncontroverted matters or evidentiary ones like the authenticity or admissibility of documents. . . .  [T]hey were never intended to be used as a demand upon a plaintiff or defendant to admit that he had no cause of action or ground of defense. . . .

It is axiomatic that the plaintiff bears the burden to prove the defendant’s negligence. It cannot follow that the defendant who puts the plaintiff to her burden should later face sanctions for not admitting what he was entitled to deny. Our rules do not, strictly speaking, prohibit merits-preclusive requests for admissions. But due process nevertheless limits the extent to which sanctions can attach to denials of those requests. Simply put, merits-preclusive requests for admissions that carry the threat of sanctions risk putting the responding party to an impossible choice: give up your case now or face sanctions later. Worse, the responding party typically will be put to this election long before any significant discovery has occurred, leaving him unable to make an informed decision on whether to concede or contest liability.

That is not how our system works. Just as a defendant may answer the claims against him with a general denial, he may also deny a merits-preclusive request for admission for which the other party bears the burden of proof. The very nature of the request provides the respondent “good reason” for failing to admit. Likewise, absent present knowledge that he will later concede he acted negligently, a defendant acting in good faith when responding to requests for admissions may maintain that his conduct was consistent with the ordinary standard of care. This is especially true at the outset of discovery. In this case, Medina decided at trial to concede negligence he had thus far denied. He was entitled to base this decision on how various aspects of the case had turned out—discovery, pre-trial rulings, jury selection, etc. And he was entitled to do so without fear he would be unduly punished for defending himself at the case’s outset.

We need not painstakingly examine each of the requests for admissions made the basis of Zuniga’s motion for sanctions to understand the gist of her argument. Through a battery of requests, she asked Medina to admit his negligence and complete responsibility in causing the accident. He initially refused, but later acceded. These facts do not give rise to sanctionable conduct under Rule 215.4. The requests at issue did not seek to narrow the contested questions for trial by eliminating noncontroversial issues or determining the genuineness of any relevant documents. Rather, Zuniga sought to litigate the entire case in one fell swoop of discovery—or at least to force Medina to take a position on every conceivable question on the merits without the benefit of a full discovery period.

We do not doubt this is standard practice for many litigators, and we do not hold that such requests are outside the scope of Rule 198. But we reiterate: requests for admissions are no method for trying the merits. And we will not reward their use in that manner by upholding sanctions like those granted in this case. . . .

Parties may change their minds on whether to defend or concede an issue on the merits for any number of reasons, including evidence uncovered through discovery, pre-trial rulings that alter the complexion of the case, or even the selection of the particular jury to hear the case. So although Medina certainly was permitted to contest sanctions on the ground that he reasonably thought he might finally prevail, this defensive argument is not his only recourse. Rather, parties defending against a Rule 215.4 motion based on merits-preclusive requests for admissions can simply argue a “good reason” always exists under rule 215.4(b) to deny a merits-preclusive request. Put differently, the question is not necessarily whether a litigation strategy is justifiable in hindsight but whether the merits-preclusive nature of the request for admission renders a denial non-sanctionable.

(citations and quotations omitted).

Relatedly, it seems clear that deemed admissions arising from untimely served RFA responses cannot be used to preclude a defendant from contesting the validity of the plaintiff’s claims or force him to concede his defenses, because that would offend due process (which generally affords a party the opportunity for a hearing on the merits of his cause.).

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Texas Supreme Court Holds that Conspiracy Cause of Action Has Same Statute of Limitations As Underlying Tort, Not Invariably a Two-Year Statute of Limitations

Posted on July 1, 2019 by Steven Callahan

Until April 5, 2019, every Texas court of appeals considering what statute of limitations applied to a conspiracy claim got it wrong. So holds the Texas Supreme Court in Agar Corp. v. Electro Circuits International (available here).

In Agar, the court of appeals applied the two-year statute of limitations generally applicable to most torts to find that a conspiracy claim also had a two-year statute of limitations. The Texas Supreme Court reversed, holding that, “[b]ecause civil conspiracy is a derivative tort that depends on participation in some underlying tort, . . . the applicable statute of limitations must coincide with that of the underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable.” (citations and quotations omitted).

This makes good sense. After all, under the court of appeals’ contrary finding, a defendant who commits defamation must be sued within one year after making the defamatory statement, but a plaintiff could sue his co-conspirator under a two-year statute of limitations. Similarly, a defendant who commits fraud could be sued within four years, but her conspirator had to be sued within two years. That didn’t make much sense.

