United States Court of Appeals
for the Federal Circuit
__________________________
RAYLON, LLC,
Plaintiff-Appellee,
v.
COMPLUS DATA INNOVATIONS, INC.,
Defendant-Appellant,
AND
CASIO AMERICA, INC. AND CASIO COMPUTER
CO., LTD.,
Defendants-Appellants,
AND
SYMBOL TECHNOLOGIES, INC.,
Defendant-Appellant,
AND
ADVANCED PUBLIC SAFETY, INC., TRIPOD DATA
SYSTEMS, ZEBRA
TECHNOLOGIES CORPORATION, EZ TAG
CORPORATION, FUJITSU AMERICA,
INC. AND FUJITSU JAPAN LTD.,
Defendants.
__________________________
2011-1355, -1356, -1357, -1358, -1359
__________________________
RAYLON v. COMPLUS DATA 2
Appeal from the United States District Court for the
Eastern District of Texas in No. 09-CV-0355, 09-CV-0356,
09-CV-0357, Judge Leonard Davis.
__________________________
Decided: December 7, 2012
__________________________
D. SCOTT HEMINGWAY, Hemingway & Hansen LLP, of
Dallas, Texas, argued for the plaintiff-appellee. On the
brief was AMANDA ABRAHAM, Roth Law Firm, of Marshall,
Texas.
JOHN R. EMERSON, Haynes and Boone, LLP, of Dallas,
Texas, argued for the defendant-appellant Complus Data
Innovations, Inc. With him on the brief were DEBRA J.
MCCOMAS, DONALD EDWARD TILLER and SEAN M. O’NEILL.
SCOTT D. STIMPSON, Sills Cummis & Gross P.C., of
New York, New York, argued for defendant-appellants
Casio Computers Co. Ltd, et al. With him on the brief
were KATHERINE M. LIEB and DAVID C. LEE.
MITCHELL S. FELLER, Sobel & Feller, of New York,
New York, argued for defendant- appellant Symbol Tech-
nologies, Inc. With him on the brief was JONATHAN M.
SOBEL.
__________________________
Before PROST, MOORE, and REYNA, Circuit Judges.
Opinion for the court filed by Circuit Judge PROST.
Concurring opinion filed by Circuit Judge REYNA.
3 RAYLON v. COMPLUS DATA
PROST, Circuit Judge.
Raylon, LLC (“Raylon”) brought three suits against,
inter alia, Complus Data Innovations, Inc. (“Complus”),
Casio America, Inc. and Casio Computer Co., Ltd., (collec-
tively “Casio”), and Symbol Technologies, Inc. (“Symbol”)
(collectively, “defendants”) in the Eastern District of
Texas. Raylon alleged that all defendants infringe claims
1-17 of U.S. Patent No. 6,655,589 (“’589 patent”). The
district court consolidated the three suits. After a com-
bined hearing, the court adopted defendants’ claim con-
struction, granted summary judgment in their favor, and
denied their motions for Rule 11 sanctions. The district
court also denied defendants’ motions for attorneys’ fees
and costs under 35 U.S.C. § 285, citing its Rule 11 deci-
sion. Defendants appeal the denial of sanctions and
attorneys’ fees. For the reasons set forth below, we affirm
in part, vacate in part, and remand for further proceed-
ings.
BACKGROUND
Raylon is the assignee of the ’589 patent, which is di-
rected to a hand-held identification investigating and
ticket issuing system. The object of the invention is to
provide an affordable, durable system that reduces the
amount of time a user spends identifying and issuing
tickets to individuals and allows the user to maintain
visual contact with the individual throughout the identifi-
cation and ticketing process. ’589 patent col.2 ll.64-65;
col.3 ll.34-48. The system is described as containing a
housing within which there is an input assembly for
entering data, an elongated slot for receiving identifica-
tion forms that have a magnetic tape, an elongated aper-
ture for access to the housing’s interior, a transceiver
assembly to communicate remotely with a computer, a
RAYLON v. COMPLUS DATA 4
printer assembly for printing tickets, and a display that
“is pivotally mounted on the housing for displaying data
entered into the input assembly.” See, e.g., ’589 patent
Abstract; col.1 ll.26-40; col.1 l.66–col.2 l.14; col.3 ll.18-33.
