View Engingeering v. Robotic Vision Systems

• Decision Date: 29 March 2000
• Citation: 208 F.3d 981,54 USPQ2d 1179
• Parties: (Fed. Cir. 2000) VIEW ENGINEERING, INC., Plaintiff-Appellee, v. ROBOTIC VISION SYSTEMS, INC., Defendant, and MORRISON LAW FIRM, Appellant. 99-1399 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 981

208 F.3d 981 (Fed. Cir. 2000)

VIEW ENGINEERING, INC., Plaintiff-Appellee, v. ROBOTIC VISION SYSTEMS, INC., Defendant, and MORRISON LAW FIRM Appellant.

99-1399

United States Court of Appeals for the Federal Circuit

DECIDED: March 29, 2000

Corrected: March 31, 2000

Appealed from: United States District Court for the Central District of California Judge Lourdes G. Baird

Ernie L. Brooks, Brooks & Kushman, P.C., of Southfield, Michigan, argued for plaintiff-appellee. With him on the brief was Frank A Angileri.

David L. Just, Lucas & Just, LLP, of New York, New York, argued for appellant. With him on the brief were Donald C. Lucas.

Before MICHEL, LOURIE, and LINN, Circuit Judges.

MICHEL, Circuit Judge.

The Morrison Law Firm ("Morrison") appeals from the decision of the United States District Court for the Central District of California sanctioning Morrison under Rule 11 of the Federal Rules of Civil Procedure. See View Eng'g, Inc. v. Robotic Vision Sys., Inc., No. CV 95-1882 (C.D. Ca. Apr. 14, 1999). On March 24, 1995, Paul, Hastings, Janofsky and Walker, on behalf of View Engineering, Inc. ("View"), filed a claim for declaratory relief against Robotic Vision Systems, Inc. ("Robotic") seeking to have Robotic's U.S. Patent No. 4,238,147 ("the '147 patent") declared invalid, or, in the alternative, seeking a finding of no infringement. On July 18, 1995, Morrison, through its local counsel, Arter & Hadden, on behalf of Robotic, filed an answer, counterclaiming that View infringed eight of its patents. On April 15, 1996, View filed a motion for summary judgment and for sanctions, alleging that Robotic's counterclaims were without merit. On April 22, 1996, Robotic withdrew its counterclaims for infringement on two of the eight patents. By May 20, 1996, Robotic withdrew its counterclaims with respect to three more of the eight patents, leaving three patents at suit. On June 24, 1996, the district court granted View's motion for summary judgment of no infringement on those three remaining patents. In addition, the district court granted View's motion for Rule 11 sanctions against Morrison, Robotic's counsel of record. The appeal was submitted for our decision following oral argument on March 6, 2000. We affirm the district court's award of sanctions under Rule 11.

BACKGROUND

View and Robotic were competitors in the field of three-dimensional vision technology, a technology whose principal use is the scanning of computer chips to insure that the leads are properly aligned.¹ Robotic holds the '147 patent (entitled "Recording Images of a Three-Dimensional Surface by Focusing on a Plane of Light Irradiating the Surface").

On March 24, 1995, Paul, Hastings, Janofsky and Walker, on behalf of View, filed a claim for declaratory relief against Robotic, seeking to have the '147 patent declared invalid, and, in the alternative, seeking a finding of no infringement by View of the '147 patent. On July 18, 1995, Morrison, through its local counsel, Arter & Hadden, on behalf of Robotic, filed an answer. Robotic also counterclaimed alleging that View's products infringed eight distinct patents -- including the one View sought to have invalidated. At this point Robotic had not seen View's products. Robotic's counterclaims were, in fact, based solely on Howard Stern's² "belief . . . based on [his] knowledge of the [Robotic] patents, View's own advertising and its claims to customers as to what its machines did, and [his] knowledge and understanding of the technology required [in the field.]" Stern Aff. ¶ 16.

Robotic served its first discovery requests on October 6, 1995. Discovery requests for documents went unanswered by View until April 12, 1996 when Robotic and View signed a protective order. View then produced approximately 1700 pages of documents marked "Attorneys Eyes Only".³ Robotic protested the marking of all 1700 pages "Attorneys Eyes Only" and the marking was lifted on the manuals provided to View's customers for their machines.

After the manuals released to Robotic, Robotic determined that there was no infringement of two of the patents and on April 22, 1996, Robotic withdrew its infringement counterclaims with regard to those two patents. Robotic then engaged an expert to review the remaining documents, and withdrew its charge of infringement with regard to three more patents by May 20, 1996.

