Backertop Licensing LLC v. Canary Connect, Inc., Appeal Nos. 2023-2367, -2368, 2024-1016, -1017 (Fed. Cir. July 16, 2024)

Our case of the week focuses on the inherent power of the district courts to investigate fraud and misconduct. The Chief Judge of the District of Delaware commenced an investigation against patent monetization firms that brought several lawsuits in Delaware, and ultimately ordered a Texas-based representative to appear in person to testify. When the representative failed to appear, the Court issued a contempt order and sanctions. This appeal followed. Notably, the underlying cases had both been dismissed. Accordingly, the Federal Circuit appointed an attorney from Hogan Lovells to represent the interests of the District of Delaware for purposes of the appeal.

Over the preceding year and a half, the Chief Judge of the District of Delaware had identified potential attorney and party misconduct in dozens of related patent cases. The plaintiffs in these cases were limited liability companies that appeared to be associated with IP Edge, a patent monetization firm, and Mavexar, an affiliated consulting shop. The district court developed concerns that arrangements between the firms might have concealed from the court the real parties in interest. The district court was also concerned about whether those parties were perpetrating a fraud on the court.

In November 2022, the district court held evidentiary hearings to gather more information about its concerns. Backertop Licensing was one of the entities involved in the investigation, and appeared to be related to IP Edge and Mavexar. Backertop had filed at least twelve patent infringement cases in various federal courts, including Delaware. Lori LaPray was its sole owner. As part of its investigation, the district court ordered Backertop, Ms. LaPray, and their attorneys to produce certain documents. Shortly thereafter, both attorneys filed motions to withdraw as counsel under what the court found to be unusual circumstances. Backertop also voluntarily dismissed the pending cases.

The dismissal did not dispel the district court’s concerns. Instead, the court carried on its investigation, set a hearing on the pending discovery issues, and ordered Ms. LaPray to attend the hearing in person. Ms. LaPray advised the district court that she would be unable to attend the scheduled hearing in person for a number of reasons, including travel, other matters, and child care, notwithstanding she had previously attended a hearing in Delaware in person. The district court sought to accommodate her travel schedule and set a new hearing. Ms. LaPray asked to attend both telephonically and by video, both requests of which were denied because the district court believed witness credibility was going to be important to gauge, and witness credibility is difficult to assess via telephone or video. Through motion practice, Backertop also argued that the requirement for Ms. LaPray to attend in person violated the geographic limits on subpoenas under Rule 45.

Ms. LaPray did not attend. The district court found her in civil contempt, and fined her $200 per day until she appeared in court in person. Backertop and Ms. LaPray appealed those orders.

After finding it had jurisdiction over the appeal, the Federal Circuit addressed whether the district court’s orders had violated Rule 45. The Court found it had not. Rule 45, it explained, is specific to subpoenas issued by attorneys or the clerk of the Court at the request of a party. It does not apply to courts when they exercise their own power under their inherent authority.

Having found that the district court’s sua sponte order for Ms. LaPray to appear did not violate Rule 45, the Federal Circuit continued its analysis of whether the lower court had abused its discretion in ordering Ms. LaPray to appear. The Court found the orders to be a “reasonable response to the problems and needs confronting the court’s fair administration of justice,” and therefore affirmed.

The opinion can be found here.

By Nika Aldrich

ALSO THIS WEEK

Koss Corporation v. Bose Corporation, Appeal Nos. 2022-2090, 2023-1173, -1179, -1180, -1191 (Fed. Cir. July 19, 2024)

The Federal Circuit handed Bose a win in appeals from inter partes reviews involving three patents owned by Koss Corp. related to wireless earphone technology. While the IPRs and instant appeal were pending, a district court in California had found all asserted claims to be patent-ineligible under 35 U.S.C. § 101 in a separate infringement case Koss had brought against Plantronics, Inc. The California court had dismissed Koss’s complaint with leave to re-plead; Koss had filed an amended complaint narrowed to certain specific claims; and after Plantronics’ second motion to dismiss was briefed but before it was decided, Koss had stipulated to dismiss its case against Plantronics with prejudice. When Koss missed the deadline to appeal in that case, Bose moved to dismiss the instant IPR appeals as moot.

In granting that motion, the Federal Circuit rejected Koss’s argument that the initial dismissal in Plantronics had been rendered a “nullity” by its filing of an amended Complaint, applying issue preclusion principles to find instead that the dismissal had merged with the final judgment. Because Koss had not appealed, the finding of invalidity under § 101 had become final, the inter partes reviews concerning those claims had become moot, and the IPR appeals were accordingly dismissed.

The opinion can be found here.

By Jason A. Wrubleski

Miller Mendel, Inc. v. City of Anna, TX, Appeal Nos. 2022-1753, -1999 (Fed. Cir. July 18, 2024)

In an appeal and cross-appeal from the United States District Court for the Eastern District of Texas, the Federal Circuit addressed three main issues. First, the Federal Circuit addressed the district court’s grant of the City of Anna’s Rule 12(c) motion. At issue was whether the district court had considered materials beyond the pleadings in deciding the motion, and whether the motion should have been granted. Regarding the district court’s considerations, the Federal Circuit found that the district court had been presented with a declaration outside the pleadings, but had not relied on the declaration—nor was the declaration needed for the court’s analysis. The Federal Circuit further held that even if it was error not to exclude the declaration explicitly, that error was harmless because the district court would have reached the same conclusion on the Rule 12(c) motion had it been excluded. Regarding the merits of the motion, the Federal Circuit affirmed the district court’s ruling, holding that the claim language showed that the claimed invention was directed to the abstract idea of performing a background check.

Second, on the City’s cross-appeal, the Federal Circuit addressed whether the district court had erred by limiting its validity findings to only certain claims of Miller Mendel’s patent when Miller Mendel’s complaint asserted that the City “infringes one or more claims.” The Federal Circuit found that the plaintiff had successfully narrowed its allegations in response to the Rule 12(c) motion and no notice of withdrawal of the other claims was necessary.

Third, the Federal Circuit also addressed and affirmed the district court’s denial of the City’s request for attorneys’ fees, holding that it was not an abuse of discretion to find the case not exceptional.

The opinion can be found here.

By Mario E. Delegato

This article summarizes aspects of the law and does not constitute legal advice. For legal advice for your situation, you should contact an attorney.