Figure 1 is a schematic perspective of the system:
With reference to Figure 1, the preferred embodiment’s
display 39 “may be pivotally mounted on the housing 12
and may be positioned generally adjacent to the first end
13 of the housing 12.” Id. col.5 ll.58-61. Claim 1 is repre-
sentative of the patented system:
1. A system for investigating an identification of a
person and for issuing tickets, the identification
comprising a card having a computer readable
magnetic tape secured on the card, the computer
readable magnetic tape containing pertinent data
5 RAYLON v. COMPLUS DATA
relating to the person displayed on the identifica-
tion card, said system being connectable to a com-
puter for transmitting data between said system
and the computer, said system being connectable
to a data cable of a computer, said system com-
prising:
a housing having an interior, said housing
having an elongated slot for selectively receiv-
ing the identification card, said housing hav-
ing an elongated aperture providing access
into said interior of said housing;
an input assembly for inputting data about a
person, said input assembly being mounted on
said housing, said input assembly including a
data reading means for reading the computer
readable magnetic tape on the identification
card;
a transceiver assembly for remotely communi-
cating with a computer, said transceiver as-
sembly being mounted in said interior of said
housing;
a display for displaying data entered into said
input assembly, said display being pivotally
mounted on said housing;
a printer assembly being mounted in said in-
terior of said housing for printing a ticket; and
wherein said printer assembly includes
a substrate for receiving indicia, said sub-
strate including an end extendable
through said elongated aperture in said
housing,
a printer means for printing indicia on
said substrate, and
means for advancing said substrate with
respect to said printer means such that
substrate is advanced though said elon-
RAYLON v. COMPLUS DATA 6
gated aperture in said housing when said
printer means prints indicia on said sub-
strate.
Id. col.7 ll.9-44 (emphasis added). Independent system
claims 16 and 17 also recite a “display being pivotally
mounted on said housing” limitation. Id. col.8 ll.55-57;
col.9 ll.20-22.
In 2009, Raylon filed three suits in the U.S. District
Court for the Eastern District of Texas against software
integrators and product component manufacturers of
various ticket-writing and enforcement handheld devices,
including Complus, Casio, and Symbol. In each suit,
Raylon asserted that defendants’ devices directly infringe
claims 1-17 of the ’589 patent literally and under the
doctrine of equivalents, that defendants induce others to
infringe, and that defendants contributorily infringe all
claims of the ’589 patent. Defendants moved to dismiss,
for judgment on the pleadings, or for summary judgment;
the court denied or postponed these motions pending
claim construction.
During the spring of 2010, Casio and other defendants
sent several letters to Raylon, expressing their concerns
that Raylon’s complaints violated Rule 11(b)(2) and Rule
11(b)(3) because, inter alia, Raylon’s claim construction
positions were unsupportable by intrinsic evidence and its
infringement positions with regards to the display, mag-
netic strip reader, and printer elements of the asserted
claims were unreasonable. Raylon disagreed, maintain-
ing that the patent supported a broad claim construction
and that the accused products infringed each and every
claim of the ’589 patent. Specifically, Raylon alleged that
the accused devices all literally met the “display being
pivotally mounted on said housing” element because they
each had “a display that is mounted on the housing and
7 RAYLON v. COMPLUS DATA
can be pivoted relative to the viewer’s or user’s angle of
visual orientation.” J.A. 4223; J.A. 4912; J.A. 5768. In
other words, under Raylon’s theory of infringement a
display with a fixed-mounted screen meets the ‘pivotally
mounted on said housing’ limitation when the user pivots
the device by moving his elbow, wrist, or other joint.
