Falsified Evidence Supports Trial Court Award of $1.5m Against Patentee

In Advanced Magnetic Closures, Inc. (AMC) v. Rome Fastener Corp., Case No. 2009-1102 (Fed. Cir. June 11, 2010) (available here), the Court of Appeals for the Federal Circuit upheld an attorneys fees award of over $1,500,000 against patentee Advanced Magnetic Closures, Inc. (“AMC”) and in favor of Rome Fastener Corp. (“Romag”) because the trial court found both exceptional case under the Patent Statute, 35 U.S.C. sec. 285, and litigation misconduct by AMC.

Romag asserted that Patentee AMC had engaged in fraud on the Patent Office and that the AMC patent was therefore invalid.  Romag charged that the patent was invalid because the patent incorrectly listed two inventors (Bauer and Riceman) when, in fact, the invention was created by only one inventor. AMC tried to corroborate Mr. Bauer’s claim of inventorship with a manufacturer’s invoice allegely for parts used to make prototypes, but at trial he admitted that he personally drafted and reconstructed the invoice.  AMC also used an invoice from a law firm for patent prosecution services but AMC later conceded that this invoice was also reconstructed.  “Despite this dispute over inventorship and falsified evidence, the district court deferred ruling on AMC’s motion for summary judgment on inventorship and allowed the case to proceed to trial.  At trial, AMC submitted more ‘reconstructed’ evidence to demonstrate that Mr. Bauer was the inventor.”  Slip opn. pg. 9.

When patentee AMC rested its case in chief, Romag moved to directed verdict (JMOL) which the district court granted.  “Moreover, the district court held that the ’773 patent was unenforceable for inequitable conduct and required AMC, [and AMC attorneys] Abelman, and [] Jaroslawicz to pay Romag’s attorney’s fees plus interest in the amounts of $1,509,976.16; $1,000,160.74; and $454,197.36, respectively.”  Id. 10.

On appeal, AMC argued that the district court erred in finding that (1) that the patent was unenforceable because Mr. Bauer committed inequitable conduct and (2) this was an exceptional case under 35 U.S.C. § 285. AMC did not argue, however, that the award of attorney’s fees under 35 U.S.C. § 285 was improper because of litigation misconduct. Finally, AMC argued that the district court erred in granting Romag’s Rule 50(a) motion for JMOL. Attorney Jaroslawicz argued that the district court erroneously sanctioned him for attorney’s fees pursuant to 28 U.S.C. § 1927. The Federal Circuit affirmed the district court finding that the patent is unenforceable based on inequitable conduct and the Section 285 award of attorney’s fees and costs against AMC. Since the patent was unenforceable, the court did not address the grant of JMOL. The Federal Circuit reversed the district court’s 28 U.S.C. § 1927 sanction award against Attorney Jaroslawicz.

It seems that the two named inventors signed a joint letter to resolve the inventorship dispute, but this evidence of good faith was discounted by the district court.

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