66 F.4th 1362
Fed. Cir.2023Background
- United Cannabis Corp. (UCANN) sued Pure Hemp Collective in July 2018 for infringement of U.S. Patent No. 9,730,911; litigation was stayed by UCANN’s April 2020 bankruptcy and the bankruptcy was dismissed in January 2021.
- The parties stipulated to dismissal: UCANN’s infringement claims were dismissed with prejudice; Pure Hemp’s counterclaims (including invalidity and inequitable conduct) were dismissed without prejudice.
- Pure Hemp moved for attorneys’ fees and sanctions under 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent authority, alleging (1) inequitable conduct by UCANN’s prosecution counsel for copying a prior-art reference (Whittle) into the patent spec and failing to disclose it to the PTO, and (2) conflicts by UCANN’s counsel (Cooley) for representing another client (GW Pharma).
- Pure Hemp explicitly declined any evidentiary hearing on its fee/sanctions motion; the district court denied the motion on the existing record, citing an undeveloped record and concluding the case was not "exceptional."
- On appeal the Federal Circuit held Pure Hemp was the prevailing party (dismissal with prejudice) but affirmed the denial of fees and sanctions because the record contained genuine disputes on materiality and intent (inequitable conduct), the conflict claim was waived and unsupported, and the appeal was not frivolous.
Issues
| Issue | UCANN's Argument | Pure Hemp's Argument | Held |
|---|---|---|---|
| Prevailing party for §285 | Any district-court error on prevailing-party finding was harmless because court separately denied fees on lack of exceptionality | Pure Hemp was the prevailing party because UCANN’s claims were dismissed with prejudice | Fed. Cir.: Pure Hemp is the prevailing party; district court erred but error was harmless because denial on merits was independently correct |
| Inequitable conduct (materiality + intent) | No inequitable conduct; prosecution counsel reasonably viewed Whittle as immaterial and record is undeveloped | Prosecution counsel copied/pasted Whittle into the spec and withheld it from the PTO, demonstrating materiality and intent to deceive | Appeal: District court did not abuse discretion—record contains genuine disputes of fact; Pure Hemp failed to prove inequitable conduct on the existing record and declined further proceedings |
| Conflicts / sanctions under §1927 and inherent power | No conflict; Pure Hemp failed to raise Rule 1.7 below (waived); no evidence of identical patents or direct adverse positions | Cooley concurrently represented GW Pharma and UCANN and took conflicting positions—warranting sanctions | Fed. Cir.: Conflict argument waived for failure to present in district court; on merits insufficient evidence of direct adversity or sanctionable conduct |
| Frivolous appeal / sanctions on appeal | Appeal was frivolous; sanctions appropriate | Appeal presented arguable issues (including prevailing-party question) and was not frivolous | Court: Appeal not frivolous (close call) — sanctions denied |
Key Cases Cited
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014) (defines "exceptional case" standard under §285)
- Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559 (2014) (abuse-of-discretion review of §285 awards)
- Bayer CropScience AG v. Dow AgroSciences LLC, 851 F.3d 1302 (Fed. Cir. 2017) (fee-seeking party’s burden to show entitlement to §285 fees)
- In re Rosuvastatin Calcium Pat. Litig., 703 F.3d 511 (Fed. Cir. 2012) (elements of inequitable conduct: materiality and specific intent to deceive)
- Thermolife Int’l LLC v. GNC Corp., 922 F.3d 1347 (Fed. Cir. 2019) (district courts have broad discretion to refuse to open additional proceedings post-judgment)
- Wedgetail Ltd. v. Huddleston Deluxe, Inc., 576 F.3d 1302 (Fed. Cir. 2009) (no blanket requirement that district court fully articulate reasoning in fee denials)
- B.E. Tech., L.L.C. v. Facebook, Inc., 940 F.3d 675 (Fed. Cir. 2019) (defining prevailing party as one that rebuffs plaintiff’s attempt to materially alter legal relationship)
- Raniere v. Microsoft Corp., 887 F.3d 1298 (Fed. Cir. 2018) (dismissal with prejudice can create prevailing-party status)
- Highway Equipment Co. v. FECO, Ltd., 469 F.3d 1027 (Fed. Cir. 2006) (dismissal with prejudice carries judicial imprimatur sufficient for prevailing-party status)
- Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (courts’ inherent authority to sanction for bad faith or vexatious conduct)
- White v. American Airlines, Inc., 915 F.2d 1414 (10th Cir. 1990) (§1927 requires intentional or reckless disregard of duties to the court)
- Romala Corp. v. United States, 927 F.2d 1219 (Fed. Cir. 1991) (standards for determining frivolous appeals)