Federal Cir. Affirms Imposition of Sanctions Against Patent Lawyer on Discovery Issues

Bloomberg BNA’s Patent Trademark & Copyright Law Daily™is the IP industry’s premier news service, offering objective, timely,and reliable daily news coverage and commentary from leading IP law...

A federal district court did not abuse its discretion or commit error in imposing discovery sanctions against the counsel of a party in a patent infringement lawsuit, the U.S. Court of Appeals for the Federal Circuit ruled July 26 (Rates Technology Inc. v. Mediatrix Telecom Inc., Fed. Cir., No. 2011-1384, 7/26/12).

Affirming monetary sanctions, the court said that there was no due process violation and that the attorney had been given adequate notice and opportunity to address the lower court before sanctions were imposed.

Plaintiff Fails to Outline Theory of Infringement.

Rates Technology Inc. held two patents (5,425,085 and 5,519,769) on “systems for minimizing the cost of placing long-distance telephone calls.” In June 2005, it initiated patent infringement claims against Mediatrix Telecom Inc. and other parties.

Mediatrix stated that the basis for the infringement allegation was unclear and Magistrate Judge Kathleen A. Tomlinson of the U.S. District Court for the Eastern District of New York granted Mediatrix's request for early, limited discovery in the form of three interrogatories against Rates regarding its theory of infringement.

Interrogatory No. 3 asked Rates to set forth the basis for its infringement claims, “including without limitation, identification on an element-by-element basis of the component, structure, feature, functionality, method or process of each accused Mediatrix product that allegedly satisfies each element.

In November 2005, the magistrate judge ordered Rates Technology to respond to this interrogatory. After issuing three more such orders, the magistrate judge concluded that there had been no adequate response and that this failure to comply with orders had been willful.

The magistrate judge then recommended dismissal of the infringement claims and imposition of $87,000 in sanctions to be split evenly between Rates Technology and its counsel, James B. Hicks of Hicks Parks, Los Angeles.

In January 2010, Judge Joanna Seybert adopted the magistrate judge's recommendation, stating that Rates and Hicks--party and counsel--were equally responsible for the failure to obey orders of the court.

Hicks appealed the monetary sanctions against him, arguing that he, personally, was not responsible for violating any discovery orders, that the sanction violated due process, and that the district court should have heard oral argument on the motion for sanctions.

Information Was Available to Counsel.

Judge William Curtis Bryson first rejected Hicks's argument that the discovery orders in question constituted demands for information that was not in Hicks's possession.

The court distinguished a series of decisions that established the proposition that sanctions against someone for failure to produce information not in his or her possession constituted a due process violation.

In those cases, the court said, the interrogatories were directed at questions of fact. However, in the instant case, Interrogatory No. 3 was asking the plaintiff for its theory of infringement.

The court said that Hicks had failed to show any error in the district court's conclusion that Hicks and Rates both had in their possession the information necessary to respond to this question and that they had failed to take advantage of the available opportunities to object to the discovery requests.

Furthermore, the magistrate judge had also noted that Rates had submitted substantial evidence into the record during the discovery process, but had consistently failed to respond to this one interrogatory.

Thus, the court said, there was no demonstrated error in the district court's finding that Hicks had failed to provide information that was in his possession. The court also rejected, based on the record, the argument that Hicks had not been given adequate notice that he might be subject to sanctions.

The court cited a statement by the magistrate judge that Rates was being given its final opportunity to respond and that the court would “fashion an appropriate remedy” in the case of failure. The motion for sanctions under Fed. R. Civ. P. 37(b) itself also gave notice to Hicks, the court said, in that it provides for sanctions against “the disobedient party, the attorney advising the party, or both.”

Court Rejects Shifting of Blame.

Regarding Hicks's argument that he, personally, did not violate any discovery order nor advise Rates Technology to do so, the court said, “As lead counsel for [Rates Technology], Mr. Hicks had a duty to comply with the district court's orders, which he failed to do--a failure that the magistrate judge characterized as willful.”

The court said it rejected his “attempt to shift the blame for the discovery abuses” to Rates Technology's patent counsel. The court found no reason to overturn the district court's ruling that Hicks himself had engaged in “egregious” conduct and was responsible for it.

Finally, the court found no abuse of discretion in the lower court's refusal to hold oral arguments on the motion for sanctions. The court noted that Hicks had an opportunity to discuss the motion at a hearing that also dealt with other matters.

Furthermore, under Dotson v. Griesa, 398 F.3d 156 (2d Cir. 2005), and other Second Circuit cases (applicable because the sanctions issue was not grounded in patent law), the court said, “there is no general right to make an oral presentation in civil matters, even on dispositive motions.”

The appellate court also said that Hicks had been given the opportunity to address the lower court orally and in writing regarding this issue on several occasions, such as status conferences and hearings on motions to compel. And on several such occasions, the magistrate judge warned of the possibility of sanctions.

The court thus found no abuse of discretion or error on the part of the lower court.

In addition, the court found that in appealing to the Federal Circuit, Hicks's brief included “misleading or improper” statements, but had not taken these into account in reaching its conclusion.

The court's opinion was joined by Judges Timothy B. Dyk and Kimberly Ann Moore.

James B. Hicks of Hicks Parks, Los Angeles, represented himself. Mediatrix was represented by Adam M. Conrad of King & Spalding, Charlotte, N.C.

By Anandashankar Mazumdar  

Opinion at http://pub.bna.com/ptcj/RatesTechJuly26.pdf