Court Opinion

ID: 895565
Source: CourtListenerOpinion
Date Created: 2013-06-07 15:22:50.295531+00
Date Added: 2024-06-11T09:05:46.114776
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

       PRECISION LINKS INCORPORATED,
               Plaintiff-Appellant,

                           v.

         USA PRODUCTS GROUP, INC., AND
            HOME DEPOT U.S.A., INC.,
               Defendants-Appellees.
              ______________________

                      2012-1461
                ______________________

   Appeal from the United States District Court for the
Western District of North Carolina in No. 08-CV-0576,
Judge Martin Reidinger.
                ______________________

                 Decided: June 7, 2013
                ______________________

    JAMES M. HARRINGTON, Harrington Law, P.C., of Con-
cord, North Carolina, argued for plaintiff-appellant.

    JASON M. GONDER, Haynes and Boone, LLP, of San
Jose, California, argued for defendants-appellees. With
him on the brief was DEBRA J. MCCOMAS, of Dallas, Texas.
                  ______________________
2                PRECISION LINKS INC.   v. USA PRODUCTS GROUP
     Before DYK, BRYSON, and REYNA, Circuit Judges.
BRYSON, Circuit Judge.
     This is an appeal from an award of attorney fees in a
patent case. The district court entered a fee award in
favor of the defendants based on its conclusion that the
plaintiff’s claims were frivolous and that the plaintiff had
engaged in litigation misconduct. While we uphold the
district court’s conclusion that various aspects of the
plaintiff’s conduct are sanctionable, we disagree with the
district court’s conclusion as to one aspect of the plaintiff’s
conduct and we therefore vacate the sanctions award and
remand for the district court to revisit whether this case
qualifies as an exceptional case, whether attorney fees
should be awarded, and if so in what amount.
                              I
    The plaintiff, Precision Links Incorporated, owns U.S.
Patent No. 5,673,464 (“the ’464 patent”), which claims a
tie-down strap to restrain the movement of cargo during
transport and a “cargo securement system for restraining
the movement of cargo” comprising a plurality of such
straps. Precision sued USA Products Group, Inc., which
manufactured a strap designed for restraining cargo, and
Home Depot, U.S.A., Inc., which sold the strap in its retail
outlets, alleging that the strap infringed claims 1, 6, and 8
of the ’464 patent. Precision also asserted a state law
claim for unfair and deceptive trade practices based on
the defendants’ sale of the accused straps.
    After dismissing the state law claim and denying the
plaintiff’s motion for a preliminary injunction, the district
court adopted the defendants’ proposed construction of the
key term in the asserted claims. Because the parties
agreed that the accused products would not infringe
under the district court’s claim construction, the district
court entered summary judgment of noninfringement.
 PRECISION LINKS INC.   v. USA PRODUCTS GROUP              3
    Precision appealed to this court, but its notice of ap-
peal was untimely, and this court dismissed the appeal.
Precision Links, Inc. v. USA Prods. Group, Inc., 404 Fed.
App’x 478 (Fed. Cir. 2010). Following the dismissal of the
appeal, the defendants filed an application for attorney
fees, arguing that the case was exceptional under 35
U.S.C. § 285. The district court granted the motion and
awarded attorney fees in the amount of $250,395. The
district court based its ruling in substantial part on its
conclusion that Precision’s infringement action was
objectively baseless and had been brought in bad faith.
The court concluded that Precision’s argument as to the
construction of claim 1 was frivolous, and that Precision’s
pre-filing investigation was inadequate and evidenced its
lack of good faith. The court added that the portion of
counsel’s pre-filing opinion letter relating to claims 6 and
8 was “so lacking in any fundamental analysis or eviden-
tiary support that the Plaintiff’s reliance on [the] opinion
in asserting infringement of Claims 6 and 8 was unrea-
sonable and reflects a lack of good faith.”
     In addition, the court found that Precision had en-
gaged in several acts of litigation misconduct that were
