IP Law Daily  Unsuccessful suit over kidney stone extractor not ‘exceptional’
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Thursday, June 22, 2017

 Unsuccessful suit over kidney stone extractor not ‘exceptional’

By Thomas Long, J.D.

Medical device company Cook Medical LLC was not entitled to an award of attorney fees incurred in its successful defense against claims that it infringed a patent for a device used to extract kidney stones, the federal district court in Indianapolis has ruled. The case was not "exceptional" for purposes of the fee-shifting provision of 35 U.S.C. §285. Although the asserted claims were ultimately found invalid in a USPTO review proceeding, the patent-holder was entitled to rely on the presumption that a granted patent was valid, and there was no evidence that the case was brought solely to extract a nuisance settlement (Stone Basket Innovations, LLC v. Cook Medical LLC, June 20, 2017, McKinney, L.).

The patent-in-suit, U.S. Patent No. 6,551,327 ("the ’327 patent"), was the sole asset owned by plaintiff Stone Basket Innovations, LLC ("SBI"). The invention featured a "sheath movement element" that allowed the physician extracting the kidney stones to close the device’s basket by advancing a "sheath" over it and then open the basket by withdrawing the sheath. In April 2015, SBI filed an infringement suit against Cook in the Eastern District of Texas. Early in the proceedings, Cook filed a motion to transfer venue. While the motion was pending, SBI served its infringement contentions, and discovery commenced. In addition, Cook served invalidity contentions on SBI, but it did not file a motion to dismiss. Cook next filed an inter partes review petition with the Patent Trial and Appeal Board for eight claims of the ’327 patent. After a claim construction hearing, the Eastern District of Texas granted Cook’s motion to transfer venue to the Southern District of Indiana. The case was then stayed pending IPR.

The Board granted the IPR petition. After the institution of IPR, one of SBI’s principals contacted Cook and offered to license the ’327 patent to Cook in exchange for $150,000. Settlement negotiations were unsuccessful. The Board eventually canceled all of the ’327 patent’s claims, and the court dismissed the infringement action with prejudice. Cook sought an award of attorney fees, arguing that the case was exceptional under Section 285.

Weakness of case. According to Cook, the "sheath movement element," which purportedly distinguished the ’327 patent from the prior art, was a well-known feature of the prior art, making SBI’s case weak. Cook also characterized SBI’s decision to file in the Eastern District of Texas—where there were no parties, witnesses, or documents related to the litigation—as a strategy aimed at increasing Cook’s costs and better positioning the case for a nuisance settlement.

The court found that Cook failed to establish that SBI maintained this litigation despite evidence showing a weakness in its litigation position. Following Cook’s service on SBI of its invalidity contentions, Cook took no actions to ensure a rapid termination of the suit. Cook did not inform SBI that it believed the lawsuit to be frivolous or unfounded, demand that SBI drop the lawsuit or indicate that the asserted claims were "clearly invalid," or move for summary judgment on invalidity. Moreover, SBI was entitled to rely on the presumption of validity of its patent in filing and maintaining the suit. There was no evidence that SBI "willfully ignored" prior art or failed to evaluate its case. The court also rejected Cook’s argument about the choice of venue because Cook admitted that it sold its accused product in the Eastern District of Texas and that it was registered to do business in Texas. There was no evidence to support the contention that SBI filed the case in that district to increase its "nuisance" value.

Pattern of litigation abuse. The court also rejected Cook’s contention that the case was exceptional because SBI’s principals had engaged in a pattern of litigation abuse. Cook’s only support for its argument was a list of over 400 cases brought by entities purportedly created by the principals, none of which had gone to trial. There was no evidence as to whether the entities ever tested the merits of the cases or that the cases were brought solely for the purpose of extracting nuisance settlements. Furthermore, the evidence did not indicate that SBI sued Cook for the sole purpose of forcing a settlement, in the court said. SBI participated in each stage of the litigation for nearly two years and tested the merits of its claims. It was not until after the PTAB proceedings, which SBI also contested, that SBI sought to recover any money from Cook.

Shell company. Cook asserted that SBI’s principals formed the company "for the sole purpose of insulating themselves from § 285 liability" and that this warranted a finding of exceptionality. Cook argued that the case of Iris Connex, LLC v. Dell, Inc. (E.D. Tex. January 25, 2017) stood for the proposition that the creation of an "empty shell" to serve as a plaintiff in a patent case was, by itself, sufficient to make the case exceptional. The court rejected this contention, stating that nothing in the Iris Connex decision supported Cook’s broad interpretation, and a simple reading of the case revealed that the shell company was only one of many factors supporting an exceptionality finding. Cook failed to set forth any evidence of the additional factors that would give rise to a finding of exceptionality; therefore, its Iris Connex argument failed.

The case is No. 1:16-cv-00858-LJM-TAB.

Attorneys: Albert Berton Deaver, Jr. (Sutton McAughan Deaver PLLC) for Stone Basket Innovations, LLC. James R. Ferguson (Mayer Brown LLP) and William A. McKenna (Woodard, Emhardt, Moriarty, McNett & Henry LLP) for Cook Medical LLC.

Companies: Stone Basket Innovations, LLC; Cook Medical LLC

MainStory: TopStory Patent IndianaNews

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