E-Pass Technologies, Inc. v. 3Com Corp.
Opinion of the Court
Opinion for the court filed by Circuit Judge LINN. Dissenting opinion filed by Circuit Judge BRYSON.
On the merits in this appeal, E-Pass Technologies, Inc. (“E-Pass”) challenges two final determinations of the U.S. District Court for the Northern District of California (i) concluding that three related cases filed by E-Pass were exceptional under 35 U.S.C. § 285 and (ii) awarding attorneys’ fees. E-Pass Techs., Inc. v. 3Com Corp., Nos. 00-CV-2255, 03-CV-4747, 04-CV-0528 (N.D.Cal. Nov. 21, 2006) (“Decision ”); E-Pass Techs., Inc. v. 3Com Corp., Nos. 00-CV-2255, 03-CV-4747, 04-CV-0528, 2007 WL 4170514 (N.D.Cal. Nov. 14, 2007). We affirm those rulings today in a separate Judgment under Federal Circuit Rule 36. This opinion addresses Access Systems Americas, Inc.’s (formerly known as PalmSource, Inc.) (“Palm-Source”) motion for sanctions, in which it argues that E-Pass’s appeal is frivolous as it pertains to PalmSource. We agree. Consequently, we grant the motion, but award a different sanction than the one requested.
I. BACKGROUND
E-Pass is the assignee of U.S. Patent No. 5,276,311 (“the '311 patent”), which is directed to a “method and device for simplifying the use of a plurality of credit cards, or the like.” This litigation commenced in February 2000, when E-Pass filed suit against 3Com Corporation and Palm, Inc. (collectively, “the Palm Defendants”),
E-Pass filed two new related suits in the same court following E-Pass I. In October 2003, it filed suit against Visa International and Visa U.S.A. for infringement of the '311 patent. In February 2004, it also filed suit against PalmSource for infringement of the '311 patent. The district court grouped these cases together as related, and subsequently granted summary judgment of non-infringement for all defendants. E-Pass again appealed the district court’s grant of summary judgment. This time we affirmed, agreeing with the district court that E-Pass failed to provide evidence showing that any defendant practiced all the steps of the claimed method. See E-Pass Techs., Inc. v. 3Com Corp., 473 F.3d 1213, 1221 (Fed.Cir. 2007) (“E-Pass II”).
Following entry of judgment but prior to E-Pass II, the district court, on the defendants-appellees’ motions, deemed each of the three actions exceptional under 35 U.S.C. § 285 and awarded attorneys’ fees. Although the district court analyzed separately why each of the three actions filed and maintained by E-Pass was exceptional, its ultimate rationale centered on the adequacy of E-Pass’s pre-filing investigations and its repeated misconduct throughout the litigation. E-Pass’s appeal on the merits challenged the district court’s ex-ceptionality findings and awards of attorneys’ fees. PalmSource argues that E-Pass’s appeal is frivolous as it relates to PalmSource based on E-Pass’s failure to identify a reversible error of the district
II. DISCUSSION
“If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.” Fed. R.App. P. 38. An appeal can be “frivolous as filed” and/or “frivolous as argued.” An appeal is frivolous as filed “when an appellant grounds his appeal on arguments or issues that are beyond the reasonable contemplation of fair-minded people, and no basis for reversal in law or fact can be or is even arguably shown.” Abbs v. Principi 237 F.3d 1342, 1345 (Fed.Cir. 2001) (internal quotations omitted). An appeal is frivolous as argued “when an appellant has not dealt fairly with the court, [or] has significantly misrepresented the law or facts.” Id.
We consider this appeal, as it relates to PalmSource, frivolous. Although there is a host of reasons that collectively support our reaching this conclusion, we focus our discussion on two. First, E-Pass “fail[s] to explain how the trial court erred or to present cogent or clear arguments for reversal.” See id. at 1345; see also Refac Int’l, Ltd. v. Hitachi, Ltd., 921 F.2d 1247, 1256 (Fed.Cir. 1990) (sanctioning party that failed to point to any basis for reversal in the lower court’s decision). Second, E-Pass has made significant misrepresentations of the record and the law to the court. See Abbs, 237 F.3d at 1345; see also Romala Corp. v. United States, 927 F.2d 1219, 1224 (Fed.Cir. 1991) (sanctioning party for, among other things, distorting the lower court’s decision). We address each in turn.
We begin by noting E-Pass’s failure to clearly or cogently identify a ground for reversal of the district court’s decision as to PalmSource. The district court found, after concluding that there was no evidence to support E-Pass’s case against the Palm Defendants, see Decision at 40-41, that E-Pass’s case against PalmSource was even weaker:
The direct case against the Palm OS software[2 ] has the same failures [as the case against Palm Defendants]. Any notion that Palm OS’[s] role as an enabler provides indirect evidence as to its indirect infringement is an even greater failure as it has never been suggested that Palm OS software somehow enables the instruction materials for the Pal-mOne devices.
