The Federal Circuit held that the evidence of the patentee’s litigation misconduct and objectively-baseless lawsuit filed without reasonable pre-suit investigation properly supported the district court’s finding that the case was exceptional under 35 U.S.C. § 285 and warranted Rule 11 sanctions.

The patents-in-issue relate to document processing systems. After claim construction, the patentee stipulated to noninfringement. Upon motions from the accused infringer, the district court found the case exceptional under 35 U.S.C. § 285 and in violation of Rule 11 of the Federal Rules of Civil Procedure. The Federal Circuit affirmed the exceptional case finding, which was supported by evidence of both litigation misconduct and the filing of an objectively baseless lawsuit in bad faith.

Many varieties of misconduct can support an exceptional case finding, including lodging frivolous filings, engaging in vexatious or unjustified litigation, as well as litigation misconduct and unprofessional behavior. Absent litigation misconduct or misconduct in securing the patent, exceptional case sanctions may only be imposed against the patentee if the litigation was brought in bad faith and the litigation is objectively baseless.

The patentee’s litigation misconduct included destroying relevant documents, intentionally not implementing a document retention plan, failing to engage in claim construction in good faith, displaying a lack of regard for the judicial system, and having a cavalier attitude towards the patent litigation process as a whole. The patentee’s lawsuit was objectively baseless because the specification unequivocally compelled a construction which limited the claims to processing information originating from hard copy documents. The accused infringer only processed information originating from a website.

Rule 11 sanctions were appropriate because the patentee’s infringement allegations were legally baseless and the patentee’s attorney failed to perform a reasonable pre-suit investigation. A reasonable pre-suit investigation requires counsel to perform an objective evaluation of the claim terms when reading those terms on the accused device.

A copy of the opinion can be found here.