“so vexatious and unjustified so as to warrant the imposi-
tion of fees in this case.” In particular, the court regarded
as “frivolous” Precision’s theory that the accused straps
were manufactured of a cheap and inferior material, and
it criticized Precision’s reliance on that allegation to
support both its motion for a preliminary injunction and
its state law claim of unfair and deceptive trade practices.
The court also found that Precision unnecessarily extend-
ed the litigation by filing a frivolous motion in the district
court in an effort to salvage its untimely appeal, which
imposed additional costs on the defendants. Precision
appeals from the fee award.
4               PRECISION LINKS INC.   v. USA PRODUCTS GROUP
                            II
    We review a district court’s exceptional case finding
under section 285 for clear error and an attorney fee
award under that section for an abuse of discretion.
However, “because of the substantial economic and repu-
tational impact of an award of attorney fees, we examine
the record with care to determine whether the trial court
clearly erred in its exceptional case finding.” Eon-Net LP
v. Flagstar Bancorp, 653 F.3d 1314, 1324 (Fed. Cir. 2011).
                            A
    In the sanctions proceeding, the district court focused
mainly on Precision’s claim construction argument. That
argument formed the basis for Precision’s contention that
the accused straps infringed claim 1 of the ’464 patent. In
pertinent part, that claim recites a tie-down strap with
openings, each of which is “dimensioned for the passage
therethrough of a main body portion of a second identical
tie down strap for the redirection of the second identical
tie down strap when the elastic main body portion defin-
ing said opening is elongated.” The specification and
figures of the ’464 patent make clear that the second strap
must be able to pass through the openings in the first
strap, which enables the user to create a multiple-strap
configuration that can be used to secure cargo.
     The accused straps had openings along their length,
but the openings in the straps were not as large as those
depicted in the ’464 figures. Moreover, instead of tapering
off, the accused straps had bulbous ends with removable
hooks. The parties agreed that although one of the ac-
cused straps could be passed through an opening in
another of the straps when the first strap was stretched,
it could do so only with some difficulty and only by dis-
torting the shape of the opening.
    Precision argued that the quoted limitation should be
construed to mean that the openings in the straps are
 PRECISION LINKS INC.   v. USA PRODUCTS GROUP             5
large enough to permit one of the straps to be pulled
through the opening in another. Precision contended that
the limitation did not require that the openings be “so
large that the main body portion [of the second strap] can
pass through without touching the sides, but simply that
it can pass through.” The district court, however, con-
strued the claim language more narrowly, to mean that
“by the elongation of the first tie down strap, the plurality
of openings in said strap become dimensioned for the
passage therethrough of a main body portion of a second
identical tie down strap, thus permitting redirection of
the second identical tie down strap.” That meant that an
opening in the first strap must be dimensioned for pas-
sage of the second strap solely as a result of the elonga-
tion of the first strap, and not by any additional distortion
caused by the passage of the second strap through the
opening.
     Because it was acknowledged that one of the accused
straps could not pass through the opening in a second
such strap without stretching and distorting the opening,
the district court’s claim construction effectively defeated
Precision’s claim of infringement. In the sanctions pro-
ceeding, the district court held that Precision’s claim
construction argument was objectively baseless and that
its infringement action on claim 1 of the ’464 patent was
sufficiently frivolous that it must have been brought in
bad faith. 1
    We need not, and do not, decide whether the district
court’s claim construction was correct; it is sufficient for

