Stone Basket Innovations v. Cook Medical LLC : When Is a Case “Exceptional” for the Purposes of §285?

Posted on 06/26/2018 by William Reid, in Patent Related Court Rulings, Patent Resources

Stone Basket Innovations (SBI) sued Cook Medical LLC (Cook) for infringement of its patent, U.S. Patent No. 6,551,327 (‘327 Patent) in the U.S. District Court for the Eastern District of Texas.[1]  Subsequently, the case was transferred to the U.S. District Court for the Southern District of Indiana (Southern District).[2]  The subject patent related to stone extraction medical devices for removing stones from biological systems, and contained elements directed to a “support filament,” “a handle comprising a sheath moving element,” and a “collapsible wire basket.”[3]  At deposition, in a moment that SBI’s attorneys’ will probably dream of again and again in a kind of horrible Groundhog Day remake, when questioned about the addition of the sheath movement element during prosecution, the inventor of the ‘327 replied, “I realize there is nothing novel about it.”[4]  Yikes!  But this is exactly what happened in Stone Basket Innovations, LLC v. Cook Medical LLC, 2017-2330 (Fed. Cir. June 11, 2018).

Cook subsequently petitioned for inter partes review, and the proceedings in the Southern District were stayed.[5]  SBM filed a motion requesting adverse judgement in the IPR, which was granted, and the PTAB cancelled all the claims.[6]  SBM moved to dismiss the litigation with prejudice, which was also granted.  The anvil, which had been nudged off the edge of the cliff at the inventor’s confession, nearly landed on Wile E. Coyote’s head when Cook filed the §285 motion for attorney’s fees.  However, the District Court denied the motion.  Cook appealed the denial, arguing that the District Court had erred in evaluating the strength of SBI’s position in litigation, and SBI’s alleged, “pattern of vexatious litigation.”[7]  The case came to the Federal Circuit just a few years after the Supreme Court had rejected its standard of what constitutes an “exceptional case,” for which attorney’s fees could be recovered.  Previously, for the Federal Circuit, an exceptional case existed if there had been material inappropriate conduct during litigation (such as inequitable conduct or vexatious or unjustified litigation), or “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.”[8]  The Supreme Court in Octane Fitness, LLC v. Icon Health & Fitness, Inc., found that the Federal Circuit’s standard was so overly rigid[9] that it would render §285 largely superfluous.[10]  The Supreme Court’s standard for an exceptional case is instead “one that stands out from others with respect to the substantive strength of a party’s litigating position *** or the unreasonable manner in which the case was litigated.”[11]   Some of the holdings of post-Octane Fitness Federal Circuit cases are listed in Table 1.  Several of these directly cite the holding in Octane Fitness.

In addressing Cook’s arguments, the Federal Circuit first found no error in the District Court’s holding that SBI had no clear notice of the ‘327 Patent’s invalidity[12]  Merely providing a list of supposedly anticipatory references, one of which was actually listed on the face of the ‘327 Patent along with conclusive statements did not meet the necessary standard.[13]  With regard to the supposedly vexatious conduct and the statement of the ‘327 Patent’s inventor, the Federal Circuit found that while the statement certainly weakened SBI’s position, “a strong or even correct litigating position is not the standard by which” exceptionality is measured.[14]  Moreover, the Federal Circuit pointed out that a comment regarding a single element in a claim of a granted patent, without more, does not invalidate the patent, since all elements in their entirety would need to be considered.[15]  Finally, with regard to Cook’s argument as to the viability of SBI’s litigation position, the Federal Circuit agreed with the District Court, actually faulting Cook, and indicating that they had failed to take actions to bring the litigation to a rapid termination.[16].

This ruling is consistent with other post-Octane-Fitness cases of the Federal Circuit regarding §285, where bad lawyering or sloppy litigation conduct does not, without more, amount to misconduct.  To that we can now add an inventor sprinkling lighting fluid on his own patent and street-dancing around it with a lit torch in both hands.

Table 1.

Federal Circuit Case -Post Octane Fitness Comments on Exceptional Cases
SFA Systems, LLC v. Newegg Inc., 793 F.3d 1344, 1349 (Fed. Cir. 2015). a district court may declare a case exceptional based on unreasonable and vexatious litigation tactics, even where it finds the legal theories advanced not objectively baseless.
SFA Systems, LLC  at 1348. We need only determine whether the district court abused its discretion when it found that the party’s litigating position was not so merit-less as to “stand out” from the norm and, thus, be exceptional.
SFA Systems, LLC at 1350. a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one’s claims, is relevant to a district court’s exceptional case determination under  
SFA Systems, LLC at 1350. to the extent the district court’s opinion in this case can be read to discount the motivations behind a patentee’s litigation history, the district court was wrong.
Lumen View Technology LLC v. Findthebest.com Inc., 811 F.3d 479, 483 (Fed. Cir. 2016), quoting Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1757 (2014) A district court may award fees in the rare case in which a party’s unreasonable conduct – while not necessarily independently sanctionable – is nonetheless so ‘exceptional’ as to justify an award of fees.
Gaymar Industries, Inc., v. Cincinnati Sub-Zero Products, Inc., 790 F.3d 1369, 1372 (Fed. Cir. 2015), citing Octane Fitness, 134 S.Ct. at 1756. The inquiry into the objective reasonableness of a party’s litigating position may still be relevant under Octane because, if a case “stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated,” it is “exceptional” under §285.
Gaymar Industries, Inc. at 1376. Without question, CSZ’s arguments *** could be properly characterized as overstatements.  But none of the cited examples amounts to misrepresentation of litigation misconduct.
Gaymar Industries, Inc. at 1377. the examples cited by the district court – whether considered in isolation or in the aggregate – amount to sloppy argument, at worst.  While such sloppiness on the part of litigants is unfortunately all too common, it does not amount to misrepresentation or misconduct.  In view of the serious consequences of a finding of misconduct, it is important that the district court be particularly careful not to characterize bad lawyering as misconduct.
[1] Stone Basket Innovations, LLC v. Cook Medical LLC, 2017-2330, slip op. at 2 (Fed. Cir. June 11, 2018).
[2] Slip op. at 2.
[3] Slip op. at 2.
[4] Slip op. at 3.
[5] Slip op. at 3.
[6] Slip op. at 3.
[7] Slip op. at 5.
[8] Brooks Furniture Manufacturing, Inc., v. Dutailier International, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).
[9] Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014).
[10] Octane Fitness at 1758.
[11] Octane Fitness at 1756.
[12] Slip op. at 6.
[13] Slip op. at 6.
[14] Slip op. at 7, citing SFA Sys., LLC v. Newegg Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015).
[15] Slip op. at 8.
[16] Slip op. at 9.

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