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Federal Circuit Affirms Award of Attorneys’ Fees for Litigation Misconduct

March 13, 2009

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Last Month at the Federal Circuit - April 2009

Judges: Michel, Prost, Moore (author)

[Appealed from: C.D. Cal., Senior Judge Pfaelzer]

In ICU Medical, Inc. v. Alaris Medical Systems, Inc., No. 08-1077 (Fed. Cir. Mar. 13, 2009), the Federal Circuit held that the district court correctly granted SJ of noninfringement and SJ of invalidity, did not commit clear error in awarding attorneys’ fees, and did not abuse its discretion in granting Rule 11 sanctions—all in favor of Alaris Medical Systems, Inc. (“Alaris”).

The technology in this case concerns medical valves used in the transmission of fluids to or from a medical patient, such as when using an IV. Prior techniques involved the insertion of an external needle into a side port that connected to the main IV line, but this technique had several problems. ICU Medical, Inc. (“ICU”) attempted to overcome these problems by inventing a medical valve that receives fluid from a medical implement (e.g., a syringe) without the use of an external needle. The medical implement compresses a seal on the valve to create a fluid pathway from the medical implement through the valve and into a patient’s IV line.

Initially, ICU sued Alaris for patent infringement, asserting only one patent and its so-called “spikeless” claims. ICU then filed for a temporary restraining order (“TRO”), which the district court denied because Alaris presented substantial questions of invalidity for the asserted spikeless claims. Subsequently, ICU amended its complaint to assert claims from three other patents. The asserted claims fall into three groups: the spike claims, the spikeless claims, and the tube claims. After a series of detailed orders and findings, the district court granted SJ of noninfringement of the spike claims, SJ of invalidity of the spikeless and tube claims, and attorneys’ fees and Rule 11 sanctions. ICU appealed all three judgments.

First, the Federal Circuit affirmed the district court’s grant of SJ of noninfringement of the spike claims, finding that the district court properly adopted Alaris’s proposed construction of the term “spike” to mean “an elongated structure having a pointed tip for piercing the seal, which tip may be sharp or slightly rounded” over ICU’s broader proposal of “an upward projection.” In doing so, the Court noted that the district court correctly relied on the written description for guidance and observed that the specification “repeatedly and uniformly describes the spike as a pointed instrument for the purpose of piercing a seal inside the valve.” Slip op. at 6. Although the functional limitation of piercing is not recited in the claim, the Court explained that it is “entirely proper to consider the functions of an invention in seeking to determine the meaning of particular claim language.” Id. at 7 (quoting Medrad, Inc. v. MRI Devices Corp., 401 F.3d 1313, 1319 (Fed. Cir. 2005)). Here, the Court found that the functional language of “for piercing the seal” is appropriate because it defines the degree to which the spike must be pointed. Lastly, the Court rejected ICU’s contention that a construction of spike that requires “a pointed tip for piercing the seal” would render a dependent claim reciting “wherein said end of said spike is pointed” superfluous, noting that the “doctrine [of claim differentiation] is not a rigid rule but rather is one of several claim construction tools.” Id. at 8.

Second, the Court affirmed the district court’s grant of SJ of invalidity of the spikeless and tube claims for lack of written description under 35 U.S.C. § 112, ¶ 1. The spikeless claims recite a needleless connector valve comprising a body and a seal; it does not recite any spike limitation. Originally, the patents-in-suit did not include the spikeless claims. The spikeless claims were added years after the patents were filed without any change to the specification.

Alaris challenged the validity of the spikeless claims on the basis that they lack written description in the specification. ICU responded that these claims are spike-optional—i.e., because the claims contain no spike limitation, they cover valves with a spike and valves without a spike. Rejecting ICU’s argument that figures and descriptions that include spikes somehow demonstrate that the inventor possessed a medical valve that operated without a spike, the Court found that a person of skill in the art would not understand the inventor of the asserted patents to have invented a spikeless medical valve.

The tube claims recite a needleless connector valve comprising a body and a resilient seal, as well as “a tube seated in the distal end of said cavity for permitting fluid to flow through the distal end of said cavity, said tube sized such that a portion of said seal fits snugly around the distal end of said tube.” ICU argued that spikes are a species of tubes and that the specification’s disclosure of spikes with one or more holes at the tip support claims to the genus of tubes. Alaris responded by pointing out that the specification discloses only tubes that are hollow or cylindrical with holes at both ends, and as part of the valve body rather than as located within the seal or distal end of the body. Considering ICU’s failure to identify any disclosure in the specification to support its species-genus argument, the Court agreed with Alaris and found that the specification draws a clear distinction between a spike and a tube.

Third, applying Federal Circuit law, the Court affirmed the district court’s award of attorneys’ fees under 35 U.S.C. § 285 only for that portion of the litigation relating to (1) the TRO/preliminary injunction (“PI”); (2) ICU’s assertion of the “spike” claims; and (3) ICU’s construction of the term “spike” at claim construction. Noting that “[a]ttorney fees may be warranted for litigation misconduct or ‘if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless,’” id. at 14-15 (quoting Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005)), the Court found that the district court applied the appropriate legal standard and articulated several bases in support of the award, none of which ICU has shown to be clearly erroneous. For example, the district court found that ICU made multiple, repeated misrepresentations to the district court regarding its own patents in an effort to conceal what are now characterized as errors in order to rescue the TRO/PI from denial. These misrepresentations related to (1) ICU’s assertion of double-patented claims; (2) ICU’s assertion of more double-patented claims even after Alaris and the district court warned ICU of the double-patenting issue; (3) ICU’s misrepresentation of Federal Circuit authority; and (4) ICU’s representation that certain figures of the common specification “clearly” disclosed a spikeless embodiment, only to later acknowledge that these figures do not disclose such an embodiment and state that its representation was an “honest mistake.” Furthermore, the Court held the district court appropriately exercised its discretion in holding that ICU’s misconduct warranted Rule 11 sanctions, and that some of the misconduct warranted an award of attorneys’ fees.

Lastly, under Supreme Court and Ninth Circuit precedent, the Court affirmed the district court’s award of Rule 11 sanctions. The Court began by noting that when reviewing an award of Rule 11 sanctions, the Supreme Court has advised all appellate courts to “apply an abuse-of-discretion standard in reviewing all aspects of a district court’s Rule 11 determination.” Id. at 17 (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)). Under this standard, “[a] district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.” Id. (alteration in original) (quoting Cooter, 496 U.S. at 405). And under Ninth Circuit law, before awarding Rule 11 sanctions, “a district court must conduct a two-prong inquiry to determine (1) whether the complaint [or relevant document] is legally or factually ‘baseless’ from an objective perspective, and (2) if the attorney has conducted ‘a reasonable and competent inquiry’ before signing and filing it.” Id. (quoting Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir. 2002)). Applying these laws, the Court found that the district court properly determined that ICU’s frivolous construction and assertion of the “spike” claims in the amended complaint concurrently justified sanctions under Rule 11. Id. The Court also noted the district court’s decision not to award monetary sanctions for the violations of Rule 11, because the amount of the award
of Rule 11 sanctions was “subsumed” by the amount of attorneys’ fees awarded under § 285, which “ha[d] sufficiently admonished ICU and its counsel for any improper conduct under Rule 11.” Id. at 18 (alteration in original) (quoting Fee Determination Order at 9).