Case Study on US IP Litigation Management

Litigation management requires a strategic approach. This is especially true in intellectual property litigation in the United States, where legal procedures are often complex and expensive, necessitating good case management. Unreasonable case management can lead to severe legal consequences. This article considers several recent court rulings in the United States to help illustrate the importance and seriousness of case management in intellectual property litigation.

Amazon.com vs. PersonalWeb Technology LLC

PersonalWeb, as the patent owner, filed lawsuits against Amazon and its customers for alleged infringement of its patents related to Amazon's S3 technology. However, not only did PersonalWeb's claims fail to receive court support, but the court also ordered PersonalWeb to pay millions of dollars in attorney fees to Amazon.

According to U.S. patent law, courts require the losing party to bear the reasonable attorney fees of the prevailing party only in "exceptional cases". In this case, the district court found that the conditions for "exceptionality" were met, and this determination was upheld by the appellate court. The court primarily based its finding on the following aspects to establish the "exceptionality" of this case:

1.  the fact that PersonalWeb filed patent infringement lawsuits against Amazon's customers based on the same patents and for the same products after losing the patent infringement lawsuit against Amazon made the claim objectively baseless, unreasonable and a violation of both claim preclusion and the Kessler doctrine (which prohibits a patent holder from suing a defendants' customers based on the same cause of action after an unfavorable judgment by the court);

2.  the court found that PersonalWeb frequently changed its infringement positions during the litigation process, particularly regarding the relationship between the S3 product and the Ruby on Rails product (Amazon products used by Amazon’s customers) as well as whether there was patent infringement by either of them, which confused the facts in the case and damaged PersonalWeb's credibility and therefore constituted unreasonable behavior in litigation;

3.  the court found that PersonalWeb unreasonably delayed the litigation process. Specifically, the court believed that following the court's ruling on claim construction, PersonalWeb should have promptly cooperated with Amazon to reach a non-infringement agreement and then appealed (if dissatisfied with the court's ruling). However, PersonalWeb refused to reach a non-infringement agreement and instead chose to "re-litigate" the court's claim construction ruling, including by providing expert witness exploiting the ambiguity of the court's claim construction;

4.  the court deemed PersonalWeb's position changes in selecting the representative case unreasonable. PersonalWeb sued a number of Amazon's customers, claiming that the case against Twitch was representative of all the cases and agreed that if the court determined the Twitch case was non-infringing, the other cases would also be non-infringing. Based on this, the district court stayed the other cases and only proceeded with the Twitch case. However, later on, after the district court issued a summary judgment in favor of Amazon and Twitch, PersonalWeb began to distinguish the Twitch case from the other cases and attempted to unravel the consolidated multidistrict litigation. The court found that PersonalWeb's conduct in this regard constituted unreasonable litigation behavior.

Based on the above, the court determined that PersonalWeb's conduct met the requirement of "exceptionality" under Section 285 Patent Act, thereby supporting Amazon's request for attorney fee shifting and ordering PersonalWeb to bear over USD 5 million in attorney fees incurred on Amazon’s side.

The Court's decision to award attorney fees is closely related to the parties' case management in this case. Parties need to properly manage related cases, both those happening at different points in the timeline, as well as parallel proceedings that are simultaneously pending. The reasonableness of the parties' litigation behavior is crucial. After the court issues rulings on key issues, settlement may become a must; continuing litigation may be seen as unjustifiably delaying the process and wasting judicial resources. Furthermore, the consistency of the parties' litigation positions is essential. If a party frequently changes positions on significant issues, for example regarding infringement theories and cross-district consolidation as in this case, the court may view it as improper litigation behavior causing delays in the litigation process.

As the court emphasized in this case, in U.S. litigation, attorneys are not only representatives of the parties but also officers of the court. They have an obligation to assist the court in managing the case proceedings "to find the best and most efficient solutions for resolving disputes, particularly in complex cases".

