Combatting Patent Trolls

A subject of extensive debate within the U.S. patent system has been the classification of “patent trolls” — most widely defined as individuals or companies that acquire patents solely for the purpose of assertion, often in cases without any merit, but which leverage the high cost of patent litigation defense to force small settlements. Sometimes, these entities are more charitably described as non-practicing entities (NPEs) — i.e., entities that do not use or practice the technologies claimed in the patents they own.
However, differences in approach and behavior generally separate the most notorious “patent trolls” from other types of NPEs (such as, for example, universities and research institutions that develop, but do not commercialize, new technologies). Ultimately, trolls are often characterized by the widespread assertion of baseless claims calculated to draw nuisance-value settlements.
A number of measures have been enacted in the U.S. patent system to combat the troll problem. Following the lobbying of big tech and others, the 2011 enactment of the America Invents Act provided a significant overhaul of the U.S. patent laws, and with it a number of tools for defending assertions of bad patents. The most popular among these is the introduction of inter partes review proceedings at the U.S. Patent and Trademark Office, which allow parties to challenge the validity of patents, giving the patent office a “second look” in a trial-like proceeding that has become the tool of choice for invalidating bad patents. But despite these new options, the troll problem has persisted.
More recently, in situations of particularly egregious behavior, federal courts have increasingly begun to impose various disciplinary measures on patent trolls — and even their attorneys — including sanctions pursuant to Federal Rule of Civil Procedure Rule 11 and 35 U.S.C. Section 285. These types of sanctions decisions are becoming more common, and possibly even signal a new trend in federal judges increasingly taking patent trolls to task.
When patent trolls or their attorneys commit particularly egregious conduct, courts can order sanctions using a number of mechanisms. One of the most common is Rule 11.

FRCP Rule 11

Federal Rule of Civil Procedure 11(b) requires attorneys to certify that court filings are not presented for an improper purpose, all legal contentions are warranted by existing law, and that there is evidentiary support for factual contentions or denials. Further, Rule 11(c) allows courts to impose sanctions on any attorney, law firm, or party that violates Rule 11(b).
In Cedar Lane Technologies v. Blackmagic Design, No. 20-cv-01302 (NDCA 2020), Rule 11 was raised against plaintiff Cedar Lane, an NPE patent holder. Cedar Lane’s attorney — one of the most prolific filers of recent patent litigation suits nationwide (see, “Top 300 Law Firms by Case Filings”) — filed three amended complaints, two of which were found to have been filed in violation of Federal Rule of Civil Procedure 15, which limits plaintiffs to a single amended complaint as of right.
Additionally, in each filing, Cedar Lane’s attorney was listed as “pro hac vice admission to be filed” — but no such pro hac vice admission was ever sought, until the issue was raised by the court. When questioned by the court, the attorney revealed that he previously had filed 49 suits in the Northern District of California despite not being admitted to the California bar. In 29 of these, he served as lead counsel but did not seek pro hac vice admission or pay an admission fee.
The court ordered sanctions under Rule 11, finding that Cedar Lane’s attorney made frivolous arguments in defense of the Rule 15 violations. Further, the court referred the attorney to the Northern District’s Standing Committee on Professional Conduct for his “deliberate scheme” to avoid paying pro hac vice fees.
The same attorney represented the plaintiff, another patent assertion entity, in Magnacross v. OKI Data Americas, No. 3:20-cv-01959-M (NDTX 2022). Here, Magnacross’ brief filed in opposition to the defendant’s motion to dismiss was found to have included sections that were copied directly from another case asserting the same patent. Problematically, the brief addressed patent claims that were not asserted in the Magnacross case. When questioned by the court, Magnacross’ counsel stated that he had not reviewed the filing, or the defendant’s reply in which the defendant pointed out the issue.
The court issued sua sponte sanctions under Rule 11. In doing so, the court found that counsel for Magnacross’ failure to conduct a reasonable inquiry regarding the contents of its brief was a clear Rule 11 violation, and held Magnacross and its attorney jointly and severally liable for sanctions in the amount of $5,000.