Anticancer, Inc. v. Crown Bioscience, Inc.: Court Abused Discretion When Plaintiffs Sanctioned to Amend Preliminary Infringement Contentions

Category: Civil Procedure
By: John Kirkpatrick, Contributor 
TitleAnticancer, Inc. v. Pfizer, Inc., No. 2013-1056 (Fed. Cir. Oct. 20, 2014).
Issues[The district court's action, in requiring Anticancer to pay defendants' attorney fees, in order for AntiCancer to supplement its Preliminary Infringement Contentions,] was [an unwarranted] sanction, [...] and that the summary judgment based on the [fee-shifting] was improper.
Anticancer, Inc., at *6 (text added).
HoldingWhen a complaint meets the standards of the Federal Rules, and there has been no reasonable opportunity for discovery and evidentiary development of the issues, it is rarely appropriate to summarily decide the merits against the complainant. We need not intrude upon the district court’s authority to require supplementation of the Preliminary Infringement Contentions when such supplementation may assist the procedures of trial. However, exercise of a court’s inherent authority to levy a sanction as a condition of supplementing the Contentions requires conduct that “constituted or was tantamount to bad faith.”
Id. at *27.


Procedural HistoryAppeal is from the district court’s summary judgment of noninfringement entered not on the substantive merits of any issue raised in the complaint, but on a procedural aspect at the threshold of the litigation arising from application of the Patent Local Rules of the Southern District of California. [Defendants, hereinafter, Pfizer, filed a motion for summary judgment on the patent infringement counts, stating that the Preliminary Infringement Contentions were defective because the “charts are missing claim limitations for each and every claim of each asserted patent, and/or do not identify specifically how Pfizer allegedly practiced each element of the asserted claims.”] The district court imposed a feeshifting sanction as a condition of permitting AntiCancer to supplement the Preliminary Infringement Contentions that the district court found defective under Patent Local Rule 3.1 [in regard to three claim elements]. [...] AntiCancer objected to this condition, and the district court entered summary judgment of noninfringement and duly dismissed the complaint with prejudice.
Anticancer Inc., at *2-3 (text added).  


