Are Rule 11 Sanctions Warranted If Plaintiff Names the Wrong Defendants?

Yes.

RooR International Bv and Sream, Inc (collectively "RooR") have filed dozens (more? - a recent search suggests over 100 such cases) of suits throughout Florida asserting trademark rights for purported counterfeit sales of its water pipes. 

Recently, RooR asserted such claims against Nipa Enterprise, Inc. and and Ashmaul Hosna for such alleged counterfeit sales at their store in 2016.  But Nipa and Hosna did not own the store in 2016.  Indeed, Nipa Enterprise, Inc. was not formed until 2017.  Defendants filed their Rule 11 motion after waiting for the Rule 11 safe harbor period to elapse.

RooR responded by seeking leave to file an Amended Complaint.  That Amended Complaint named different defendants, and no longer named Nipa and Hosna.  The Court then took up Nipa and Hosna's Rule 11 motion.

Nipa and Hosna claim there is no factual basis for the Complaint because they did not own the store when the counterfeit sale happened. (Doc. 34 at 2-3). Rather than deny or disputing this claim, Roor and Sream filed an Amended Complaint identical to the original Complaint, except it replaces Nipa and Hosna with new defendants. (Doc. 38). So Roor and Sream implicitly admit that the new defendants owned the store at the time of the sale—not Nipa and Hosna. On that basis, the Court concludes that the original Complaint was objectively baseless. See Busse v. Lee Cty., Fla., No. 2:07-cv-228-FtM29SPC, 2007 WL 4350863, at *2-3 (M.D. Fla. Dec. 11, 2007) (finding plaintiff’s claim, that defense counsel perpetuated fraud before she was born, objectively baseless)

RooR likely did not help itself by failing to respond to the sanctions motion:

Roor and Sream also should have known that Nipa and Hosna were the wrong parties. See Attwood v. Singletary, 105 F.3d 610, 613 (11th Cir.1997) (per curiam) (“Rule 11 requires [litigants] to make reasonable inquiries into the veracity of information filed before the court[.]”). A simple public record search could have easily fixed the error. Instead, Nipa and Hosna were named defendants for three months. RooR and Sream wasted three months of Nipa’s, Hosna’s, and the Court’s time and resources. And RooR and Sream have failed to respond as to why they did so when given the chance. The Court thus finds sanctions warranted and will award Nipa and Hosna reasonable costs and attorney’s fees. See Donaldson v. Clark, 819 F.2d 1551, 1556 (11th Cir. 1987) (Rule 11 sanctions can be “viewed as a form of cost-shifting, compensating opposing parties injured by the vexatious or frivolous litigation” or “as a form of punishment imposed on those who violate the rule[.]”).

The Court then imposed liability on plaintiffs' counsel to pay defendants' reasonable costs and attorney fees.

Motion for sanctions, granted.
RooR International Bv v. Ullah Business, Inc., Case No. 2:19-cv-222-FtM-38MRM (M.D. Fla. July 31, 2019) (J. Chappell)

Are the Pleading Standards for Method Claims More Rigorous in the Context of Rule 11?

No.

Micro Processing Technology, Inc. sent a letter to Plasma-Therm alleging that Plasma-Therm was infringing MPT's patent.  Plasma-Therm filed a declaratory judgment action seeking a declaration that it did not infringe.  Six months into the litigation, MPT served preliminary infringement contentions, which were based "[u]pon the information currently available to MPT and its belief."  MPT twice amended its infringement contentions. 

Plasma-Therm then moved to strike MPT's infringement contentions, arguing MPT lacked diligence in their preparation.  The Court denied the motion to strike, noting that while the contentions were "sparce," they gave notice of MPT's preliminary theories.  The Court also noted that the parties would have an opportunity to serve final contentions later in the litigation.

