When Has a Patentee Performed a Reasonable Pre-Suit Investigation Under Rule 11?

June 13th, 2018

Summary

Rule 11 of the Federal Rules of Civil Procedure requires a patentee to conduct a reasonable pre-suit investigation before filing a patent infringement suit.  A reasonable pre-suit investigation includes construing the claims and comparing the construed claims to the accused product or method to determine whether each limitation or element of the claims is found in the structure or operation of the accused device or method.  While in certain instances, the patentee may not be required to obtain and reverse engineer the allegedly infringing product, there must be a reasonable basis from which to conclude that each limitation of at least one reasonably construed claim is present in the product.  In addition, though the same pre-suit investigation is required for both method claims and non-method claims (e.g., an article of manufacture, a machine, and/or a composition of matter), a reasonable pre-suit investigation for a method claim may vary with respect to a non-method claim due to the inherent difficulties associated with obtaining information regarding a particular process.  If the patentee is unable to directly examine a potentially infringing device or method, case law may suggest that the patentee carefully explore other sources of information before filing suit.  For example, if public information is available regarding an allegedly infringing product or method, it may be prudent to obtain and review such information before filing suit.  In addition, although not always strategically advantageous, asking the alleged infringer for information on the allegedly infringing product or method when such is otherwise unavailable may be a factor that a court considers in determining whether a patentee conducted a reasonable pre-suit investigation.  Finally, an attorney’s reliance solely on the lay opinion of the client for a pre-suit infringement analysis is a factor that a court may consider in finding a Rule 11 violation.

1.  Introduction

By presenting a signed paper to the court, an attorney certifies that (1) the pleading or motion is not being presented for any improper purpose, (2) the claims and other legal contentions are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law, and (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery. See Fed. R. Civ. P. 11(b).  However, allowing factual contentions to be made “on information and belief does not relieve litigants from the obligation to conduct an appropriate investigation into the facts that is reasonable under the circumstances.” Fed. R. Civ. P. 11 advisory committee’s notes (amended 1993).

Rule 11 is aimed at curbing baseless filings, which abuse the judicial system and burden the courts and parties with expense and delay. Cooter & Gell v. Hartmax Corp., 496 U.S. 384, 397-98 (1990).  To “reduce the reluctance of courts to impose sanctions,” Rule 11 was amended in 1983 to provide that courts “shall impose” sanctions if the rule is violated. Refac Int’l, Ltd. v. Hitachi, Ltd., 921 F.2d 1247, 1257 (Fed. Cir. 1990).  Rule 11 was further amended in 1993 to require a party seeking sanctions to wait 21 days after service on the opposing party before filing the motion with the court.  Fed. R. Civ. P. 11 advisory committee’s notes (amended 1993).

Accordingly, as mentioned, Rule 11 requires a patentee to conduct a reasonable pre-suit investigation before bringing an infringement action. Judin v. United States, 110 F.3d 780, 784 (Fed. Cir. 1997).  More specifically, Rule 11 requires a patentee to construe the claims and compare the construed claims to the accused product or method to determine whether each limitation of at least one claim is present in the accused product or method. Id.

As set forth below, case law provides further guidance as to what constitutes a reasonable pre-suit investigation under Rule 11.  While the same pre-suit investigation is required for method and non-method claims, what constitutes a “reasonable” investigation for method claims may vary with respect to non-method claims due to the inherent difficulties associated with obtaining information regarding a particular process. See, e.g., Hoffman-LaRoche Inc. v. Invamed, Inc., 213 F.3d 1359 (Fed. Cir. 2000) (denying sanctions where patentee sought information regarding the defendant’s process to no avail).

2.  Non-Method Claims

a.  Judin v. United States

In Judin, the patentee filed suit alleging that the federal government infringed three patents relating to bar code scanners. 110 F.3d at 781.  Prior to filing the Complaint, the patentee observed bar code scanners being used at the post office and reviewed technical specifications and commercial literature related to these scanners. Id.  From these observations, the patentee determined that at least some of the elements of the claims were present in the accused devices. Id. at 781-82.  However, prior to filing suit, the patentee neither obtained an actual accused product nor a technical description of the product from the defendant. Id. at 782-83.  In addition, the patentee did not perform any reverse engineering and failed to determine whether two key elements of the claims were present in the accused devices. Id.

