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

Background

Niazi Licensing Corporation (NLC) owns U.S. Patent No. 6,638,268, concerning 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 2019 claim-construction ruling, only method claim 11 remained in dispute. The court denied NLC’s motion for summary judgment of infringement and granted St. Jude’s motion for summary judgment of non-infringement because NLC lacked evidence of direct infringement and evidence that St. Jude knowingly and specifically intended to encourage infringement.

While NLC’s appeal was pending, St. Jude sought attorneys’ fees and costs. In an October 25, 2021 order, the court found that NLC had engaged in bad-faith efforts to prolong the case after October 2019. The court awarded reasonable fees and costs under 35 U.S.C. § 285, which permits fees in an exceptional patent case, and imposed liability on NLC’s attorneys under 28 U.S.C. § 1927 for intentionally or recklessly disregarding their duties to the court. The court rejected St. Jude’s request for sanctions under Rule 11.

The Federal Circuit later reversed the district court’s construction of several patent terms and its determination that several patent claims were indefinite, and remanded for further proceedings. It affirmed the no-infringement judgment as to claim 11, the exclusion of expert testimony, and sanctions for discovery violations. NLC then moved under Rule 60(b) to vacate the earlier fee order. St. Jude separately sought $753,110.12 in fees and costs.

NLC’s Motion to Vacate

Rule 60(b)(5) permits relief from an order based on an earlier judgment that has been reversed or vacated. The court held that NLC’s motion was timely and procedurally proper. The motion was filed promptly after the Federal Circuit’s decision, and it did not improperly substitute for an appeal because the earlier fee order had not quantified the fee award and NLC was challenging the effect of the later appellate decision rather than the original fee determination itself.

Fees Under 35 U.S.C. § 285

The court granted NLC’s motion to vacate to the extent the earlier fee order rested on St. Jude’s status as a prevailing party under § 285. Because the Federal Circuit’s decision left fewer than all claims resolved and remanded the case, the action had not reached a final judgment. The court therefore concluded that St. Jude’s prevailing-party status could not yet be determined for purposes of § 285.

The court also vacated the August 11, 2021 Cost Judgment because ordinary costs under Federal Rule of Civil Procedure 54(d)(1) are awarded to the prevailing party. The court stated that the ruling did not prevent either party from seeking fees and costs as a prevailing party after the litigation concludes.

Sanctions Under 28 U.S.C. § 1927

The court denied NLC’s motion to vacate to the extent the earlier fee order was based on § 1927. That statute allows a court to require an attorney to pay excess fees and expenses caused by unreasonably and vexatiously multiplying court proceedings. The court found that the Federal Circuit’s decision did not undermine its earlier findings that NLC’s attorneys had repeatedly relied on undisclosed evidence, disregarded scheduling deadlines, willfully violated an order striking improper evidence, and advanced unreasonable and meritless arguments.

The court distinguished § 1927 sanctions from § 285 fees. Section 1927 focuses on deterring attorneys’ intentional or reckless disregard of their duties to the court and does not depend on which party ultimately prevails. The court therefore continued to impose § 1927 liability even though St. Jude could not yet be treated as the prevailing party under § 285.

Amount of the § 1927 Award

St. Jude requested $505,479.05 in attorneys’ fees, $230,510.65 in expert-witness fees, and $17,120.42 in other nontaxable costs. The court found St. Jude’s hourly rates reasonable but concluded that the request for more than $500,000 was unreasonable. Only one claim remained after claim construction, and the billing records suggested overstaffing, redundant work, excessive work, and vague descriptions of tasks.

The court identified $49,120 in fees directly attributable to NLC’s attorneys’ intentional or reckless disregard of court orders. It excluded other claimed fees because they could not be sufficiently separated from legitimate litigation work, St. Jude’s own work, or potentially excessive and unnecessary billing.

The court excluded all $230,510.65 in requested expert-witness fees. It did not decide whether expert fees could qualify as expenses under § 1927 because St. Jude had not shown a direct connection between those fees and NLC’s sanctionable conduct, nor provided a reliable way to isolate such fees.

For nontaxable costs, the court deducted unsupported miscellaneous expenses and transcript-related costs that appeared duplicative or inadequately documented. It awarded $8,747.13 in reasonable nontaxable costs.

Attorneys Subject to the Sanction

The court excluded NLC’s local counsel from liability. The supplemented record showed that local counsel did not actively participate in the vexatious conduct, and the record did not show that local counsel’s conduct directly caused excess fees or costs. The court found that the reputational consequences of its prior orders provided adequate deterrence for local counsel.

The court ordered NLC’s lead counsel, Michael T. Griggs and Sarah M. Wong of Boyle Fredrickson, S.C., to personally satisfy the $49,120 fee award and $8,747.13 cost award.

Disposition

The court ordered that:

- NLC’s motion to vacate was granted in part and denied in part. - The October 25, 2021 fee order was vacated in part, only insofar as it relied on St. Jude’s prevailing-party status under § 285. - The August 11, 2021 Cost Judgment was vacated. - NLC’s motion to vacate was denied in all other respects. - St. Jude’s request for attorneys’ fees and costs was granted in part and denied in part. - St. Jude was awarded $49,120 in reasonable attorneys’ fees and $8,747.13 in reasonable costs under § 1927. - The parties were directed to contact Magistrate Judge Becky R. Thorson within seven days to schedule a status conference about proceeding on remand.