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Texas Supreme Court Issues Important Guidance for Proving Up Claim for Attorney’s Fees—TLDR: Keep Detailed Time Records

Posted on July 1, 2019 by Steven Callahan

On April 26, 2019, the Texas Supreme Court issued its opinion in Rohrmoos Venture v. UTSW DVA Healthcare (available here). The case has importance guidance concerning attorney’s fees under Texas law. Notable points include:

  • When seeking attorney’s fees, a claimant must “put on evidence of reasonable hours worked multiplied by a reasonable hourly rate” which “yield[s] a base figure [i.e., the lodestar amount] that can be adjusted by considerations not already accounted for in either the hours worked or the rate.” Prior to the decision, there was confusion as to whether one should use the so-called Arthur Anderson factors [1] to calculate the base amount of attorney’s fees, and what Arthur Anderson factors should be utilized when adjusting the “lodestar” amount upwards or downwards. The “lodestar” method developed as a “short hand version” of the Arthur Anderson factors “and was never intended to be a separate test or method.” 
  • The lodestar “base calculation” (i.e., time x rate) is the “presumptively reasonable” amount of attorney’s fees. The claimant bears the burden of providing sufficient evidence on both the time and the rate. “Sufficient evidence includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing such services.”
  • According to the Court, “the lodestar calculation should produce an objective figure that approximates the fee that the attorney would have received had he or she properly billed a paying client by the hour in a similar case.” Further, “[t]his readily administrable and objectively reasonable calculation is the standard for calculating the reasonableness and necessity of attorney’s fees in a fee-shifting situation.”
  • After the “base calculation” is performed, the calculation can either be enhanced or reduced. The following Arthur Anderson considerations cannot be used to adjust the base calculation, as they are usually reflected in the base lodestar calculation: (i) “the time and labor required,” (ii) “the novelty and difficulty of the questions involved,” (iii) “the skill required to perform the legal services properly,” (iv) the fee customarily charged in the locality for similar legal services, (v) the amount involved, (vi) “the experience, reputation, and ability of the lawyer or lawyers performing the services,” (vii) “whether the fee is fixed or contingent on results obtained,” (viii) “the uncertainty of collection before the legal services have been rendered,” and (ix) the “results obtained” up to trial. If a fee claimant or a fee opponent seeks an upward or downward adjustment it must produce specific evidence showing that a higher amount is necessary to achieve a reasonable fee award or to overcome the presumptive reasonableness of the base lodestar figure, respectively.
  • The Court also addressed what happens when the attorney is charging under an alternative billing arrangement (e.g., flat fee, fixed fee, etc.):

We recognize that when fee agreements provide for arrangements other than hourly billing, the attorney will not be able to present evidence of a particular hourly rate billed or paid for the services performed. In those instances, the fee claimant, through its expert, has the burden of showing that the rate claimed for purposes of the base lodestar calculation reflects a reasonable market rate given considerations in Arthur Andersen, including the attorney’s experience and expertise, the novelty and complexity of the questions involved, any special skill required for the representation, the attorney’s risk in accepting such representation, which may be reflected in a contingent fee agreement, and any other considerations that would factor into an attorney’s fee negotiations if the attorney were to bill hourly.

