Exceptional Cases

Just over four years ago, Dallas lawyer Austin Hansley was working handling DWI and small criminal cases, with a memorable TV ad complete with flashing police lights and inmates in orange jumpsuits. But for reasons unknown, at least to me, in the spring of 2012 he began appearing as counsel for plaintiffs in patent cases.  It started slow, with 13 cases that year, but grew quickly, and over the next four years, he would file approximately 650 patent cases, including over 400 in the Eastern District of Texas in 2015 alone. The cases that he filed generated enormous negative attention nationwide, and for the past year or two it seems a week didn’t go by that I didn’t read an article citing his cases as a reason for legislative or judicial action, thus I thought a brief recap of what has happened to Mr. Hansley and his cases might be of interest.  Mark Twain once said that history doesn’t repeat itself, but it does rhyme, and if that is true, this is a tune that you would be well-advised to avoid whistling.  And if you hear it being hummed a little too loudly in a courthouse near you, this should be a useful summary of the tools available to litigants and courts to respond.  Of interest to me at least is the remarkable consistency with which courts across the nation handled similar allegations regarding the lack of merit of claims, and the corresponding requests for “exceptional case” status under 35 U.S.C. Section 285. Eastern District of Texas – eDekka In 2015, Mr. Hansley took over filing cases in the EDTX for a plaintiff named eDekka.  That company had filed a number of cases in 2013-2014, but its counsel left after Alice came out in 2014 and motions to dismiss under 35 U.S.C. Section 101 became common.  After beginning representation of eDekka, Mr. Hansley filed approximately 101 cases for them in 2015 – all after Alice.  In fact approximately 500 of his total filings for multiple clients were after Alice.  Most readers of this weblog know what happened next.  In the summer of 2015 Judge Rodney Gilstrap set a hearing on the eDekka defendants’ motions to dismiss under Section 101 for lack of patentable subject matter, and following the hearing granted the motions last fall, resolving the entire 101 defendant litigation approximately 5 1/2 months after the first of the 2015 cases were filed.  The Court then found the case “exceptional” under the new test set forth in Octane Fitness and awarded the remaining defendants approximately $390,000 in attorneys fees in January of this year. Mr. Hansley’s filings in the district dropped from approximately 425 cases in 2015 to 11 in 2016.  But worse was to come, both inside the EDTX and outside it. District of New Jersey As I have previously noted, on March 30 of this year U.S. District Judge Jerome B. Simandle of the District of New Jersey in Garfum.com v. Reflections by Ruth, 14-5919 also found the claims by one of Mr. Hansley’s clients lacking under Section 101, and assessed 285 sanctions for similar conduct – in fact quoting from Judge Gilstrap’s opinion in eDekka. The amount of the award in New Jersey is not yet set, which is a little interesting in itself.  That case was filed seven months earlier than eDekka, and the fees motion was filed four months earlier than eDekka.  The 285 award was made a little over three months later than eDekka, but eight months later (now ten months after eDekka and counting) neither the amount of the fee nor the plaintiff’s motion for reconsideration has been ruled on, perhaps due in part to the notices of supplemental authority on, among others, recent Federal Circuit decisions on 101.   As the fees were for the period following the plaintiff’s response to the defendant’s motion to dismiss under Section 101, my guess is that the fees awarded for the relevant time period would be between $10-20,000, but that’s just a guess, based on the timing of the period the judge awarded fees for, and knowing that the plaintiff’s last settlement offer before the 101 motion was filed was, according to the judge’s order, $2,500.  (Judge Gilstrap observed in eDekka that the final settlement offers after the 101 hearing was set were $3,000). Eastern District of Texas – Marshall Feature Recognition In the fall of this year Mr. Hansley’s last two Eastern District cases came to an end following a hearing before Judge Payne in Marshall on motions to dismiss for want of prosecution.  At that hearing Judge Payne was blunt about the allegations. “Mr. Hansley,” he said at the beginning of the hearing, ” I can tell you that there is a pattern that has displayed itself in these cases and apparently in other cases, based on what I’m reading from the citations provided by the Defendants, of your clients not complying with deadlines that have been set by the Court.  I’m trying to figure out what is causing that, and the motion [to stay] that you filed cited reasons that I don’t find convincing.” Judge Payne gave Mr. Hansley’s client Marshall Feature Recognition 30 days to enroll new counsel, and set a followup hearing for November 16.  On that date, while my wife and I were across the street preparing to celebrate our 20th anniversary that evening, Judge Payne was watching the time for the hearing come and go without an attorney or representative of MFR darkening the door of his courtroom or take any further action to prosecute matters on behalf of MFR.   In a short order filed later that day, the Court wrote that “[a] review of the record, and the argument at the hearing, shows that Plaintiff has consistently failed to abide by the Court’s deadlines or to meet its discovery obligations. Plaintiff has failed to respond to interrogatories, failed to produce documents, failed to engage in the meet and confer process attempted by Defendants’ counsel, failed to timely file claim construction briefing, and failed to timely respond to motions. When confronted with these failures, counsel for Plaintiff advised that he is not in a position to represent Plaintiff at this time and that Plaintiff has declined his request to retain other or additional counsel. Despite the passage of nearly two more months since the September hearing, Plaintiff has taken no steps to remedy the defaults. Under these circumstances, Plaintiff has made it impossible for the Court to proceed with the adjudication of the claims. The record makes clear that Plaintiff’s representatives, and not just its counsel, are aware of the defaults in this Court, as well as those in the Northern District of Illinois and the Northern District of Texas. Defendants have shown through their filings that they have incurred significant expense in attempting to defend this case. A dismissal with prejudice is the only appropriate remedy for these violations.” Northern District of Illinois November 16 was not going to get any better for Mr. Hansley or his client after Judge Payne’s order came down.  On the same date that Judge Payne dismissed Mr. Hansley’s last two cases in the EDTX, U.S. District Judge Sharon Johnson Coleman of the ND Ill. denied MFR’s motion to reconsider her prior order awarding the defendant in that case attorneys fees in the amount of $148,201.  The court noted the similar issues regarding Mr. Hansley’s request to withdraw from the case, and held a hearing where MFR was represented by local counsel in Illinois.  It noted that MFR wholly failed to appear for the prior hearing, but nonetheless found that “the totality of the circumstances renders this case exceptional. The Court certainly has never seen another case like it.” (Emphasis added). Judge Coleman rejected MFR’s argument that responsibility for the fees should be shifted to MFR’s attorneys, but with a caveat. “MFR […]

