Niazi Licensing Corporation v. St. Jude Medical S.C., Inc.

Background

Niazi Licensing Corporation (NLC) owns U.S. Patent No. 6,638,268, which concerns a catheter system that can be inserted into the heart’s coronary sinus and methods for using it. NLC sued St. Jude Medical S.C., Inc. in 2017, alleging that St. Jude indirectly infringed the patent by inducing medical professionals to infringe it.

After the court’s October 21, 2019 claim-construction order, only Claim 11 remained in dispute. That claim describes steps for using a double catheter. The parties filed competing summary-judgment motions. The court denied NLC’s motion for summary judgment on infringement and granted St. Jude’s motion for summary judgment of non-infringement because NLC lacked evidence of two essential elements: that someone directly infringed the patented method and that St. Jude knowingly induced infringement with specific intent to encourage it.

St. Jude later moved for attorneys’ fees and costs under Federal Rule of Civil Procedure 11, 35 U.S.C. § 285, and 28 U.S.C. § 1927. NLC opposed the motion.

Rule 11 Request

Rule 11 requires a reasonable factual and legal inquiry before filing a claim. The court denied St. Jude’s request for Rule 11 sanctions for both procedural and substantive reasons.

Procedurally, St. Jude did not file a separate Rule 11 motion and the record did not show that St. Jude served NLC with the proposed sanctions motion at least 21 days before asking the court to impose sanctions. The court treated those failures as fatal to the Rule 11 request.

Substantively, the court also concluded that St. Jude had not shown that NLC lacked a reasonable, good-faith basis for inferring infringement when it filed the lawsuit or before the claim-construction order. The court had previously denied St. Jude’s motion to dismiss, and NLC could initially rely on a reasonable expectation that discovery would produce evidence of the alleged infringement. The court also noted that the patent’s disputed claims had not yet been construed when NLC filed suit.

Patent-Law Fee Request Under 35 U.S.C. § 285

Section 285 permits a court to award reasonable attorneys’ fees to the prevailing party in an “exceptional” patent case. The court found that this case became exceptional because of NLC’s conduct after the October 2019 claim-construction order.

The claim-construction order invalidated several patent claims as indefinite and left only Claim 11. The court construed “the catheter” to mean the double catheter and held that Claim 11 was infringed only if the steps were performed in the listed order.

After fact discovery closed and despite those rulings, NLC continued litigating Claim 11. The court found that NLC repeatedly tried to rely on evidence not disclosed before the discovery deadline. Among other things, NLC attempted to identify its own infringement expert as a direct infringer after discovery ended. NLC’s counsel later conceded that efforts to identify direct-infringement evidence had been “dead ends.” The magistrate judge struck the late evidence, and the district court affirmed that ruling. NLC also used the stricken evidence in its summary-judgment filings, violating a court order and resulting in additional sanctions and an order to amend the filings.

The court further found that NLC continued making legally and factually unsupported arguments after removing the improper evidence. In particular, NLC relied on a speculative hypothetical statement in a St. Jude damages expert’s rebuttal report to try to show direct infringement. The court concluded that the statement could not establish infringement and that NLC lacked circumstantial evidence supporting direct infringement. The court also had found that NLC lacked evidence that St. Jude knowingly induced infringement or specifically intended to encourage it.

The court concluded that NLC acted in bad faith to prolong the litigation after October 2019 and that its remaining claim was so lacking in merit that NLC should either have abandoned the case or limited its efforts to challenging the claim-construction ruling on appeal. The court therefore granted St. Jude’s request under § 285 for reasonable attorneys’ fees and costs incurred after October 2019.

Litigation-Conduct Sanctions Under 28 U.S.C. § 1927

Section 1927 allows a court to require an attorney to personally pay excess costs, expenses, and attorneys’ fees caused by unreasonably and vexatiously multiplying the proceedings. The court found that NLC’s attorneys engaged in conduct showing intentional or reckless disregard of their duties to the court.

The conduct included repeatedly relying on undisclosed evidence, disregarding scheduling deadlines, willfully violating the order striking improper evidence, and advancing unreasonable and meritless arguments. The court also found that NLC’s attorneys continued misrepresenting the record and making objectively meritless arguments while opposing the fee motion.

The court granted St. Jude’s request under § 1927 for reasonable attorneys’ fees and costs incurred after October 2019. NLC’s attorneys were ordered to be jointly and severally liable for any award of fees and costs, meaning each could be responsible for the full amount subject to later allocation among them.

Disposition

The court ordered that St. Jude’s motion for attorneys’ fees and costs was granted as to reasonable fees and costs incurred after October 2019 under 35 U.S.C. § 285 and 28 U.S.C. § 1927, and denied in all other respects. The court did not set the amount of the award in this order. St. Jude was directed to file a supplemental motion and supporting materials within 30 days; NLC could respond within 21 days after that filing, and St. Jude could reply within 14 days after NLC’s response.