  • When fee-shifting is authorized (by statute or contract), the party seeking a fee award “must prove the reasonableness and necessity of the requested attorney’s fees.” “[O]nly fees reasonable and necessary for the legal representation will be shifted” and “not necessarily the amount contracted for between the prevailing party and its attorney, as a client’s agreement to a certain fee arrangement or obligation to pay a particular amount does not necessarily establish that fee as reasonable and necessary.” “[F]act finders should be concerned with awarding reasonable and necessary fees, not with any contractual obligations that may remain between the attorney and client.” Accordingly, “a client could ultimately owe its attorney more fees than the amount of the award shifting fees to the non-prevailing party.”  
  • A party must be represented by an attorney to secure an award of attorney’s fees (the attorney may be in-house counsel).
  • The amount of reasonable and necessary attorney’s fees “are questions of fact to be determined by the fact finder[.]”
  • Some statutes allow recovery for attorney’s fees that are “incurred.” In those instances, a fee can only be recovered “when one becomes liable for it.” (A pro se attorney cannot recover fees under a statute that mandates that the fees be “incurred” because the pro se attorney did not “incur” attorney’s fees.) When statutes do not contain an explicit requirement that the fees be “incurred” courts will not imply such a term.
  • A party need not be awarded monetary damages to recover under an agreement that contains a provision that specifies that the prevailing party shall be entitled to recover its attorney’s fees. (Texas courts have interpreted some statutes (e.g., Chapter 38 of the Texas Civil Practices and Remedies Code) as containing a requirement that, in order to recover fees, the claimant must prove damages).
  • A defendant can be a prevailing party by successfully defending against the plaintiff’s claim, because it has achieved a material alteration in its legal relationship with the plaintiff.
  • To recover attorney’s fees, it is not enough for the party’s attorney to testify as to (i) his number of years of experience, (ii) his standard rate, (iii) that he has handled similar cases, and (iv) what the reasonable and necessary number of hours to spend on the case would be. In this case, the attorney did not attempt to introduce billing records into evidence, nor did he testify to the details of his work. 
  • Time estimates based on generalities are not sufficient to support a fee-shifting award. Nor is general testimony about an attorney’s experience, the total amount of fees, and the reasonableness of the fees.
  • “General, conclusory testimony devoid of any real substance will not support a fee award. Thus, a claimant seeking an award of attorney’s fees must prove the attorney’s reasonable hours worked and reasonable rate by presenting sufficient evidence to support the fee award sought. Sufficient evidence includes, at a minimum, evidence of (1) particular services performed, (2) who performed those services, (3) approximately when the services were performed, (4) the reasonable amount of time required to perform the services, and (5) the reasonable hourly rate for each person performing such services.”
  • Although “[c]ontemporaneous billing records are not required to prove that the requested fees are reasonable and necessary”, “billing records are strongly encouraged to prove the reasonableness and necessity of requested fees when those elements are contested.” (emphasis added). “Creating [the billing records] makes them available for production, provides a basis for testifying as to the reasonableness and necessity of the requested fees, and permits cross-examination.”
  • The Court stated that it did not want “satellite litigation” as to fees: “Importantly, however, we are not endorsing satellite litigation as to attorney’s fees. The fact finder will generally not benefit from attorneys cross-examining each other point-by-point on every billable matter. Parties should use discovery and pretrial procedure to evaluate attorney’s fee claims and the evidence supporting them, then present to the fact finder the evidence relevant to determining a reasonable and necessary fee as discussed in this opinion.” (Note: In a run-of-the-mill case, this is all well and good. But there are some cases where the parties’ respective claims for attorney’s fees quickly dwarf the amount of compensatory damages at issue, and one’s opponent has billed an unreasonable amount. In that situation, it makes sense for any competent attorney to devote a substantial amount of his or her trial presentation to the unreasonableness of the other party’s fee request. (For example, in the instant case, one party requested $1.3 million in fees while seeking less than $300,000 in compensatory damages).)

[1] The Arthur Anderson factors are as follows: (i) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; (ii) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer; (iii) the fee customarily charged in the locality for similar legal services; (iv) the amount involved and the results obtained; (v) the time limitations imposed by the client or by the circumstances; (vi) the nature and length of the professional relationship with the client; (vii) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (viii) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.

p.s. I’m now so old that clients have used abbreviations in e-mails with me that I had to look up (TLDR=Too Long, Didn’t Read). #Cloudflare.

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Supreme Court Holds That IPRs Are Not Available To The Government

Posted on June 16, 2019 by Steven Callahan

On June 10, 2019, the Supreme Court issued its 6-3 decision in Return Mail, Inc. v. United States Postal Service (decision available here). The American Invents Act of 2011 created the Patent Trial and Appeal Board, and allowed three new types of administrative proceedings (IPR, CBM, and PGR proceedings) before the Board that allow a “person,” other than the patent owner, to challenge the validity of a patent post-issuance. The Court found that the Government was not a “person” under the statute, such that the PTAB proceedings are not available to it.

The Court essentially resolved the case based on (i) the principle that, “in the absence of an express statutory definition, the Court applies a longstanding interpretive presumption that ‘person’ does not include the sovereign” and (ii) the Dictionary Act, 1 U.S.C. § 1, which excludes the Government from the definition of “person.” Congress, of course, is free to change the statute and make post-grant proceedings available to the Government. But until then, the Government cannot invoke these post-granting proceedings.