    1  We review the district court’s determination of ob-
jective baselessness without deference, the factual find-
ings underlying its determination of subjective bad faith
for clear error, and its attorney fee award for abuse of
discretion. Highmark, Inc. v. Allcare Health Mgmt. Sys.,
687 F.3d 1300, 1309-10, 1322 (Fed. Cir. 2012).
6                PRECISION LINKS INC.   v. USA PRODUCTS GROUP
us to conclude that Precision’s argument as to the proper
construction of the claim was at least not frivolous. For
that reason, we hold that Precision’s infringement theory
as to claim 1 of the ’464 patent was not objectively base-
less and that it was improper for the district court to
conclude that the infringement allegations as to claim 1
were brought in bad faith.
    In ruling that the first strap “must achieve the di-
mensions required for the passage therethrough of the
main body of a second strap by the act of elongation,” the
district court looked to a dictionary definition of the word
“dimensioned” (i.e., “form[ed] to the required dimensions”)
which the court regarded as consistent with the plain
meaning of the limitation.
    The court also relied on the specification, which the
court interpreted as requiring that the opening in the first
strap be “dimensioned for” the passage of the second strap
solely “by the elongation of the first strap.” The court
found no support for the plaintiff’s argument that some
minor deformation of the first strap’s opening would be
permitted as the second strap passed through it, as long
as the passage did not result in “substantial deformation”
of the opening, and as long as the stretching required to
accommodate the second strap did not require “excessive-
ly loading the first strap” by exceeding its recommended
stretching tolerance.
    While the evidence surveyed by the district court pro-
vides some support for the court’s claim construction of
the critical claim language, we do not believe that the
evidence is sufficiently conclusive to render the plaintiff’s
contrary argument frivolous. Patent holders “are shielded
from the additional litigation burden of fee-shifting when
their positions are reasonable.” Checkpoint Sys., Inc. v.
All-Tag Sec. S.A., 711 F.3d 1341, 1346 (Fed. Cir. 2013). It
was reasonable for Precision to view an opening as “di-
mensioned for” the passage of an object even if the object
 PRECISION LINKS INC.   v. USA PRODUCTS GROUP             7
must distort the opening in order to pass through it, as
could be true, for example, of a button passing through a
hole in an elastic fabric, or the ends of fingers passing
through the holes in fingerless rubber gloves. Even if
distorting the strap’s openings would not be the optimal
design, even “inefficient infringement” is still infringe-
ment. Biogen, Inc. v. Berlex Labs., Inc., 318 F.3d 1132,
1141 (Fed. Cir. 2003), citing Laitram Corp. v. Cambridge
Wire Cloth Co., 863 F.2d 855, 859 (Fed. Cir. 1988).
    Moreover, Precision argued that while the bulbous
end portions of the accused straps were larger than the
openings, the “main body” portions of the accused straps
were smaller than the ends and were approximately the
same size as the openings. It was not frivolous to argue
that the claim should be construed to permit a minor
distortion of the opening as the “main body” portions
passed through.
    Nor is there anything in the specification or the pros-
ecution history of the ’464 patent that unmistakably
limits the scope of the claim language in the manner
suggested by the district court. The fact that depictions of
the preferred embodiment do not reveal any distortion in
the openings is unsurprising. Although the specification
suggests that elongation of the strap is preferably respon-
sible for the dimensioning of the openings, it does not
explicitly rule out distorting the openings after elonga-
tion. Thus, we conclude that the district court clearly
erred in finding that Precision’s proposed claim construc-
tion was frivolous and that its allegation of infringement
of claim 1 was objectively baseless and brought in bad
faith.
     We also do not agree with the district court that Pre-
cision’s pre-filing investigation of the infringement allega-
tions as to claim 1 was inadequate. A simple examination
of the accused product was sufficient to show that, under
Precision’s proposed claim construction, the accused
8               PRECISION LINKS INC.   v. USA PRODUCTS GROUP
product would infringe claim 1. USA Products concedes
that its straps can be elongated to lengthen the openings
to some degree, and that a second strap could be passed
through an opening, although with some distortion of the
opening. If Precision erred, it was in its claim construc-
tion, which we have found to be reasonable, not in its
investigation under that construction.
    We take a different view, however, of Precision’s alle-
gations regarding claims 6 and 8. Those claims were to a
“cargo securement system” comprising a plurality of
elongateable straps used in conjunction. In his pre-filing
opinion letter, Precision’s counsel acknowledged that he
had no evidence that the accused straps were sold with
instructions or other directions that they should be used
in tandem; instead, the opinion letter simply stated that
“claims 6 and 8 might form the basis for a claim of con-
tributory infringement or for infringement by inducement,
and so these claims should be pled as well.”
    Precision never identified any act by the defendants
that would constitute contributory infringement or in-
fringement by inducement, and it never identified any
evidence that any third party had engaged in infringing
conduct at the behest of the defendants. The district
court therefore found that the allegations of infringement
were baseless and that any reliance on the pre-filing
opinion of counsel would have been unreasonable. The
opinion, the court observed, “is completely devoid of
analysis and fails to provide an objective basis for bring-
ing suit for infringement of the ’464 Patent.” The inade-
quate pre-filing investigation demonstrated that the
plaintiff “lacked any reasonable basis to accuse the De-
fendants of infringing Claims 6 and 8.”
    In its request for reconsideration of the court’s attor-
ney fee award, Precision argued that there was a reason-
able basis for charging the defendants with indirect
infringement, because the defendants “offer[ed] to sell
 PRECISION LINKS INC.   v. USA PRODUCTS GROUP            9
multiple of the accused straps together,” by which Preci-
sion appeared to mean that there was more than one such
item on the shelf at one time. But that assertion falls far
short of the kind of showing required for indirect in-
fringement. See Fujitsu Ltd. v. Netgear Inc., 620 F.3d
1321, 1326 (Fed. Cir. 2010); C.R. Bard, Inc. v. Advanced
Cardiovascular Sys., Inc., 911 F.2d 670, 675 (Fed. Cir.
1990). We therefore uphold the district court’s conclusion
that the charges of infringement as to claims 6 and 8 were
frivolous.
                              B
     In addition to finding that Precision’s charges of in-
fringement were baseless, the court concluded that Preci-
sion had engaged in litigation misconduct that provided
further justification for the imposition of attorney fees. 2
First, the court ruled that Precision had sought a prelimi-
nary injunction based in large part on the theory that the
accused straps were manufactured of an inferior material
and posed a threat of malfunction. Precision sought to
enjoin the defendants from selling the allegedly inferior
product because customers could be injured by those
products and mistake them for Precision’s similar-looking
invention. The district court characterized that theory as
“frivolous,” and we agree. Precision’s theory of irrepara-
ble harm was based on pure speculation by its owner; the