On an appeal from the district court’s denial of sanctions, the Federal Circuit held that Rule 11 requires more than observing the operation of the accused products and determining that some of the limitations of the patent claims were met. Id. at 784.  As mentioned, the court held that determining infringement is a two-step process requiring that 1) the claims be construed and then 2) compared to the accused device to determine whether the claim elements are found in the accused device. Id.  The court then noted:

[P]rior to the filing of the suit, neither [the patentee] or [sic] his counsel had made any reasonable effort to ascertain whether the accused devices satisfied the two key claim limitations, either literally or under the doctrine of equivalents.  No adequate explanation was offered for why they failed to obtain, or attempted to obtain, a sample of the accused device from the Postal Service or a vendor so that its actual design and functioning could be compared with the claims of the patent.  Under these circumstances, there is no doubt that [the patentee] failed to meet the minimum standards imposed by Rule 11 . . . . The trial court’s determination to the contrary is an abuse of its discretion.

Id. at 784.  The Federal Circuit also rejected the assertion that any defect in filing the Complaint was cured because the patentee consulted with an expert after filing and was able to make arguments of infringement. Id. at 785.  The court noted that “Rule 11 is not about after-the-fact investigation” and instead requires that the inquiry be undertaken “before the suit is filed, not after.” Id. at 784-85.  In view of the foregoing, the Federal Circuit remanded to the district court for a determination of sanctions. Id. at 785.

b.  View Engineering v. Robotic Vision Systems

The Federal Circuit revisited the requirements of Rule 11 in View Engineering, Inc. v. Robotic Vision Systems, Inc., 208 F.3d 981 (Fed. Cir. 2000).  After being sued for declaratory judgment, the patentee counterclaimed for infringement of eight patents relating to three-dimensional scanning technology.  Id. at 983.  The patentee asserted that its counterclaims were based on knowledge of its patents, its understanding of the technology required in the field, and statements and advertising made by the accused infringer. Id.  However, at the time of filing the counterclaim, the patentee had not obtained any of the accused products, had not construed the claims of its patents, and had not constructed an element by element infringement analysis. Id. at 985.  When asked why the infringement analysis had not been conducted, the patentee’s attorney responded that it could not perform the analysis until it “learned what View [the accused infringer] actually did.” Id.

The Federal Circuit affirmed the district court’s finding that the patentee had not undertaken an appropriate pre-filing inquiry. Id. at 986.  The court held that Rule 11 requires each asserted claim of the patent to be applied to the accused device. Id.  Affirming sanctions, the court stated:

The presence of an infringement analysis plays the key role in determining the reasonableness of the pre-filing inquiry made in a patent infringement case under Rule 11. . . .

A patent suit can be an expensive proposition.  Defending against baseless claims of infringement subjects the alleged infringer to undue costs – precisely the scenario Rule 11 contemplates.  Performing a pre-filing assessment of the basis of each infringement claim is, therefore, extremely important.  In bringing a claim of infringement, the patent holder, if challenged, must be prepared to demonstrate both to the court and the alleged infringer exactly why it believed before filing the claim that it had a reasonable chance of proving infringment.  Failure to do so should ordinarily result in the district court expressing its broad discretion in favor of Rule 11 sanctions, at least in the absence of a sound excuse or considerable mitigating circumstances.

Id.

c.  Antonious v. Spalding & Evenflo

In Antonious v. Spalding & Evenflo Cos., the Federal Circuit also held that the patentee failed to conduct a reasonable pre-filing inquiry. 275 F.3d 1066, 1068 (Fed. Cir. 2002).  In Antonious, the patentee filed an infringement suit identifying 21 different golf clubs of a product line manufactured by the accused infringer. Id. at 1071.  The patent related to a golf club and included a key limitation regarding how the club head connected to the hosel. Id. at 1070.  Prior to filing suit, the patentee obtained a single club from the product line and cut open the club head to determine whether the asserted claim limitations were present. Id.  However, neither the patentee nor his attorneys determined whether the key limitation of the claims was present in any of the remaining twenty clubs and instead inferred that other products were manufactured similar to the club obtained by the patentee. Id.

Construing Rule 11, the Federal Circuit stated:

 As applied by this court, Rule 11 requires an attorney who files a patent infringement action to compare the accused device with the construed patent claims.  The attorney may consult with his client but may not rely solely on the client’s lay opinion that the accused device infringes the patent.  Instead, counsel must make a reasonable effort to determine whether the accused device satisfies each of the claim limitations.

