Digeo's Winning Appeal Lessens Blow in "Dead" Inventor Case

Digeo, Inc., maker of "state of the art home entertainment technologies," won an appeal yesterday brought by rival, Audible, Inc. in a dispute involving U.S. Patent No. 5,734,823, a patent entitled "Systems and Apparatus for Electronic Communication and Storage of Information." US5734823.pdf Yesterday's decision by the Federal Circuit Court of Appeals affirmed Judge Robart's ruling that the case is not "exceptional" within the meaning of 35 U.S.C. Section 285. Digeo lost the case on summary judgement in a bizarre turn of events, including the "discovery" that a listed inventor, presumed by all to be dead, was actually alive.

Put yourself in the shoes of plaintiff's counsel for a moment. Imagine receiving service of a subpoena for the deposition of a listed inventor you thought was dead for two years. Now imagine what this would do to your allegations in the complaint that your client is "the owner of all right, title, and interest in the '823 patent, including the right to sue for infringement of that patent." This sounds like every lawyer's nightmare.

Digeo's complaint was dismissed for lack of standing. Smelling blood, Audible moved for attorneys fees and a finding that the case was "exceptional" under section 285. Audible did not assert Rule 11 grounds for fees, just a ruling that the case was exceptional and that it should therefore be entitled to fees. Judge Robart denied Audible's motion, finding that Digeo and its lawyers did not know (and had no reason to know) certain assignment documents in the file history were "forgeries."

In affirming Judge Robart's decision, the CAFC clarified the often confusing cases granting attorney's fees under Rule 11 and section 285. Audible relied heavily on the CAFC's decision in View Engineering Inc. v. Robotic Vision Sys. Inc, 208 F.3d 981 (Fed. Cir. 2000), a case applying Ninth Circuit law and affirming an award of sanctions based on Rule 11. In View Engineering, the CAFC explained that the plaintiff has the burden of proof to identify facts showing a reasonable pre-filing investigation. Calling the View Engineering case "inapposite" to Audible's appeal, the CAFC drew a distinction between cases seeking fees under section 285 and those seeking fees under Rule 11. In a Rule 11 case, the plaintiff bears the burden of proof to show a reasonable pre-filing investigation, while in a section 285 context, the accused infringer will have the burden to prove that a given case is "exceptional." Of course, many "exceptional"cases are also ones where the prevailing party has sought sanctions under Rule 11, so in many cases both standards may apply.

Another rule from this case is that there is no affirmative duty for a plaintiff to investigate title prior to filing an infringement law suit, not unless he "knew or should have known its legal title was defective."