Great Concepts, LLC v. Chutter, Inc.

Great Concepts is the proprietor of the U.S. trademark "DANTANNA'S", applied for in 2003 and registered in 2005. In 2006, a cancellation procedure was initiated against this trademark, which was later suspended due to a trademark infringement lawsuit. In the trademark infringement action, the district court issued a summary judgment in favor of Great Concepts on September 15, 2009, and the appellate court upheld the decision on July 15, 2010. The trademark cancellation procedure was reinstated, and the Trademark Trial and Appeal Board (TTAB) dismissed the petitioner's cancellation request on December 14, 2010.

Meanwhile, on March 8, 2010, while the aforementioned cases were ongoing, Great Concepts' former attorney submitted to the United States Patent and Trademark Office (USPTO) a continuing use declaration under Section 8 and an incontestability declaration under Section 15 U.S. Trademark Act . For this purpose, Great Concepts' former attorney claimed that the trademark was not involved in any pending legal proceedings, whether at the USPTO or in courts. This declaration disregarded the aforementioned trademark cancellation procedure and the trademark infringement litigation, both of which were ongoing at the time the Section 15 declaration was made.

Based on the erroneous declaration, Chutter requested cancellation of Great Concepts' "DANTANNA'S" trademark. The TTAB found the Section 15 declaration fraudulent under Section 14 U.S. Trademark Act and cancelled the trademark. Great Concepts appealed to the United States Court of Appeals for the Federal Circuit, which ruled that Great Concepts' fraudulent statement was made in the course of petitioning for incontestability of the trademark, rather than during the registration process. In other words, Great Concepts’ misbehavior was about the incontestability status of the trademark, but not the validity of the registration thereof. Accordingly, the legal consequences of this fraudulent statement should only reach the incontestable status of the trademark but not the validity of registration.

In this case, although the false statement may not have resulted in Great Concepts losing the trademark, it provided a cause of action for the cancellation proceeding and jeopardized the incontestability status of the trademark. If the individuals involved had conducted a thorough investigation into the litigation history of the trademark before proceeding to make the declaration, such legal consequences could have been avoided.

In fact, the responsibility of litigation management is not solely on litigants or their attorneys but also on the decision-makers. In the following case, the Patent Trial and Appeal Board (PTAB) was taken to court by the parties due to its failure to comply with the legally prescribed deadline for making a decision.

Purdue Pharma L.P. vs. Collegium Pharmaceuticals, Inc.

Purdue, the patent holder, initiated bankruptcy proceedings while a post-grant review (PGR) procedure against its patent was underway. The PTAB suspended the PGR proceedings and extended its decision-making timeline from the normal 12 months to the maximum of 18 months following the initiation of the bankruptcy action. However, by the time the PGR procedure was resumed, the 18-month deadline had already passed.

Even though the US patent law prescribes the rules about PTAB’s normal timeline and extension, it does not specify the legal consequences for PTAB's failure to adhere to this deadline. It became a focal point of contention later in this case whether PTAB retained the authority to render a decision after exceeding the statutory period.

While the court ultimately ruled in favor of the PTAB, this case serves as a reminder of the decision makers’ responsibility in time management. Adjudicators, while supervising the parties, are also subject to the parties' supervision. The smooth and efficient progression of a litigation is a shared responsibility of every participant involved.
 

Links to cases:

https://law.justia.com/cases/federal/appellate-courts/cafc/19-1918/19-1918-2020-06-17.html (Amazon.com vs. PersonalWeb Technology LLC)

https://law.justia.com/cases/federal/appellate-courts/cafc/22-1212/22-1212-2023-10-18.html (Great Concepts, LLC v. Chutter, Inc.)

https://law.justia.com/cases/federal/appellate-courts/cafc/22-1482/22-1482-2023-11-21.html (Purdue Pharma L.P. vs. Collegium Pharmaceuticals, Inc.)