Rule 11 Sanctions Appropriate for Frivolous Inventorship Pleading

While litigants may oft use Rule 11 prematurely or inappropriately, it does have its proper time and place when deployed as intended. In the patent context, examples include when claim elements are clearly missing in an accused product but a patent owner refuses to withdraw infringement allegations or, conversely, when a defendant continues to contest infringement when all claim limitations are clearly present in the accused product. Rule 11 grounds also arise in different contexts, as in the recent case of Imprenta Services, Inc.v. Karll.

On July 5, 2022, Judge George Wu of the Central District of California ordered Imprenta Services and Mike Sanchez (“Plaintiffs”) to pay $103,722 in Rule 11 sanctions for maintaining objectively baseless inventorship claims against Nicholas Karll and Eco Packaging Solutions (“Defendants”) in Imprenta Services, Inc. et al. v. Karll et al., 20-cv-6177 (C.D. CA. Jul. 5, 2022).

Plaintiffs filed a declaratory judgment complaint for non-infringement of U.S. Patent No. 10,513,375, inequitable conduct and incorrect inventorship. Defendants moved for summary judgment on all three allegations and also sought Rule 11 sanctions of $141,776 for defending against the inequitable conduct and incorrect inventorship charges. Judge Wu agreed that the inventorship allegations were baseless, lacked evidentiary support and were premised on the intentional omission of key facts—“despite having multiple opportunities to do so, counsel has failed to address the unsupported factual assertions in the Complaint or explain why key emails and attachments were omitted from those assertions” indicating that Defendant Karll conceived of the invention, not Plaintiff Sanchez. Id., Dkt. 106, 3, 5. While Plaintiffs’ counsel cited Plaintiffs’ oppositions to Defendants’ various motions, he never addressed how or why the unsupported factual assertions were included in the Complaint—“counsel did not argue he conducted a reasonable investigation supported by facts or argue reasonable mistake; rather, counsel appeared to merely maintain that the allegations were properly included.” Id., 5. Judge Wu explained that “[w]here a conclusory allegation that counsel conducted a prefiling investigation is inadequate to avoid Rule 11 sanctions, the absence of even a conclusory allegation or other meaningful responses is likewise inadequate.”

For the amount, the Court found it “reasonable” and “necessary to deter future conduct” to impose “the sanctions amount jointly and severally against Plaintiffs and their counsel.” Id., 6. Judge Wu also explained that:

although the Court could have awarded an even greater sanction to reflect additional work necessitated by the baseless allegations in the Complaint (e.g., filing a motion to dismiss, completing Markman proceedings, filing an infringement summary judgment motion), the Court elects to cap the amount of sanction here at the reasonable fees and costs incurred in preparing the inventorship motion for summary judgment and the sanctions motion.

Id. He next analyzed the specific amounts billed by Defendants’ counsel and reduced Defendants’ requested amount to $103,722, finding several time entries to be unrelated to the inventorship and Rule 11 motions.

The Imprenta case provides important guidance for both sides of the “v.” For Defendants and defense counsel, it offers a useful approach to recouping reasonable expenses drawn from frivolous litigation on any potential issue—not only weak patents asserted with transparent infringement issues before or after claim construction. For Plaintiffs’ and plaintiffs’ counsel, the case reminds us that once it becomes clear that a claim is unmeritorious, the failure to abandon that claim may result in substantial financial penalties to both a plaintiff and its lawyers.

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