Id. at 1073-74. (emphasis added) (citations omitted).  The court noted that advancing even a single claim without a proper pre-filing inquiry is improper and sanctionable under Rule 11. Id. at 1075.

d.  Eskimo Ice v. Nautic-Kold

In Eskimo Ice Corp. v. Nautic-Kold, Inc., the United States District Court for the Southern District of Florida held that the patentee failed to conduct a reasonable pre-filing inquiry relating to machine claims. No. 02-Civ-60059 at 26 (S.D. Fla. Feb. 17, 2004).  In Eskimo Ice, the patentee asserted infringement of a patent claim directed to an ice making machine placed on the engine deck level of a boat that pumps ice to the upper levels thereof. Id. at 1.  In response, the defendant filed a Rule 11 motion for sanctions, alleging that the patentee failed to conduct a pre-filing inquiry relating to the defendant’s ice machine. Id. at 4.

Before filing the suit, the patentee attempted to construe the claims and compare the accused ice machine to the construed claims. Id. at 7-11.  For the claim construction portion of the pre-filing inquiry, the patentee and his counsel looked to the language of the claims and set forth three main components, namely, a refrigeration circuit, a flexible conduit, and storage chambers. Id. at 7.  In addition, the patentee and his counsel provided several definitions for certain claims terms, which were supported by the specification and the prosecution history. Id. at 7, 9.  Attempts by the patentee to compare the accused device to the construed claims included several visits to the defendant’s booth at a boat show, which displayed the allegedly infringing ice machine. Id. at 7-9, 18.  During each visit, however, the patentee (as well as the patentee’s employee and a hired private investigator) viewed only the exterior of the defendant’s ice machine. Id. at 18.

Therefore, the court noted that “none of these individuals saw or could see the interior of the ice assembly unit.” Id.  As such, the court noted that the patentee could not observe the “internal mechanisms that moved the ice from the ice assembly unit into the conduit.” Id.  Further, though the patentee obtained the defendant’s product brochures, the court noted that the brochures did not depict the inner workings of the unit nor did the brochures explain how its auger functioned. Id.  The court additionally noted that the patentee made no attempt to reverse engineer the defendant’s ice machine. Id. at 19.

In view of the foregoing, the court granted the defendant’s Rule 11 motion for sanctions. Id. at 26.  Finding no issues with the patentee’s claim construction, the court noted that “an objectively reasonable attorney would not believe that each element of Claim 1 of the ‘724 patent reads on the accused device.” Id. at 19-20.  Further, the court noted that the patentee’s pre-filing inquiry did not set forth the role of the auger in the defendant’s ice machine or how the machine advanced the ice therethrough. Id. at 20.  In addition, the court noted that the patentee’s failure to purchase the defendant’s ice machine, even though the machine cost more than $7,000, was not a valid defense.  Id. at 22.  Moreover, the court stated that the patentee could have easily requested drawings or specifications of the allegedly infringing ice machine, but failed to do so. Id. at 23.  For at least these reasons, the court concluded that the patentee violated Rule 11. Id.

3.  Method Claims

a.  Hoffman-LaRoche v. Invamed

In Hoffman-LaRoche Inc. v. Invamed, Inc., the Federal Circuit provides an example as to what constitutes a reasonable pre-filing investigation under Rule 11 for method claims. 213 F.3d 1359, 1361 (Fed. Cir. 2000) case, the patentee owned a patent directed to a method for manufacturing a drug marketed as TICLID. Id.  The defendant, a Canadian company, owned the generic version of the drug and filed with the FDA to market the generic drug in the United States. Id.  The patentee then filed suit, alleging that the defendant’s method for manufacturing the generic drug infringed their patented process for making TICLID. Id.

Before filing the suit, the patentee attempted to “ascertain whether the processes so used were infringing, but [was] unable to do so” because the process was subject to a confidentiality agreement. Id. at 1363.  Though the defendant provided samples of their drug product, the patentee was unable to determine the method of manufacturing the drug through reverse engineering. Id.