Legal Reasoning (NEWMAN, Reyna, and Taranto)
Summary Judgment - No Genuine Issue of Material Fact The grant of summary judgment is reviewed without deference. [...] Summary judgment is appropriate when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.
Anticancer Inc., at *7 (text added, internal citations removed).
Application of Local Rules and Disciplinary Authority is Abuse of DiscretionA district court’s application of its local rules is reviewed on the standard of abuse of discretion. [...] The district court’s exercise of its disciplinary authority is reviewed on the standard of abuse of discretion. [...] Abuse of discretion may be established when the court commits a clear error of judgment in weighing the relevant facts or exercises its discretion based upon an error of law or clearly erroneous factual findings.
Id. (text added, internal citations removed).
Sanction Requires Finding of Bad FaithThe Supreme Court has observed that action “in bad faith, vexatiously, wantonly, or for oppressive reasons” may incur sanctions in the form of attorney fees under the court’s inherent powers [that “‘are necessary to the exercise of all others.’”] [...] Invocation of the district court’s inherent powers is a matter of regional circuit law, rather than Federal Circuit law. Under Ninth Circuit precedent, “[b]efore awarding sanctions under its inherent powers . . . the court must make an explicit finding that counsel’s conduct ‘constituted or was tantamount to bad faith.’”
Id. at *8-9 (text added, internal citations removed).
Analysis: Review of Claim Elements Found Insufficient in the Preliminary Infringement Contentions
Revised Contentions Sufficient if Supplemented with Explanations Provided in Opposition to Summary JudgmentThe district court held that the claim charts were deficient as to three elements: the “promoter monitoring” and “delivering cells” elements of [United States Patent No. 6,649,159 (the ’159 patent)], and the “metastasis to a second site” element of [Reissue Patent No. RE 39,337 (the ’337 patent)]. [...] AntiCancer stresses [...] that it is not expected or intended that the Contentions must provide complete proof of infringement before the patentee has a meaningful opportunity to conduct discovery. [...] We note the limiting language of Patent Local Rule 3.1, requiring the plaintiff to identify the accused products, instrumentalities, or acts “of which the party is aware”; and to be “as specific as possible,” with the name or model number of the accused product, device, or apparatus “if known.” These requirements harmonize the Local Rule with the discovery provided by the Federal Rules and warrant consideration when reviewing the district court’s fee-shifting sanction. [...] [W]e do not see how revised Contentions could be insufficient if AntiCancer added to them the brief explanations it provided in its opposition to summary judgment.
Anticancer Inc., at *16-18 (text added, internal citation removed).
Promoter Monitoring Element - No Explicit Finding of Bad FaithEach asserted ’159 patent claim includes the clause “whereby the ability of said promoter to promote expression is monitored.” [...] AntiCancer had argued in its brief opposing the motion for summary judgment that “it would be clear to any competent scientist or even a layman, that measuring the ‘intensity’ of any process is another way of saying that the process is being ‘monitored,’” and provided the declaration of its founder and President, Dr. Robert M. Hoffman, explaining this science. [...] Although the district court described the Contentions as “woefully insufficient” and “vague,” and described AntiCancer as “act[ing] unreasonably” and “disingenuous” in submitting the Contentions, [...] there is no explicit finding of bad faith. Indeed, the district court’s observation that AntiCancer’s brief in opposition to the motion for summary judgment and the Hoffman declaration might meet the court’s concerns weighs against any inference of bad faith. We thus conclude that a feeshifting sanction conditioned on AntiCancer’s supplementation for the “promoter monitoring” element cannot be sustained.
Id. at *18-22 (text added, internal citations removed).
Delivering Cells Element - Court Exceeded Discretionary Authority in Imposing a Fee-Shifting Sanction as a Condition of Proceeding with the LitigationThe “delivering cells” element appears in each of the asserted ’159 patent claims, as “delivering, to an animal, cells containing a nucleic acid encoding a fluorophore operatively linked to the promoter.” [...] AntiCancer responded that “[a]lthough the Pfizer Article does not explicitly state that GFP [green fluorescent protein]-labeled cells were delivered, such delivery is so implicit that it needs no statement . . . [because] it could not be done any other way than by ‘delivering cells,’ a basic scientific concept that should be well understood by a company with Pfizer’s expertise.” [...] The district court faulted the Preliminary Infringement Contentions for failing to provide sufficient “evidence” of the accused instrumentalities and “information” about how Pfizer practiced the “delivering cells” element. [...] AntiCancer argues that [...] the purpose of the Contentions is to outline the theories of infringement and streamline discovery, not to provide proof of infringement. [...] We conclude that, in view of AntiCancer’s presentation of the “delivering cells” element at this stage, and applying the law of the Ninth Circuit concerning the standards for fee-shifting, the district court exceeded its discretionary authority in imposing a fee-shifting sanction is a condition of proceeding with the litigation.
Id. at *22-24 (text added, internal citations removed).
Metastasis to a Second Site - Preliminary Infringement Contentions do not Require Proof of InfringementThe third element for which the district court held the Preliminary Infringement Contentions to be deficient is “metastasis to a second site” in the ’337 patent claims. [...] [Pfizer] argued that [...] their poster presentation [...] does not specifically describe the implanted tumor as metastasizing to a second location. AntiCancer responded that the ’337 patent claims require sufficient mouse immuno-deficiency to “allow said transplanted neoplastic tissue to grow at said primary site and metastasize to said secondary tumor sites,” and that the defendants’ publications showing growth of the tumor at the site of implantation “is direct evidence that the mice used were sufficiently immuno-deficient to allow for growth at the primary site and for metastasis at secondary sites.” [...] The district court stated: [...] How does the growth of the tumor at the primary site provide ‘direct evidence’ that the mice were sufficiently immuno-deficient to allow for metastasis to secondary sites?" [...] AntiCancer states that [...] the district court’s question of “how” tumor growth relates to immuno-deficiency transcends the requirement of Local Rule 3.1, to simply provide “a chart identifying specifically where each element of each asserted claim is found within each Accused Instrumentality.” [...] [T]he Northern District court explained that the Preliminary Infringement Contentions “are not meant to provide a forum for litigation of the substantive issues; they are merely designed to streamline the discovery process.” [...] The Preliminary Infringement Contentions do not need to include proof or direct evidence of infringement.
Id. at *25-26 (text added, internal citations removed).
We conclude that the district court exceeded its discretion in imposing the condition of payment of the defendants’ attorney fees and costs in order to permit AntiCancer to supplement its Preliminary Infringement Contentions. We vacate the condition, and the summary judgment based thereon. The case is remanded for further proceedings.
Anticancer Inc., at *26-27.


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