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Federal Circuit Finds That States’ Patents Are Subject To IPRs, Rejecting Sovereign Immunity Defense

Posted on June 16, 2019 by Steven Callahan

On June 14, 2019, the Federal Circuit issued its decision in Regents of the University of Minnesota v. LSI Corp. (available here). The Federal Circuit found that “state sovereign immunity does not apply to” inter partes review proceedings, as the Federal Government’s role in IPRs renders it a superior sovereign (i.e., IPRs represent the sovereign’s reconsideration of the initial patent grant). This is consistent with the Federal Circuit’s earlier decision in Saint Regis Mohawk Tribe finding that a Native American Tribes’ sovereign immunity does not apply in IPRs.

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Another Decision Holding That Section 285 Attorney’s Fees Are Not Available From A Party’s Counsel (And Also Finding That Folks Don’t Go To Jail For Failing To Pay Debts)

Posted on June 16, 2019 by Steven Callahan

The Eastern District of Texas’ Magistrate Judge Payne, on June 5, 2019, issued a decision in My Health, Inc. v. ALR Technologies, Inc. (available here), finding that 35 U.S.C. § 285 does not allow an award of attorney’s fees against a party’s counsel. I previously discussed an earlier case holding the same.

Interestingly, the defendants in My Health, after being awarded their attorney’s fees from the plaintiff My Health (and My Health failing to pay such fees), sought an order to show cause why My Health should not be held in contempt of court for failing to pay the fees. (The defendants apparently forgot that debtors’ prisons went out of style a long time ago.) Judge Payne rejected this request:

Defendants seek an order from this Court holding My Health in civil contempt for failing to pay the attorneys’ fees previously awarded to Defendants. However, contempt is not the appropriate mechanism for enforcing the § 285 Order. Any claim to attorneys’ fees must be processed in compliance with Federal Rule of Civil Procedure 54(d)(2)(B). IPXL Holdings, L.L.C. v. Amazon.com, Inc., 430 F.3d 1377, 1386 (Fed. Cir. 2005). A Rule 54(d) award of attorneys’ fees is considered a money judgment. Federal Rule of Civil Procedure 69 provides for post-judgment remedies. See 3 Kids, Inc. v. Am. Jewel, LLC, No. 3:18-MC-096-S (BH), 2019 WL 462781, at *2 (N.D. Tex. Jan. 15, 2019), report and recommendation adopted, No. 3:18-MC-096-S, 2019 WL 460325 (N.D. Tex. Feb. 6, 2019). Rule 69 provides that a “money judgment is enforced by a writ of execution, unless the court directs otherwise.” Fed. R. Civ. P. 69(a)(1).

Here, the attorneys’ fees award under § 285 is a money judgment. The Court will thus not hold My Health in civil contempt for failure to pay where such an award is enforceable through a writ of execution and other methods for enforcing money judgments. Defendants’ contempt motion (Dkt. No. 183) is therefore denied.

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Federal Circuit to RPX: “In IPR, You Only Get One Shot”

Posted on June 16, 2019 by Steven Callahan

As Eminem once said, “You only get one shot, do not miss your chance to blow / This opportunity comes once in a lifetime.” On January 17, 2018, the Federal Circuit similarly told RPX in RPX Corp. v. Chanbond (available here) that, in an IPR, it only gets one shot—i.e., if it loses in an IPR, it cannot appeal the adverse decision to the Federal Circuit because it lacked Article III standing.

In the case, RPX filed a petition for an inter partes review of Chanbond’s patent. In response, the PTAB found that RPX did not show that the patent was unpatentable. RPX appealed the PTAB’s decision to the Federal Circuit. Chanbond moved to dismiss the appeal for lack of standing.

Although Chanbond had asserted the patent in litigation, it had not sued or accused RPX of infringement. RPX, however, argued that, unlike its primary competitors Unified Patents and Askeladden, RPX “seeks to distinguish itself by filing only ‘high quality IPR challenges[.]’” (Booyah).

RPX argued that it suffered three types of injury sufficient to establish standing: (i) injury to its statutory rights, (ii) injury to its standing relative to competitors, and (iii) injury to its reputation of successfully challenging wrongfully issued patent claims. The Federal Circuit disagreed.

Because RPX was not engaged in any potentially infringing activity, its argument that the PTAB’s decision injured RPX by impeding its “right to file multiple IPR petitions on the same patent claims” failed.

Competitor standing didn’t apply here, because the evidence submitted did not demonstrate “that the Board’s determination increased or aids the competition in the market of the non-defendant IPR petitioners.”

Finally, RPX’s appellate submission did not “demonstrate a concrete and particularized reputational injury.” The evidence submitted “indicates that customers consider a variety of items when choosing a non-defendant IPR filing entity.”