Id. at 41. After summarizing the litigation record, the district court found that “[t]he nonexistence of any direct infringement evidence to be presented at the time of summary judgment leads inexorably to the conclusion that there was no such evidence known to [E-Pass] at the time these cases were filed.” Id. at 44. The district court also found, as it did with respect to each of the cases on appeal, that E-Pass engaged in litigation misconduct. Among other things, the district court found E-Pass guilty of misconduct in the case against PalmSource based on its ever-changing allegations of infringement, id. at 29, its refusal to supplement infringement contentions, id. at 30-31, and its opposition to summary judgment on the basis of lack of discovery and its subsequent failure to take the discovery it had requested and received, id. at 32; see also id. at 40 (“Reviewing the entire history of the litigation, it is clear to this Court that E-Pass’s strategy was to delay and obfuscate in an
Despite appealing the district court’s ex-ceptionality determination as to Palm-Source, E-Pass virtually ignores Palm-Source on appeal. Its brief focuses almost entirely on the other defendants-appellees, and in particular, whether the district court erred in finding that infringement did not occur by virtue of two events' — i.e., the January 2001 CES demonstration and the March 2001 Visa in-house demonstration — both of which occurred before Palm-Source existed, and neither of which were asserted in E-Pass’s brief to apply to PalmSource.
We next note E-Pass’s multiple misrepresentations to the court. The first significant misrepresentation relates to the record. As we discussed above, the district court’s determination that the case against PalmSource was exceptional was based in part upon its finding that there was at least “a serious question” as to E-Pass’s pre-filing investigation. See Decision at 40-41; see also id. at 44 (“The non-existence of any direct infringement evidence to be presented at the time of summary judgment leads inexorably to the conclusion that there was no such evidence known to [E-Pass] at the time these cases were filed.”). Nevertheless, in its opening brief E-Pass boldly contended that “[t]he District Court specifically found that E-Pass’s pre-filing investigation was sufficient to avoid making the case exception
This misrepresentation of the district court’s decision — exacerbated by repetition — speaks for itself. It is worth observing, however, that not only does E-Pass attempt to paint the district court’s finding as applying to all defendants-appellees when it clearly does not, it also mischarac-terizes the finding itself. The district court did not, as E-Pass argues, “specifically f[i]nd” that E-Pass’s pre-filing investigation was sufficient as to any defendant-appellee, including Visa International. Rather, the district court merely found that whether or not the “minimalist pre-filing investigation” conducted was sufficient, any question as to its sufficiency was overcome by E-Pass’s numerous acts of litigation misconduct.
Another misrepresentation relates to the legal standard for exceptionality identified by E-Pass. In its opening brief, E-Pass argued that the cases it filed against the defendants-appellees were not exceptional because its claims of infringement were “at least reasonably disputable.” E.g., E-Pass’s Opening Br. at 29. In its reply brief, however, E-Pass went further, arguing that the cases were not exceptional because it did not bring the litigation in bad faith and the litigation was not objectively baseless. In support of its argument, E-Pass stated unequivocally that “[t]he standard for an exceptional case finding is whether the case was brought in subjective bad faith and the litigation was objectively baseless.” E-Pass’s Reply Br. at 29 (citing Serio-US Indus., Inc. v. Plastic Recovery Techs. Corp., 459 F.3d 1311, 1322 (Fed.Cir. 2006)); see also id. at 30 (“Therefore, any shift in legal theory itself does not make this case exceptional since it was not done in subjective bad faith nor was it objectively baseless.”). This is not the law. Serio-US Industries, cited by E-Pass for this erroneous proposition, actually begins with an important condition: “Absent misconduct in the litigation or in securing the patent, a trial court may only sanction the patentee if both the litigation is brought in subjective bad faith and the litigation is objectively baseless.” 459 F.3d at 1322 (emphasis added). E-Pass made this same misrepresentation earlier, in its opening brief, by citing Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., 393 F.3d 1378, 1384 (Fed.Cir. 2005), for the proposition that an infringement action is not exceptional so long as the infringement “can reasonably be disputed.” E-Pass’s Opening Br. at 28. However, E-Pass omits Brooks’ recitation of the same condition stated in Serio-US Industries, of “[ajbsent misconduct in conduct of the litigation.” Brooks, 393 F.3d at 1381.
E-Pass’s omission of this condition might be of lesser consequence if litigation misconduct were not at issue in this case. But litigation misconduct is a central issue — the district court specifically concluded that E-Pass had engaged in repeated
For all of the reasons set forth above, taken collectively, we conclude that E-Pass’s appeal as to PalmSource is frivolous. Assuming for the sake of argument that E-Pass did make a non-frivolous (yet ultimately unmeritorious) argument, it would not change our determination that the appeal as a whole is frivolous. “We have held that even the presence of a few non-frivolous arguments does not prevent an appeal as a whole from being deemed frivolous.” Romala, 927 F.2d at 1224 (citing In re Perry, 918 F.2d 931, 934-35 (Fed.Cir. 1990) (“When an appeal is a ‘complete loser,’ most of which is ‘patently groundless,’ sanctions should be imposed under Rule 38.”)). The tactics employed by E-Pass in this appeal, including both the misrepresentations made and the failure to cogently identify any reversible error of the district court, far outweigh any non-frivolous argument that may be lurking in its briefs.
