The Federal Circuit affirmed a district court’s award of sanctions for bad faith against a plaintiff’s conduct based on the meritless nature of several lawsuits filed in incorrect venues.

Background

The case[1] involves PS Products Inc. and Billy Pennington (collectively “PSP”) as plaintiffs-appellants against Panther Trading Co. Inc. (“Panther”) as the defendant-appellee. The appeal is from a decision by the United States District Court for the Eastern District of Arkansas, which granted Panther’s motion for sanctions against PSP.

PSP owns U.S. Design Patent No. D680,188, related to a stun device, and alleged Panther infringed this patent. Panther argued the infringement claim was frivolous, as the patented design and the accused product were dissimilar, and the venue was improper. Panther filed a motion to dismiss the case, and after discovering prior art similar to the patented design, demanded PSP dismiss the lawsuit. PSP moved to voluntarily dismiss the case with prejudice, but Panther sought attorney fees and sanctions. The district court deemed the case exceptional under 35 U.S.C. § 285, awarding Panther $43,344.88 in attorney fees and costs, and imposed $25,000 in deterrence sanctions on PSP and their attorney, Chris Stewart.

PSP appealed the $25,000 sanctions, arguing the district court lacked authority to impose them after awarding attorney fees and costs, and claimed the court applied the wrong legal standard.

Issue(s)

Does a district court have inherent authority to award deterrence sanctions after awarding attorney fees and costs?

Holding(s)

Yes, it is not an abuse of discretion to award deterrence sanctions. The district court did not apply an incorrect legal standard because district courts have inherent power to impose sanctions for bad faith conduct.

Reasoning

The Federal Circuit discussed the proper venue for patent cases, referencing Valeant Pharmaceuticals North America LLC v. Mylan Pharmaceuticals Inc. and In re Cray Inc., emphasizing that venue is proper where the defendant resides or has a regular and established place of business. PS Products Inc. (PSP) had a history of filing numerous patent infringement lawsuits in the Eastern District of Arkansas, often using the incorrect general venue statute, 28 U.S.C. § 1391, instead of the patent-specific statute, 28 U.S.C. § 1400. The district court inferred bad faith from PSP’s pattern of filing meritless lawsuits in incorrect venues. The court found PSP’s conduct warranted sanctions under its inherent power, as Rule 11 sanctions were unavailable due to PSP dismissing the case before Panther could file a motion.

The Federal Circuit declined Panther’s request for additional attorney fees for the appeal, determining that while PSP’s appeal was without merit, it was not frivolous as they had not been previously decided by the court.

[1] PS Products, Inc. v. Panther Trading Co., Inc., No. 23-1665 (Fed. Cir. 2024)