Anti-Cancer, Inc. v. Pfizer, Inc., et al.

Addressing the issue of when it is appropriate to issue sanctions for deficient Preliminary Infringement Contentions (PICs) (under state court procedural rules), the U.S. Court of Appeals for the Federal Circuit overturned a district court’s grant of summary judgment based on a party’s refusal to pay the opposing party’s costs and fees.  Anti-Cancer, Inc. v. Pfizer, Inc., et al., Case No. 13-1056 (Fed. Cir., Oct., 20, 2014) (Newman J.)  The Federal Circuit ruled that because it found no evidence of bad faith and the lower court had failed to explicitly find such, there was no reasonable basis for imposing sanctions under Ninth Circuit law.

Anti-Cancer brought suit against Pfizer over a patent directed to imaging proteins using green fluorescent protein.  Under the procedural rules of the District Court for the Southern District of California, Anti-Cancer filed its PICs based entirely on the defendants’ scientific publications, citing to specific portions of the publications as examples of infringement.  Anti-Cancer asserted in its filing that the contentions were as crystalized as possible because discovery had not yet begun and reserved the right to supplement its PICs.  Defendants filed a motion for summary judgment claiming that the PICs were defective because they did not include an explanation of how each element was infringed.  The district court agreed that the PICs failed to connect the dots from the descriptions in the scientific publications to the claim elements or explain how certain technology in the publication related to the technology found in the claims.  The district court explained that because Anti-Cancer could explain in its brief opposing summary judgment how a person of skill in the art would understand the publication excerpts to show infringement, it could have included an explanation in the PICs, but chose not to.  The court authorized Anti-Cancer to supplement its PICs, but only if it paid the defendants’ attorney fees and costs for their summary judgment motion.  When Anti-Cancer objected to the payment, the court entered summary judgment in favor of the defendants.  Anti-Cancer appealed.

On appeal, Anti-Cancer argued that the fee-shifting was an unwarranted sanction and that summary judgment on the condition of payment was improper.  Relying on Ninth Circuit law, because fee-shifting is part of a court’s inherent authority rather than patent law, the Federal Circuit agreed.  Under Ninth Circuit precedent, the court must make an explicit finding of bad faith before awarding sanctions under its inherent powers.  Additionally, the local patent rule 3.1 recognizes evidentiary limits by requiring the plaintiff to list evidence “if known” or of which it is “aware.”  This indicates that the PICs are intended to be a “guide for discovery” rather than a “forum for litigation of the substantive issues.”  PICs need not necessarily include proof or direct evidence of infringement.  Because the Federal Circuit found no evidence of bad faith on the part of Anti-Cancer and the district court had not made any explicit finding of bad faith, the district court had exceeded its discretion by imposing sanctions as a condition to supplement Anti-Cancer’s PICs.