In advance of the Markman hearing, both Raylon and
defendants proposed constructions of, inter alia, “display
being pivotally mounted on said housing,” “a printer
assembly being mounted in said interior of said housing,”
and “said housing having an elongated slot for selectively
receiving the identification card.” Defendants also filed
motions for Rule 11 sanctions in each suit. The district
court consolidated the three suits for purposes of claim
construction, summary judgment, and sanctions.
On December 2, 2010, the district court held a con-
solidated hearing. The only term construed was “display
being pivotally mounted on said housing.” Raylon con-
strued the term to mean “an electronic device attached to
a housing for the visual presentation of information, the
display capable of being moved or pivoted relative to the
viewer’s perspective.” Defendants proposed various
constructions, all of which excluded from “pivotally
mounted” any displays that are fixed or incapable of
pivoting.1 The district court rejected Raylon’s construc-
tion, noting that its citation to the specification did not
support its overly broad claim construction such that its
1 Defendant EZ Tag proposed a construction that
requires the housing and display to not be in fixed posi-
tions. Defendants Casio, Complus, and Fujitsu construed
the limitation as requiring the display to be mounted to
the housing such that the housing and display are pivotal
with respect to each other.
RAYLON v. COMPLUS DATA 8
construction “stretch[es] the bounds of reasonableness
beyond what I am willing to accept.” J.A. 3681. Accept-
ing defendants’ construction, the district court granted
summary judgment in their favor. The court concluded
the hearing by denying defendants’ motions for Rule 11
sanctions.
The district court’s holdings were memorialized in
later-issued orders. On March 9, 2011, the district court
issued an order reflecting its denial of Rule 11 sanctions.
In that order, the district court quoted the Fifth Circuit’s
objective standard and stated that while “Raylon’s claim
construction arguments and infringement theory do
stretch the bounds of reasonableness, and the Court
rejected Raylon’s positions, they do not cross the line.”
J.A. 4. The court then analyzed Raylon’s settlements and
damages model to determine whether Raylon filed suit to
recover nuisance value settlements or whether the num-
bers were “indicative of the good faith nature with which
the case is brought.” Id. It found Raylon’s proffered
model “not large for a patent case,” suggesting that Ray-
lon’s “earlier settlements were not so unreasonable as to
indicate that Raylon believed its case was weak or frivo-
lous.” Id. On this basis, the district court concluded that
this was not a situation where “the cost of the litigation is
more of a driving force than the merits of the patent-in-
suit,” so it denied the motions without considering the
merits of the suit. J.A. 6.
On March 23, 2011, the district court issued an order
granting summary judgment of non-infringement in favor
of defendants. Based on the court’s construction of the
“pivotally mounted” term2 and the fact that all the ac-
2 As a result of the consolidated hearing, discussed
above, the district court construed the “display being
9 RAYLON v. COMPLUS DATA
cused products have a fixed display screen, the district
court held that none of the accused products literally
infringe. The district court also found that the accused
products’ fixed screens do not infringe under the doctrine
of equivalents because the fixed screens do not perform
substantially the same function in the same way to
achieve the same result as a pivotally mounted display,
and Raylon’s theory would read the “pivotally mounted”
limitation out of the claims.
After final judgment was entered on March 23, 2011,
defendants filed motions for attorneys’ fees and costs
pursuant to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the
court’s inherent powers. In a joint order on October 31,
2011, the district court denied the motions. It found
Raylon’s suits were not objectively baseless for the same
reason it denied Rule 11 sanctions. The court also re-
jected defendants’ arguments that Raylon’s conduct in
pursuing the baseless claims constituted litigation mis-
conduct. The court similarly denied fees and costs under
§ 1927. On October 31, 2011, the court entered an
amended final judgment. Defendants appeal.
