IP Law Daily Patent-holder sanctioned for ‘vexatious’ post-settlement conduct and ‘frivolous’ appeal
Friday, January 6, 2017

Patent-holder sanctioned for ‘vexatious’ post-settlement conduct and ‘frivolous’ appeal

By Thomas Long, J.D.

By continuing to litigate a patent infringement dispute after the parties settled all claims, a patent holder was properly sanctioned by a district court for his vexatious conduct, the U.S. Court of Appeals for the Federal Circuit has held. An order awarding the defendants $20,500 in attorney fees and costs was affirmed. In addition, the patent holder’s appeal of the sanctions order was itself frivolous, both as filed and as argued, making the patent holder subject to additional sanctions of $51,800 (Walker v. Health International Corporation, January 6, 2017, Reyna, J.).

Patent holder Andre Walker filed suit against multiple defendants for infringing a patent related to a device for exercising abdominal muscles. Eventually, only Health International Corporation, HSN Inc., and HSN Interactive LLC (collectively, "HSN") remained in the case. Walker and HSN engaged in mediation and reached a settlement agreement requiring HSN to pay Walker $200,000 in exchange for a release and Walker’s stipulation to dismiss all claims against HSN with prejudice.

HSN then moved to stay the litigation based on the settlement agreement, but Walker opposed the motion, stating that HSN’s assertion that the agreement resolved all claims was "simply incorrect." The motion to stay was denied, and the parties continued to litigate the case through a series of motions and oppositions over the next several weeks. After Walker moved to file an amended third complaint and to set a date for a Markman hearing, HSN filed a motion to enforce the settlement agreement. A few days later, Walker executed a general release of his claims against HSN, and HSN’s counsel forwarded payment of $200,000 to Walker. Shortly thereafter, Walker filed an opposition to HSN’s motion to enforce the settlement agreement, and HSN responded by filing a formal motion for sanctions, along with a motion to dismiss the lawsuit.

The district court dismissed all claims and found that Walker’s actions had "unnecessarily multiplied the proceedings at a time when the underlying claims [had] admittedly been resolved." Finding that Walker’s actions were not supported by any justifiable strategy, the court awarded HSN its attorney fees and costs resulting from Walker’s vexatious post-settlement actions, in the amount of approximately $20,500. Walker appealed.

District court proceedings. Walker argued that the district court erred in awarding fees without making "findings of subjective bad faith." This argument mischaracterized the law, the Federal Circuit said. The district court had the authority to award damages under its equitable powers when a litigant acted "in bad faith, vexatiously, wantonly, or for oppressive reasons." There was ample support in the record for the district court’s finding that Walker’s post-settlement actions were vexatious. The settlement agreement unambiguously resolved all claims between the parties and clearly dismissed the suit with prejudice upon HSN’s payment of $200,000. There was no legitimate reason to keep litigating once the settlement was reached, the appellate court said. In addition, Walker’s objection to the award of fees made improper attempts to repeat unsuccessful arguments raised in earlier filings. Finally, the appellate court explained that the district court retained jurisdiction over the question of whether to impose sanctions after the settlement was reached, rejecting Walker’s argument that the court lacked jurisdiction to sanction him because the case had ended.

Appellate court proceedings. Walker next argued that the fee award was improper because he was the "prevailing party" in the infringement suit by compelling a voluntary change in HSN’s conduct. This argument contradicted clear authority, the Federal Circuit said, because the Supreme Court had explicitly rejected the so-called "catalyst theory" of attorney fee recovery. By continuing to press this frivolous argument and by making baseless misconduct accusations against opposing counsel, Walker demonstrated a tendency to "mischaracterize clear authority and to draw illogical conclusions from the law and facts." Walker’s appeal was frivolous as filed, the Federal Circuit stated. There was no support in the record for Walker’s attempts to prolong the litigation after a comprehensive settlement had been reached. In addition, Walker’s "numerous mischaracterizations of clear authority in arguing the appeal" made the appeal frivolous as argued. Therefore, pursuant to the court’s authority under Federal Rule of Appellate Procedure 38, the court imposed sanctions on Walker and awarded damages to HSN for its attorney fees and double costs in the amount of approximately $51,000.

The case is No. 2015-1676.

Attorneys: Ramon Pizarro (Law Office of Ramon L. Pizarro) for Andre Walker. Daniel P. Dietrich (Burr & Forman LLP) for Health International Corporation, HSN Inc., and HSN Interactive LLC.

Companies: Health International Corporation; HSN Inc.; HSN Interactive LLC

MainStory: TopStory Patent FedCirNews

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