Rembrandt Techs., LP v. Comcast of Fla./Pa., LP (In Re Rembrandt Techs. LP)
899 F.3d 1254
Fed. Cir.2018Background
- Rembrandt acquired nine patents (eight cable-modem related, one broadcast) originally owned by Paradyne and later Zhone; some patents had lapsed and were later revived via PTO petitions stating the delay in maintenance‑fee payment was "unintentional."
- Rembrandt retained three former Paradyne employees as consultants (Attic) under an agreement that provided contingent payments tied to future licensing/litigation proceeds; those consultants later served as fact witnesses.
- After Zhone acquired Paradyne, Zhone destroyed thousands of boxes of warehoused documents (many potentially relevant); Rembrandt had contractual rights to access/copy those materials but did not issue a formal litigation hold until years later.
- Rembrandt filed multi‑district patent suits (consolidated in D. Del.); claim construction rulings and subsequent dismissals left only the ’627 patent, which was resolved against Rembrandt and affirmed on appeal.
- Appellees moved for fees under 35 U.S.C. § 285, alleging (1) improper contingent payments to fact witnesses, (2) spoliation of evidence Rembrandt controlled or should have prevented, and (3) enforcement of fraudulently revived patents; the district court found the case exceptional and awarded ~ $51M in fees.
Issues
| Issue | Rembrandt's Argument | Appellees' Argument | Held |
|---|---|---|---|
| Whether the litigation is "exceptional" under § 285 | Rembrandt argued its conduct did not justify exceptionality and that the court erred procedurally and factually | Misconduct (tainted-witness payments, spoliation, inequitable‑conduct in patent revival) made the case exceptional | Affirmed: district court did not abuse discretion considering the totality of circumstances (Octane Fitness standard) |
| Whether contingent payments to fact witnesses were improper | Agreement did not anticipate witnesses or prejudice defendants; similar arrangements have been upheld when tied to patent assignments | Contingent payments created incentive to tailor testimony and were not part of a patent assignment | Held improper here: contingent interest to likely fact witnesses (not tied to an assignment/license) risked tainted testimony; finding not clearly erroneous |
| Whether Rembrandt is responsible for Zhone’s document spoliation | Rembrandt lacked physical control and did not intentionally cause destruction | Rembrandt had contractual access/control, knew destruction was foreseeable, and failed to preserve or instruct others to preserve | Held spoliation finding not clearly erroneous: court reasonably found Rembrandt had control/duty and its inaction was prejudicial |
| Whether the revived patents were unenforceable for inequitable conduct | Revival was, at most, a mistake; clear-and-convincing intent to deceive not shown | Statements that abandonment was "unintentional" were material to revival and, given surrounding evidence, deceptive intent was the most reasonable inference | Held: district court reasonably found inequitable conduct by Paradyne and that Rembrandt had or should have had sufficient knowledge; not erroneous under applicable standards |
| Whether the fee award was properly sized and tied to misconduct | Rembrandt argued the award was excessive and lacked a causal connection to the specific misconduct | Appellees sought nearly all fees, arguing pervasive misconduct infected the entire MDL | Vacated: district court erred by failing to explain how awarded fees related to specific misconduct; remanded for a remedial, causally‑connected fee allocation (rough‑justice approach) |
Key Cases Cited
- Octane Fitness v. ICON Health & Fitness, 134 S. Ct. 1749 (2014) (district courts have broad discretion to find a case "exceptional" under § 285 using totality of circumstances)
- Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (inequitable conduct requires materiality and specific intent to deceive PTO)
- Network Signatures, Inc. v. State Farm Mut. Auto. Ins. Co., 731 F.3d 1239 (Fed. Cir. 2013) (use of standard PTO revival procedure does not automatically prove intent to deceive)
- Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (2017) (fee awards as remedial sanctions must relate to losses sustained; courts should aim for "rough justice")
- Monolithic Power Sys., Inc. v. O2 Micro Int’l Ltd., 726 F.3d 1359 (Fed. Cir. 2013) (pervasive, abusive litigation misconduct can justify full-fee award)
- Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081 (Fed. Cir. 2003) (fee award must bear relation to extent of misconduct)