Fed. Cir. on District Judge's Case Dismissal: Try Again, Without ‘Orders on Confusion'

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By Tony Dutra

Aug. 28 — Southern District of Texas Judge Lynn M. Hughes's dismissal of a patent infringement case with prejudice took a sound thrashing by the Federal Circuit in an Aug. 28 nonprecedential opinion.

The opinion quoted from the district court record frequently, clearly pointing out Hughes's mistakes and misunderstandings, perhaps most tellingly in his issuing an “Order on Confusion” after patent owner KI Ventures LLC submitted its proposed claim constructions.

Former district court judge and now appeals court Judge Kathleen M. O'Malley wrote the opinion, which indicated that Hughes might be better off “using the well-known terminology” of patent law practice the next time around.

Not According to Patent Case Playbook

KI Ventures' patent (U.S. Patent No. 6,569,019) is on a virtual reality game controller shaped like a weapon such as a rifle, pistol or shotgun. It filed this patent infringement action against CTA Digital Inc., which makes and sells video game controllers, and CTA's distributor Fry's Electronics Inc.

In general, Judge Hughes agreed with CTA's repeated complaints that KI Ventures was providing inadequate responses to requests for more information. But the Federal Circuit faulted KI Ventures only as to one order—and that one, only in part.

The list of concerns the court had with Hughes's approach includes:

• At least twice, he asked KI's attorney to “speak English,” and he repeatedly “refused to discuss the actual language of the '019 patent.”

• Hughes made comments indicating skepticism that the controller was patentable without ever reading the whole patent, instead focusing on the figures.

• He clearly asked for claim construction arguments in an order and held that KI's response was inadequate for failure to make infringement arguments; hence the “Order on Confusion.”

• At a hearing on KI's preliminary infringement contentions, he only asked arguments about the patent's validity.


No More Orders of Confusion, Please

Hughes dismissed the case “for recalcitrant non-compliance with Court orders,” with prejudice, citing both Fed. R. Civ. P. 11 and his “inherent power to manage a case and have its orders complied with.” The appeals court held that it was abuse of discretion on both counts.

“Although Rule 11 sanctions may be appropriate if KI had submitted a document to the court for an improper purpose, Rule 11 is not used to sanction non-compliance with court orders,” the court said.

And as to a federal judge's inherent powers, the court said that dismissal as a sanction should only be for “bad faith or willful abuse of the judicial process” under Fifth Circuit law.

“Although KI admittedly failed to comply with part of one court order, they continually tried to clarify their infringement contentions, through pictures, words, and even videos,” the court said. And it characterized CTA's complaints about KI's responses as “disingenuous,” such that they “likely confused the court, stimulating the premature dismissal of this case.”

The Southern District of Texas has local patent rules, but Hughes indicated early he would not be using them. The Federal Circuit did not demand that he do so, but said, “using the well-known terminology would probably help avoid future ‘Order[s] on Confusion.' ”

And above all, the court insisted that Hughes allow KI to refer to the language of the patent, without having to resort to “pictures or ‘simple English.'”

Chief Judge Sharon Prost and Judge Todd M. Hughes joined the opinion.

William P. Ramey, III of Ramey Browning PLLC represented KI Ventures. Peter L. Berger of Levisohn Berger LLP, New York, represented CTA Digital.

Text is available at http://www.bloomberglaw.com/public/document/KI_Ventures_v_Frys_Electronics_Docket_No_1401187_Fed_Cir_Dec_30_2.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Anandashankar Mazumdar at amazumdar@bna.com


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