The Federal Circuit upheld the denial of sanctions, noting that before filing suit, the patentee performed a more extensive inquiry than necessary by contacting the defendant and asking for disclosure of its method. Id. at 1361, 1365.  Further, the court noted it was “difficult to imagine what else [the patentee] could have done to obtain facts relating to [the defendant’s] alleged infringement of their process patents.” Id. at 1364.  Moreover, the defendant “pointed to nothing else that it believes they could or should have done.” Id.

b.  Q-Pharma v. Andrew Jergens

The importance of a reasonable infringement analysis by counsel as part of the pre-filing inquiry relating to method claims was further emphasized by the Federal Circuit in Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295 (Fed. Cir. 2004).  In Q-Pharma, the patentee asserted infringement of a patent claim directed to a method of administering a certain active ingredient (CoQ[10]) of a “therapeutically effective amount” within a mixture to treat impaired skin. Id. at 1297.  At trial, the patentee learned the defendant’s product contained no more than 0.00005 percent of the active ingredient and sought to dismiss its infringement claims. Id. at 1298.  Noting that the patentee failed to test a sample to determine the amount of the active ingredient before filing suit, the defendant filed a motion for sanctions under Rule 11. Id. at 1301-02.

The Federal Circuit upheld the district court’s denial of sanctions, noting that before filing suit, the patentee’s attorney had interpreted the claims and analyzed the accused product. Id. at 1300-01.  Regarding claim construction, the Federal Circuit noted that even though the patentee’s attorney relied on a broad claim construction that did not require a certain percentage of the active ingredient, the attorney’s declaration that he interpreted and analyzed the patent claims, specification, and file history to reach an infringement analysis was reasonable. Id.  Regarding analysis of the accused product, the Federal Circuit acknowledged the patentee did not analyze a sample of the product to determine its precise composition, but noted that the patentee obtained a sample and reviewed the defendant’s advertisements touting the presence of the active ingredient with therapeutic benefits. Id. at 1302.  As such, the Federal Circuit held that “the key factor in determining whether a patentee performed a reasonable pre-filing inquiry is the presence of an infringement analysis,” and that such analysis “can simply consist of a good faith, informed comparison of the claims of a patent against the accused subject matter.” Id. (citations omitted).

c.  Smart Options v. Jump Rope

In Smart Options, LLC v. Jump Rope, Inc., No. 12 C 2498, 2013 U.S. Dist. LEXIS 17743, at *1 (N.D. Ill. Feb. 11, 2013), the United States District Court for the Northern District of Illinois held that the patentee failed to conduct a reasonable pre-filing inquiry under Rule 11 relating to method claims.  In Smart Options, the patentee asserted infringement of a patent claim directed to a method for providing “an ‘option’ to buy a good, service, or ticket to an event at a certain ‘reservation price’ within a certain period of time” to a consumer. Id. at *1-2 (citation omitted).  If the consumer fails to buy the good/service/ticket during the limited time period, the “option fee” is not refunded. Id. at *2 (citation omitted).  The defendant owned a smartphone application that allows a user to purchase a “jump” for lines at certain events, thereby allowing the user to skip in line to immediately access the event. Id. (citation omitted).

In response to the infringement suit, the defendant filed a Rule 11 motion alleging that its application “does not provide options or charge option fees.” Id. at *3 (citation omitted).  Therefore, the defendant argued that the patentee failed to conduct a reasonable pre-suit inquiry by not construing and investigating its claims prior to filing the Complaint. Id. at *11.  In addition, the defendant argued that the patentee could have easily downloaded the defendant’s application for free to ascertain the differences. Id.

The district court agreed with the defendant and granted the Rule 11 motion for sanctions, noting that the patentee’s counsel used conclusory words in the Complaint to describe the pre-suit investigation without detail as to what steps were taken to construe the claims and compare the construed claims with the allegedly infringing method.  Id. at *14, 27.  Furthermore, the court noted that the patentee “apparently relied upon certain Terms of Use from [the patentee’s] website . . . rather than basing its conclusions on anyone’s use of the application.” Id. at *14.  Therefore, the court heavily relied on the ease to which the patentee could have learned of the defendant’s method to verify whether the patentee’s pre-suit investigation was reasonable. Id. at *16-17.  Since the patentee could have easily done more, the district court held the patentee failed to conduct a reasonable pre-filing inquiry under Rule 11. Id. at *17.

d.  PrinterOn v. Breezyprint

In PrinterOn Inc. v. Breezyprint Corp., the United States District Court for the Southern District of Texas provided an example of a reasonable infringement analysis by counsel as part of the pre-filing inquiry. 93 F. Supp. 3d 658, 667 (S.D. Tex. Mar. 19, 2015).  In PrinterOn, the patentee asserted infringement of a group of patents directed to systems and methods for printing files from remote devices, such as smartphones and tablets. Id.  Before filing suit, the patentee monitored the defendant’s activity in the marketplace and collected technical literature, drawings, videos, and screen shots relating to the accused product. Id. at 709-10.  Further, the patentee learned that some of its former employees, who subsequently worked for the defendant, had “embedded ‘printeron’ metatags in the iTunes App Store so that any user searching for [patentee] would also find [defendant].” Id. at 710.  The patentee, however, did not download the defendant’s publicly availably software application to try and reverse engineer the software. Id.