Consequently, we grant Palm-Source’s motion for sanctions, although not the amount requested by PalmSource.
III. CONCLUSION
PalmSource’s motion for sanctions is GRANTED, and a sanction of Palm-Source’s reasonable attorneys’ fees is awarded against E-Pass and its counsel, jointly and severally.
. The Palm Defendants also include palmOne, Inc. and HandSpring, Inc., which were later sued in the action involving PalmSource.
. Palm OS is software owned by PalmSource and licensed for use in the Palm handheld devices alleged to infringe the '311 patent.
. In response to PalmSource’s motion for sanctions, E-Pass argued, for the first time, that "the 2001 CES demonstration relates to PalmSource since PalmSource admits that, upon its formation in 2001, it obtained from Palm substantially all’ of the liabilities related to Palm’s then-existing operating system and software business.” E-Pass’s Resp. to Palm-Source’s Mot. for Sanctions at 5. It is not entirely clear how this helps E-Pass, nor why if it was so important, E-Pass failed to raise it in its briefs. Because E-Pass failed to raise it in its opening brief, we deem the issue waived. SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed.Cir. 2006) ("[A]rguments not raised in the opening brief are waived.”).
. PalmSource requests "an amount equal to the amount that E-Pass has paid its attorneys since the date upon which PalmSource’s judgment would have become final and unap-pealable absent this appeal." PalmSource's Motion for Sanctions at 3-4. Whatever the motivation might have been for PalmSource to make such an unusual request, we see no valid reason here to award a sanction based on fees paid to opposing counsel. See State Indus., Inc. v. Mor-Flo Indus., Inc., 948 F.2d 1573, 1581 (Fed.Cir. 1991) (noting amount of sanction under Rule 38 is within our discretion).
Dissenting Opinion
dissenting.
While I do not take issue with most of the majority’s criticisms of the appellant’s presentation in this court, I would not impose sanctions. It is true that E-Pass did not do a good job of identifying those
As to the misrepresentations in E-Pass’s brief, I agree that certain statements in the brief strayed beyond the limits of fair advocacy and into the realm of falsehood. In particular, the district court’s comment, with respect to Visa International, that “E-Pass’ minimalist profiling investigation in and of itself, may not make this case exceptional” cannot fairly be characterized as a finding by the court that, as E-Pass puts it, “E-Pass’s pre-filing investigation was sufficient to avoid making the case exceptional.” The mis-characterization is particularly problematic because, even though the district court’s statement applied only to Visa International, E-Pass at one point included its characterization of the district court’s statement in a passage that references both Palm-source and the Visa defendants.
The other instances of misleading conduct pointed out by the majority are not as serious. The majority faults E-Pass for providing the court with a truncated version of the standard to be used in determining whether a district court may sanction a party by imposing attorney fees. It is true that at page 29 of its reply brief E-Pass used a shorthand version of the standard that omitted an important condition. But earlier in the same reply brief (page 15) E-Pass cited the same authority, and in that reference it set forth the standard with the condition expressly included. It plainly would have been preferable to include the condition in both places, but the inclusion of the condition in connection with the first reference to the cited authority mitigates the effect of omitting it in the later reference.
The majority asserts that E-Pass made the same mistake on page 28 of its opening brief when it argued that “[s]o long as the infringement ‘can reasonably be disputed,’ the infringement action is not exceptional in terms of section 285.” That proposition was included in a portion of E-Pass’s opening brief that was directed to the question whether litigation was brought in bad faith, and E-Pass cited a case that addressed that issue. See Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed.Cir. 2005). In the portion of that case cited by E-Pass, we stated: “Bringing an infringement action does not become unreasonable in terms of [section] 285 if the infringement can reasonably be disputed.” Id. at 1384. Although it is true that the Brooks Furniture case articulated the complete
As I see it, then, the question for us is whether sanctions should be imposed because of an unduly aggressive characterization of a comment by the district court, a failure to provide the full text of an applicable legal test on the second occasion that the test was set forth, and a failure to explain whether only one issue on appeal was applicable to Palmsource, or if more than one issue was applicable to Palm-source, what the legal basis for Palm-Source’s liability would be. Accepting that in those regards E-Pass’s briefs on appeal fell short of the standards we expect of counsel in this court, I nonetheless conclude that the shortfall is not so egregious as to call for the imposition of sanctions.
Reference
- Full Case Name
- E-PASS TECHNOLOGIES, INC., Plaintiff-Appellant, v. 3COM CORPORATION (Also Known as 3Com, Inc.), Palm, Inc., palmOne, Inc. and HandSpring, Inc., Defendants-Appellees, and Visa International Service Association and Visa U.S.A., Inc., Defendants-Appellees, and Access Systems Americas, Inc. (Formerly PalmSource, Inc.), Defendant-Appellee
- Cited By
- 4 cases
- Status
- Published