In the meantime, on April 15, 1996, View moved for sanctions against Robotic and Morrison, stating that there was no reasonable basis under Rule 11 for their filing of counterclaims accusing View of infringing 120 claims of eight different patents. On June 26, 1996, Judge Baird awarded sanctions against Morrison in the amount of 75% of View's costs, including attorney fees, from the time of filing of the counterclaims through the motion for sanctions. It is undisputed that Morrison made the filing decision -- Mr. Stern stated in his affidavit that "in reliance on [Morrison's] advice that [Robotic] had sufficient grounds to assert a counterclaim, [Robotic] authorized the filing of the counterclaims alleging infringement of the eight patents at issue. No officer at [Robotic] signed or verified the counterclaim." Stern Aff. ¶ 17. The district court found that Robotic was justified in relying upon Morrison for legal advice, but that Morrison had violated Rule 11(b) by filing suit before making a reasonable inquiry into the facts. The judge found, furthermore, that this was only true for six of the eight patents on which counterclaims were filed, and, therefore awarded View only 75% of their attorney fees.

Morrison appealed the June 26, 1996, Order awarding sanctions against it before the court actually quantified the sanctions award. The Federal Circuit dismissed the appeal, on the basis that the sanction was not final, and thus not appealable, since the amount of the sanction had not yet been determined, and remanded the case. See View Eng'g, Inc. v. Robotic Vision Sys., Inc., 1997 U.S. App. LEXIS 13741, No. 96-1472 (Fed. Cir. June 10, 1997).

On remand, the district court quantified the sanctions amount as $97,825.48 and retracted its previous order on June 24, 1996, to the extent that it held that View was entitled to 75% of its fees. The district court stated "that this amount [was] necessary to act as a future deterrent to attorneys considering filing suit without first performing a reasonable inquiry as to the existence of a valid claim." View Eng'g, slip op. at 25-26.

Morrison timely appealed the sanctions to this court. We have jurisdiction under 28 U.S.C. § 1295 (1994).

DISCUSSION

Rule 11 of the Federal Rules of Civil Procedure imposes a duty on attorneys to certify by their signature that (1) they have read the pleadings or the motions they file and (2) the pleading or motion is "well-grounded in fact," has a colorable basis in law, and is not filed for an improper purpose. Fed. R. Civ. P. 11. Judge Baird held in the instant case that Morrison failed to conduct a reasonable inquiry into the facts before filing counterclaims for Robotic, and so sanctioned Morrison. Rule 11 sanctions are reviewed for the error underlying them under the abuse of discretion standard. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384,405 (1990). The abuse of discretion standard applies to both the decision to sanction, and the amount of the sanction. See Id. The Supreme Court has held that the "central purpose of Rule 11 is to deter baseless filings. . . . Rule 11 imposes a duty on attorneys to certify that they have conducted a reasonable inquiry and have determined that any papers filed with the court are well grounded in fact [and] legally tenable. . . ." Id. at 393. We must, therefore, determine whether Judge Baird abused her discretion in determining that at the time Morrison filed the infringement counterclaims it had failed to conduct a reasonable inquiry into their legal and factual bases.

I.

Robotic admits that it had no factual basis for its counterclaims.⁴ At the time the counterclaims were filed, the only basis for their filing was the belief of Howard Stern that the View devices probably infringed the Robotic patents. This belief, in turn, was based solely on his knowledge of the Robotic patents, View's advertising, and the statements View made to its own customers. Howard Stern never had physical access to any of the View machines before the filing of the 120 counterclaims of infringement of eight patents.⁵ Morrison's co-counsel, Martin Stein, stated that Robotic filed the counterclaims so it could have "access to View's software and drawings [otherwise] . . . View [could not] possibly hope to convince [Robotic] that it is not infringing one or more of the eight patents." Letter from Stein to Angileri at 2 (Mar. 19, 1996), J.A. at 254. Morrison performed no independent claim construction analysis, nor did it do any formal written infringement analysis before filing the counterclaims. Roger S. Thompson, an attorney with Morrison, states in his affidavit that they relied upon Mr. Stern's review of the technology, and that based on this, and "[their] review of the patents-in-suit and View's literature, [they] prepared the counterclaims herein and authorized their filing by [their] local counsel." Thompson Aff. ¶ 20. No reference is made to any claim construction or infringement analysis on the part of Morrison. In fact, Thompson stated that Morrison's belief that View infringed Robotic's patents was "based on what we could learn about View's machines from publicly available information, and View's literature." Id. ¶ 11. Thompson stated, further, that upon being asked "exactly why, on an element by element basis, [Robotic] felt View infringed the '147 patent" Morrison responded that it "could not do so in that sort of detail until [it] learned what View actually did." Id. ¶ 12. Even relatively standard litigation tactics, such as being asked "for an infringement claim chart struck [Thompson] as a stonewalling...