   2   Although litigation misconduct “generally involves
unethical or unprofessional conduct by a party or his
attorneys during the course of adjudicative proceedings,”
Old Reliable Wholesale, Inc. v. Cornell Corp., 635 F.3d
539, 549 (Fed. Cir. 2011), it also includes “advancing
frivolous arguments during the course of the litigation or
otherwise prolonging litigation in bad faith.” Highmark,
687 F.3d at 1316. The district court found Precision’s
litigation misconduct to fall into that category.
10               PRECISION LINKS INC.   v. USA PRODUCTS GROUP
district justifiably held that speculation plainly insuffi-
cient to warrant the exceptional remedy of a preliminary
injunction. Precision provided no foundation from which
one could conclude that its owner had any reliable
knowledge of the accused strap’s quality or durability.
We therefore sustain the court’s reliance on the improvi-
dent preliminary injunction motion as further support for
the court’s exceptional case finding.
     Second, the district court pointed to Precision’s efforts
to resuscitate its original appeal after filing a late notice
of appeal. Following its out-of-time notice of appeal,
Precision asked for one of three alternative forms of relief
from the district court: (1) to characterize its response to
the defendants’ motion for summary judgment, in which it
announced that it intended to appeal after the entry of
judgment, as a timely notice of appeal; (2) to amend a
previous order to retroactively grant an extension of time
for filing its notice of appeal; or (3) to treat its out-of-time
notice of appeal as a request for an extension of time to
file a notice of appeal because of excusable neglect. The
defendants opposed that motion and moved in this court
to dismiss the appeal as untimely. Before the district
court ruled on the motion, this court dismissed Precision’s
appeal, and the district court then dismissed the motion
as moot.
    We agree with the district court that the litigation
over the timeliness of the notice of appeal was baseless.
Precision’s summary judgment response, in which it
“reserve[d] the right to appeal the Court’s order and the
entry of judgment” if and when those rulings were entered
did not constitute a notice of appeal. 3 Moreover, the