A month later, MPT filed its counterclaims asserting patent infringement (and other claims).    Plasma-Therm moved to dismiss those counterclaims.  Two weeks later (before MPT responded to the motion to dismiss), Plasma-Therm sought sanctions pursuant to Rule 11 for MPT's failure to conduct a proper pre-suit inquiry before asserting its patent infringement counterclaims.

The next day, the Court construed a number of terms the parties has disputed, adopting Plasma-Therm's constructions.  Shortly thereafter, MPT voluntarily dismissed its counterclaims and the case settled in full, but for resolution of the sanctions motion.

MPT offered four defenses to the sanction motion:

1. its counterclaims were compulsory, so it had to file them at an early stage of the litigation;
2. the sanctions motion is better resolved as a motion to dismiss;
3. the standard for pre-suit investigations is different for method patent claims than product claims; and
4. its pre-suit investigation was reasonable in light of its "good faith constructions.

As to the counterclaim being compulsory:

the fact that a counterclaim may be compulsory does not excuse a litigant or counsel from compliance with Rule 11.  See e.g. View Eng'g, Inc. [v. Robotic Vision Sys], 208 F.3d 981, 986 (Fed. Cir. 2000) (affirming Rule 11 sanctions on defendant who filed counterclaims of patent infringement without reasonable inquiry following plaintiff's declaratory action seeking to have defendant's patent declared invalid, or in the alternative, a finding of no infringement).

As to the sanctions motion being better resolved as a motion to dismiss:

The Court disagrees.  With respect to patent infringement claims, Rule 11 asks whether there was, at a minimum, a reasonable basis for a finding of infringement.  Thought not the only factor, the content of the pleadings is relevant to that analysis.

As to the legal standard for sanctions in connection with method claims:

None of the cases MPT cites support its theory that a different pre-filing standard exists with respect to patent infringement claims involving a method. Q-Pharma, Inc. [v. Andrew Jergens Co.], 360 F.3d 1295, 1300-01 (Fed. Cir. 2004) (analyzing a patent “directed to a method” and stating that “[i]n the context of patent infringement actions, we have interpreted Rule 11 to require, at a minimum, that an attorney interpret the asserted patent claims and compare the accused device with those claims before filing a claim alleging infringement”); PPS Data, LLC [v. Athenahealth, Inc], 2012 WL 601208, at *1 (describing pre-filing analysis). Other case law on the topic of Rule 11 sanctions does not support MPT’s assertion, either. See, e.g., Judin v. U.S., 110 F.3d 780, 784 (Fed. Cir. 1997) (analyzing whether claimant and attorney adequately compared accused devices with patent claims involving a method). Therefore, the Court finds no basis to adopt MPT’s contention that it did not need to conduct a factual inquiry prior to filing suit.

As to the reasonableness of its pre-suit analysis:

Here, MPT has not shown why, prior to filing suit, MPT believed its claim of infringement was meritorious. MPT has not compared any product, process, or method utilized by Plasma Therm to the patents-in-suit. Nor has MPT even identified any such product, process, or method utilized by Plasma-Therm against which the patents-in-suit could have been compared. See Judin, 110 F.3d at 784 (Viewing an alleged infringing device “may have been sufficient to put Judin on inquiry about whether the Government was using a device that infringed his patent. But Rule 11 requires more. It requires that the inquiry be undertaken before the suit is filed, not after.”). 

The only explanation MPT gives as to why it believed it had a reasonable chance of proving infringement is provided in a footnote, in which MPT states that “if Plasma-Therm practiced the disputed claims in the way Plasma-Therm implies it did in its claims constructions it would infringe the claims as construed by MPT.” Doc. 111 at p. 2, n. 3. But Plasma-Therm’s claim construction brief does not explain its own products, processes, or methods. Rather, PlasmaTherm’s claim construction brief describes only the patents-in-suit, including the specification and prosecution, to explain why the disputed claim terms should be construed as Plasma-Therm suggests. To the extent MPT draws inferences about Plasma-Therm’s product, processes, or method from Plasma-Therm’s advocacy of certain claim constructions, this is not explained. Nor would such inferences have necessarily been reasonable and sufficient for MPT to meet its burden under Rule 11 given the Court’s rejection of MPT’s claim constructions. See Source Vagabond Sys. Ltd. [v. Hydrapack, Inc.], 753 F.3d 1291, 1302 (Fed. Cir. 2014).