Motion to Sever Denied (rinse, repeat)

This is a patent infringement case involving two defendants which raises issues of misjoinder and severance. It is not case in which the plaintiff filed separate actions against defendants based on infringement, but one in which from the outset the plaintiff asserted claims against two unrelated defendants in the same action, and the issue of misjoinder arose at a later point.

Beaumont jury awards $20.34 million in medical device case

Last week a Beaumont jury in Chief Judge Ron Clark’s court returned a verdict in favor off the plaintiff in Barry v. Medtronic, which dealt with devices used in scoliosis surgeries.  It found all the asserted claims infringed and willfully so, and that none of the defensive issues had been shown by clear and convincing evidence.  It awarded a total of $20,346,390.

Enhanced damages of 20% awarded under Halo

Back in September, a Marshall jury in Judge Rodney Gilstrap’s court returned a unanimous verdict finding that the claims asserted by Core Wireless against LG were infringed, willfully infringed, and not invalid. The jury set the damages at $2.28 million. Since the jury found that the infringement was willful, Judge Gilstrap exercised his discretion under 35 USC 284 to decide whether to award enhanced damages, noting the Supreme Court’s recent decision in Halo, which gave district court’s discretion in deciding whether to award enhanced damages, and in what amount. The Court decided that an award toward the lower end of the spectrum was appropriate in this case, and set the award at $456,000 (20% of the potential 200%). The court noted the following factors as supporting an award in this range: First, the court noted that it was undisputed that defendant LG had detailed knowledge of the patents in suit long before the filing of the lawsuit. That it was able to present a noninfringement position at trial the court concluded did not necessarily insulate it from enhanced damages. Additionally while it asserted and invalidity defense, the court noted that LG’s corporate representative testified in his deposition that after a thorough review of the patents in suit he had concluded that the patents were novel and nonobvious. But most important to the court appeared to be the manner in which LG abruptly terminated licensing negotiations.  After requiring the plaintiff to send a representative to Korea, LG simply delivered a one page document stating that it would prefer to litigate the portfolio and wait until another major cell phone manufacturer had licensed to the portfolio and established a royalty scheme. The court concluded that this meant that LG’s decision to continue operations without a license was driven not by the merits or strength of its noninfringement and invalidity defenses, but its resistance to being the first in the industry to take a license.