Notably, the court discussed Judin and Smart Options for upholding sanctions based on the patentee’s failure to obtain or download public information.  Id. at 710.  More specifically, the court noted the Federal Circuit in Judin held that sanctions were appropriate because the patentee failed to obtain or attempt to obtain the product so that its function could be compared with the patent claims. Id. at 710 (citing Judin v. United States, 110 F.3d 780, 783 (Fed. Cir. 1997)).  Similarly, the court noted the Federal Circuit in Smart Options held that sanctions were appropriate because the patentee failed to download the defendant’s free software application before filing suit. Id. at 710 (citing Smart Options, LLC v. Jump Rope, Inc., Case No. 12 C 2498, 2013 U.S. Dist. LEXIS 17743, at *1 (N.D. Ill. Feb. 11, 2013)).

The Southern District of Texas, however, noted that “neither downloading an app nor reverse engineering, without access to source code, are bright-line requirements.” Id.  Rather, in PrinterOn, the court agreed with the Federal Circuit in Q-Pharma, and looked to whether the patentee conducted an infringement analysis that included “a good faith, informed comparison of the claims of a patent against the accused subject matter.” Id. (quoting Q-Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1302 (Fed. Cir. 2004)).  Since the patentee’s “investigation included obtaining publicly available information about [defendant] and comparing the [defendant’s] product to [the patents-at-suit],” the court held that the patentee’s pre-filing investigation was reasonable. Id. at 711.

e.  Somaltus v. Noco Company

In Somaltus, LLC v. Noco Co., the United States District Court for the Northern District of Ohio provided another example of a reasonable infringement analysis as part of the pre-filing inquiry relating to method claims. No. 1:17 CV 1111, 2018 U.S. Dist. LEXIS 50568, at *1 (N.D. Ohio Mar. 27, 2018).  In Somaltus, the patentee asserted infringement of their patent directed to a method for controlling a charge signal for charging a battery. Id.  Before filing suit, the patentee reviewed their patent and its prosecution history and completed a claim chart using public information relating to the defendant’s product. Id. at *5.  The public information included the Owner’s Manual and the User Guide for the defendant’s product, which contained technical and battery specifications for the product. Id.  The patentee, however, did not purchase or test the defendant’s battery system. Id.  In response, the defendant filed a “Motion to Find the Case Exceptional and Award Fees and Costs,” alleging that the patentee failed to conduct a reasonable pre-filing inquiry. Id. at *1, 3.

The Northern District of Ohio, however, noted that “obtaining a sample of the infringing product is not a bright-line requirement to filing a patent infringement claim.” Id. at *6 (citing Intamin Ltd. v. Magnetar Techs., Corp., 483 F.3d 1328, 1338 (Fed. Cir. 2007) and PrinterOn Inc. v. Breezyprint Corp., 93 F. Supp. 3d 658, 710 (S. D. Tex. Mar. 19, 2015)).  Rather, like PrinterOn, the court agreed with the Federal Circuit in Q-Pharma, and held “the key factor in determining whether a patentee performed a reasonable pre-filing inquiry” to be “the presence of an infringement analysis.” Id. (quoting Q-Pharma, 360 F.3d at 1302).  Since the patentee “conducted an infringement analysis which included an informed comparison of the claims of the ‘386 patent against the publicly available information” relating to the product, the court held that the patentee’s pre-filing investigation was sufficient. Id. at *6-7.

4. Conclusion

Accordingly, courts have made clear that prior to filing a patent infringement action, Rule 11 requires the patentee to 1) construe the claims and 2) compare the construed claims to the accused product or method to determine whether each limitation or element of the claims is found in the operation or structure of the accused device or method.  In doing so, case law may suggest the following considerations for conducting a reasonable pre-suit investigation: 1) obtaining and testing the product, (2) determining if public information relating to an allegedly infringing product or method is available and if so, seeking to obtain and review such information, (3) asking the alleged infringer for the allegedly infringing product or method (although not always strategically advantageous), and (4) asking what else can be done to obtain facts about an allegedly infringing product or method.