Avoiding Malpractice Traps, Lessons Learned from a Recent CAFC Decision

In a perfect world, every attorney would be totally serious about their practice.... acting only in good faith, being capable of instantaneously spotting legal issues and inherently knowing all relevant law when advising others. However, the more we practice and live, the more we are reminded that neither Earth nor Law is infallible. A case out of the Court of Appeals last winter illustrates malpractice traps that any sane attorney should avoid like the Plague. Eko Brands, LLC v. Adrian Rivera Maynez Enterprises, Inc. et al., Case Nos: 2018-2215 & -2254 (Fed. Cir. Jan. 13, 2020)(pertaining to enforcement arguments that can be “exceptional” under §285 as well as erroneous jury instructions on willfulness).

Eko Brands involves patents covering adaptors for use with Keurig single-brew coffee machines. The case originated out of the International Trade Commission, where Adrian Rivera Maynez Enterprises (or “ARME”) sought an exclusion order against Eko Brands for importing accused infringing devices. The ITC found the asserted claims invalid for written description and the Court of Appeals affirmed.

Later, in the Western District of Washington, the company Eko Brands sought a declaratory judgment that the claims not found invalid in the ITC action were neither infringed or nonobvious. The company further asserted its own patent against ARME. The district court awarded Eko Brands a declaratory judgement of non-infringement as to ARME’s remaining claims but forewent an obviousness finding at summary judgment. Eventually, the jury found the claims obvious. The court awarded Eko Brands attorney’s fees for both the infringement and nonobviousness positions taken by ARME. Additionally, the WDWa found ARME to be infringing Eko Brand’s patent but neither willfully or to an extent warranting enhanced damages. Each party appealed.

As to attorney conduct, the COA panel affirmed the district court’s award of fees. Prevailing patent litigants can recover attorney’s fees where an opposing party takes a position or engages in conduct that is “exceptional.” 35 USC §285. After Highmark, fee awards are only reversible for an abuse of discretion. J. Dyk, writing for the panel, found ARME’s infringement position to be exceptional and reasoned that attorney’s fees for ARME’s infringement position was not an abuse of discretion because it was unreasonable to pursue infringement under these circumstances. The panel endorsed the lower court’s view that it was “patently obvious” that the products could not infringe the claims because “[n]o reasonable person” would believe the product had at least one identified claim limitation or its equivalent. It is unclear whether ARME’s failure to assert these claims in the prior ITC action was relevant to finding their subsequent infringement position in the WDWa action to be exceptional; their inaction in the earlier proceeding would suggest a lack of confidence as to infringement. Nevertheless, and interestingly, at least one judge (J. Reyna) found ARME’s noninfringement position to be reasonable, saying that the claim construction was not supported by the specification and the examples in the specification were improperly treated as importing limitations into the claims.

The COA panel also affirmed the district court’s award of fees regarding ARME’s nonobviousness position despite the lower court denying Eko Brands’ motion for summary judgment on this issue. J. Dyk clarified that Checkpoint Systems, a case where the COA stated that a denial of summary judgment is “an indication that the party’s claims were objectively reasonable and suitable for resolution at trial,” did not state that “the denial of summary judgment conclusively establishes objective reasonableness... only that the district court [must] consider[] the denial of summary judgment...” Here, the district court noted that it was not aware of ARME’s lack of seriousness in its nonobviousness position until trial was underway at which time it became apparent that ARME was not seriously trying to defend against obviousness, ARME’s position was based on clearly disputed issues of fact, secondary factors were not demonstrated and the §103 arguments were “largely” seen as a “charade.”

Eko Brands teaches that the potential benefit of any attorney argument should be weighed against potential costs if the arguments are unreasonable or not made in good faith.

As an aside, Eko Brands appealed the district court’s failure to award willful infringement damages. Though this aspect of the decision was affirmed, the panel in Eko Brands identified error in the Federal Circuit Bar Association’s National Patent Jury Instruction No. 4.1 as to willful infringement. The district court’s reliance on the instruction was erroneous because the FCBA instruction tasks the jury with weighing enhanced damages considerations like “especially worthy of punishment” and “willful infringement is reserved for only the most egregious behavior.” (the stricken portion removed in this trial). Enhanced damages is a judicial function, not one for the jury, under §284 and Halo.

"The question of enhanced damages is addressed by the court once an affirmative finding of willfulness has been made. [citing Halo] It is at this second stage at which the considerations of egregious behavior and punishment are relevant. Questions of whether an accused patent infringer’s conduct was 'egregious behavior' or 'worthy of punishment' are therefore not appropriate for jury consideration."

The panel also criticized Instruction 4.1’s use of terminology like “malicious,” “consciously wrongful,” and “bad faith.” By this same tokens, AIPLA’s 2018 model instructions are subject to criticism as well. The errors, however, were not too egregious because the Instruction “in its entirety” under Verizon v. Vonage, otherwise reasonably explained that willfulness is a question of deliberate behavior and provided a list of facts the jury could properly consider on willfulness such as intentional copying and reasonable belief of either noninfringement or invalidity.

Eko Brands further teaches that in proposing instructions one should consider removing the language related to enhanced damages from the FCBA’s (and AIPLA’s) willfulness instruction.

These sorts of lessons are much better learned this way rather than by stepping in them in practice. No one is perfect but we can keep striving and avoiding the... ah, stirrers in life!