Summarizing its analysis, the Court noted that "neither MPT nor its counsel even suggest that they attempted to apply the claims of the patents-in-suit to any accused device, method, process, or product of Plasma-Therm.  The failure of MPT and its attorneys to make a reasonable inquiry before filing the frivolous infringement counterclaims warrants Rule 11 sanctions."

Motion for sanctions granted.
Plasma-Therm, LLC v. Micro Processing Technology, Inc., Case No. 8:15-CV-2785-T-36TBM (M.D. Fla. Oct. 23, 2018) (J. Honeywell)

Are Fees Recoverable Automatically When You Make a "Good" Offer of Judgement?

Nope.  The party seeking fees pursuant to a rejected Rule 68 Offer of Judgment still has the burden of showing a proper offer was made, was served, and was not accepted.

After what appears to have been 3+ years of contentious copyright infringement litigation, Plaintiffs were awarded $1,015.20 in damages against Defendants.  Plaintiffs owned copyrights in certain artwork, and Defendants had used this artwork in connection with certain "paint parties."  After this damage award, the parties engaged in various motion practice seeking sanctions and costs against each other.  The Court summarized the case's posture as follows:

Although this case presented fairly straightforward issues of copyright infringement, the case proceeded in anything but a straightforward manner. The nearly 400 docket entries in this case contain a plethora of motions for extensions of time and modification of deadlines, and other filings before the Court that can be best described as unprofessional and unnecessary squabbling between the parties. The tone of the parties’ papers was so poor, that early in the litigation the Magistrate Judge admonished the parties to “confine their presentations to facts and law that are relevant to the Court’s determination of the issues presented in the parties’ papers. Counsel shall refrain from caustic comments and characterizations of the motive of any party or counsel.” (Doc. 90, pp. 2–3). Unfortunately, this advice went unheeded, and the case dragged on for another three years.

After deciding neither sides' behavior rose to the level warranting sanctions, the Court addressed Defendants' argument that it was entitled to recover its fees and costs because Defendants had allegedly served an Offer of Judgment pursuant to Fed. R. Civ. P. 68 to settle the case for $2,500 -- more than Plaintiffs recovered at trial.  Problem is, Defendants did not  attach a copy of the offer of judgment that was purportedly served.

Instead, Defendants referenced an "Exhibit 1" in their briefing.  But Defendants did not attach an exhibit to the brief.  Instead, Defendants filed a brief that exceeded the page limits set by local rules and was admonished by the Court for doing so.  (The Court struck a few portions of the brief and refused to consider them in order to bring the brief's page count back into the 25-page limit set by the rules.)

The Court noted that it was not responsible for hunting for the evidence a moving party seeks to use to support its position:

The burden does not fall on this Court to ferret through the ballooned docket in this case to find evidence supporting Bloomington’s claims for fees and costs.  By failing to attach a Rule 68 offer to its Motion for fees, or to otherwise direct the Court where to find the document in the record, Bloomington has not carried its burden of establishing it is entitled to fees under Rule 68. 

Notwithstanding this admonition, the Court did search through the various docket entries and find something labeled "offer of judgment."  But there was not sufficient evidence showing such a document was served in accordance with the rules.   As such, the request for fees pursuant to Rule 68 were denied.

The Court then went through an analysis of Plaintiffs' request for recoverable costs, and awarded $4,482.95 as recoverable costs.

Motions for sanctions, denied.  Motion for fees, denied.  Motion for taxation of costs, granted.

Duncanson v Bloomington, Case No. 6:14-cv-704-PGB-KRS (M.D. Fla. Aug. 23, 2018) (J. Byron)