Thereafter, RPX filed a petition for certiorari with the United States Supreme Court. On October 1, 2018, the Supreme Court invited the Solicitor General to file a brief expressing the view of the United States. On May 9, 2019, the United States filed its brief (available here), arguing that the Supreme Court should not hear the case as the Federal Circuit correctly decided that RPX lacked standing. The United States’ brief likely spells the end of the line for RPX, but there’s always the chance that the Supreme Court grants cert. Time will tell.

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Judge Posner Gets It Wrong On Patents: A Patent Doesn’t Give Anyone The Right To Practice The Invention

Posted on June 1, 2019 by Steven Callahan

I had lunch the other day with an attorney who said that, when he was in law school, ol’ Learned Hand was the judge whose cases you were most often likely to read. I remember only one of Hand’s cases, United States v. Carroll Towing Co., 159 F.2d 169 (2d Cir. 1947), which involved determining whether a legal duty of care (i.e., the duty not to act negligently) had been breached. By the time I went to law school (in the early 2000s), Hand was out and Judge Richard Posner (and his law and economics theories) was in. Until recently, Judge Posner sat on the Seventh Circuit Court of Appeals. (He’s now helping pro se litigants.)

With Uber going public a few weeks ago, and in my quest to reach the end of the internet, I came across a decision (available here) by Judge Posner that discussed Uber.

In the decision, Judge Posner said the following (albeit in dictum) about what rights patents give their owners:

A patent confers an exclusive right to make and sell the patented product, but no right to prevent a competitor from inventing a noninfringing substitute product that erodes the patentee’s profits.

Judge Posner is certainly right that a patent does not prevent a competitor from inventing a non-infringing substitute product. And he’s wicked smart. But he’s dead wrong on a patent giving “an exclusive right to make and sell the patented product.”

A patent provides no right to make or sell anything. Instead, a patent (nominally) provides the right to exclude others from making or selling the patented invention:

Every patent shall contain . . . a grant to the patentee, his heirs or assigns, of the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States, and, if the invention is a process, of the right to exclude others from using, offering for sale or selling throughout the United States, or importing into the United States, products made by that process, referring to the specification for the particulars thereof.

35 U.S.C.A. § 154; see also TransCore, LP v. Elec. Transaction Consultants Corp., 563 F.3d 1271, 1275 (Fed. Cir. 2009) (“the grant of a patent does not provide the patentee with an affirmative right to practice the patent but merely the right to exclude”); Leatherman Tool Group Inc. v. Cooper Indus., Inc., 131 F.3d 1011, 1015 (Fed. Cir. 1997) (“In fact, the federal patent laws do not create any affirmative right to make, use, or sell anything.”)

So I can obtain a patent for (i) a vehicle with (ii) a new and improved windshield wiper, but my patent doesn’t give me the right to make anything, and certainly not the right to make a vehicle (even one with my windshield wiper) if someone else holds a patent on the vehicle. In that case, I can exclude others from making a vehicle with my windshield wiper, but I can’t make the product myself.

Additionally, despite Section 154’s language about patents granting “the right to exclude others” from making the patented product, to actually exclude someone from making your invention, you need to obtain an injunction. Stated differently, there’s no automatic right to exclude someone from infringing your patent. Instead, federal law:

  • defines (direct) infringement of a patent as “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent”, 35 U.S.C. § 271(a);

  • provides that “[a] patentee shall have remedy by civil action for infringement of his patent”, 35 U.S.C. § 281;

  • requires the court to award “damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer,” 35 U.S.C. § 284; and

  • allows, but does not require, courts to “grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.” 35 U.S.C. § 283.

And actually obtaining an injunction in a patent case is exceedingly rare, especially after the Supreme Court’s Ebay decision.

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Section 285 Of Patent Act Cannot Be Used To Obtain Attorney’s Fees From Opposing Counsel

Posted on June 1, 2019 by Steven Callahan

So holds the district court (C.D. Cal.) in Cap Export v. Zinus (available here). As I previously noted, courts have used Section 285 of the Patent Act—which provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party”—to allow successful defendants to seek attorney’s fees against the plaintiff’s owners. In Cap Export, the prevailing party sought an award of fees against its opponent’s attorneys. The court rejected this request, noting that it could not find any authority supporting the proposition that an opposing party’s attorneys could be liable under Section 285. This is undoubtedly the correct result, especially where multiple other avenues exist to obtain fees from opposing counsel (e.g., Rule 11, 28 U.S.C. § 1927, etc.).

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