     3In its motion, and in its opening brief on appeal,
Precision cited in support only Becker v. Montgomery, 532
U.S. 757, 767 (2001), and Smith v. Barry, 502 U.S. 244,
249 (1992). Those cases do not stand for the proposition
that a summary judgment response can serve as a notice
 PRECISION LINKS INC.   v. USA PRODUCTS GROUP           11
district court lacked the authority to retroactively convert
its order regarding the timing of the attorney fee litiga-
tion into an order granting an extension to file a notice of
appeal that Precision had not moved for. See Fed. R. App.
P. 4(a)(5)(A). Similarly, at the time of Precision’s motion,
the district court had no authority to grant a motion for
an extension of time to file the notice of appeal based on
excusable neglect. See Shah v. Hutto, 722 F.2d 1167,
1168-69 (4th Cir. 1983). Precision offered no plausible
basis on which the district court could have granted it
relief sufficient to resuscitate its appeal. Therefore,
although an unsuccessful attempt to rescue an untimely
appeal does not constitutes litigation misconduct per se,
the district court was justified in finding Precision’s
arguments to be frivolous and in taking that motion into
consideration in its exceptional case finding.
    The district court found that Precision’s actions undu-
ly extended the proceedings and imposed additional
burdens on its opponents. Giving appropriate deference
to the district court’s superior position to assess the
behavior of the litigants before it, we hold that the court
did not clearly err in considering the behavior at issue to
be litigation misconduct that could properly be taken into
account in making an exceptional case determination.
While an exceptional case finding that is based on litiga-
tion misconduct “usually does not support a full award of
attorneys’ fees,” the court may assess fees to compensate

of appeal, regardless of whether it mentions the prospect
that an appeal may ultimately be filed. This court has
already rejected Precision’s argument because adopting
such a rule “would render [Federal Rule of Appellate
Procedure] 4(a)(1) meaningless.” Precision Links, 404 F.
App'x at 478.
12               PRECISION LINKS INC.   v. USA PRODUCTS GROUP
the opposing party for the extra legal effort to counteract
the misconduct. Highmark, 687 F.3d at 1316. 4
                              C
     In sum, while we sustain most of the district court’s
findings, we disagree with its ruling with respect to
whether Precision’s infringement contention under claim
1 was baseless. Where, as in this case, the “underpin-
nings” of the district court’s fee award “are partially
reversed, we may remand for further evaluation by the
trial court.” Molins PLC v. Textron, Inc. 48 F.3d 1172,
1186 (Fed. Cir. 1995). Because the allegations as to claim
1 played a significant part in the litigation before the
district court, and in the court’s exceptional case determi-
nation, we vacate the attorney fee award and remand this
case for consideration of “the specific types of conduct” we
have identified as potentially supporting a fee order. Id.
On remand, the district court should determine whether
it continues to regard this case as exceptional and deserv-
ing of an attorney fee award in light of our holding that
Precision’s infringement allegations as to claim 1 were not
frivolous. If so, it should determine what award amount
is appropriate for the remaining conduct.
     Each party shall bear its own costs for this appeal.
              VACATED and REMANDED

     4In its second order on the sanctions issue, the dis-
trict court referred in passing to Precision’s “conduct
throughout this litigation” as “demonstrat[ing] a pattern
of disregard for the Court’s rules and deadlines,” but did
not point to specific instances of Precision’s violations. To
the extent that the court on remand elects to base its
sanctions order on violations of the court’s rules and
deadlines, it should make specific findings in that regard.