DISCUSSION
On appeal, defendants challenge the district court’s
denial of Rule 11 sanctions and of attorneys’ fees. We
address each issue in turn.
A. Rule 11 Sanctions
pivotally mounted on said housing” term as “the display
must be mounted on the housing so that the display and
housing may pivot with respect to each other.” J.A. 7029.
RAYLON v. COMPLUS DATA 10
Rule 11 expressly requires that an attorney present-
ing a pleading, motion, or other paper before the court
certify that he has performed “an inquiry reasonable
under the circumstances” such that he can verify that (1)
“it is not being presented for any improper purpose, such
as to harass, cause unnecessary delay, or needlessly
increase the cost of litigation,” (2) “the claims . . . are
warranted by existing law or by a nonfrivolous argument
for extending, modifying, or reversing existing law;” (3)
“the factual contentions have evidentiary support or, . . .
will likely have evidentiary support after a reasonable
opportunity for further investigation or discovery.” Fed.
R. Civ. P. 11(b)(1)-(3). As the 1993 advisory committee
note explains, this rule “requires litigants to ‘stop-and-
think’ before initially making legal or factual conten-
tions.” Fed. R. Civ. P. 11 advisory committee note to 1993
amendments, 149 F.R.D. 401, 584-85. The notes explain
that the changes to the rule “emphasize[] the duty of
candor by subjecting litigants to potential sanctions for
insisting upon a position after it is no longer tenable.” Id.
In reviewing a district court’s decision to deny Rule 11
sanctions, we apply the law of the regional circuit. Eon-
Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1328 (Fed.
Cir. 2011). The Fifth Circuit reviews a denial of sanctions
for an abuse of discretion. Whitehead v. Food Max of
Miss., Inc., 332 F.3d 796, 802 (5th Cir. 2003) (en banc); see
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405
(1990). A district court necessarily abused its discretion
“‘if it based its ruling on an erroneous view of the law or
on a clearly erroneous assessment of the evidence.’”
Whitehead, 332 F.3d 796 (quoting Cooter & Gell, 496 U.S.
at 405); Skidmore Energy, Inc. v. KPMG, 455 F.3d 564,
566 (5th Cir. 2006) (“A district court abuses its discretion
if it imposes sanctions based on (1) an erroneous view of
11 RAYLON v. COMPLUS DATA
the law or (2) a clearly erroneous assessment of the evi-
dence.”).
Defendants argue that the denial of Rule 11 sanctions
should be reversed because the district court abused its
discretion in two regards. They argue that the district
court applied the wrong standard—a subjective, rather
than objective one—in evaluating Raylon’s conduct.
Defendants argue that under the proper standard, Ray-
lon’s claim construction and infringement contentions
with regards to the “pivotally mounted” limitation (as well
as others not addressed by the district court) were objec-
tively unreasonable. Defendant Symbol also alleges that
the district court abused its discretion by failing to con-
sider some of its arguments. Specifically, Symbol argued
that Raylon’s construction of a printer in “said housing” to
include a printer in any housing, including an auxiliary
housing, was frivolous; Symbol also argued that Raylon’s
infringement allegations against its products, none of
which contain a printer, were frivolous.
We agree with defendants. In the Fifth Circuit, when
determining whether there was a Rule 11 violation, “the
standard under which an attorney is measured is an
objective, not subjective standard of reasonableness under
the circumstances.” Whitehead, 332 F.3d at 803. The
district court abused its discretion by evaluating
RAYLON v. COMPLUS DATA 12
Raylon’s conduct under a subjective standard.3 See FDIC
v. Maxxam, Inc., 523 F.3d 566, 580-81 (5th Cir. 2008);
Cooter & Gell, 496 U.S. at 405. Specifically, the court
evaluated Raylon’s damages model and early settlements
to determine whether it brought its suits in good faith or
merely to obtain nuisance value settlements. The court
opined that “in some situations, a plaintiff asserting a
large damages model while making very low offers in the
case may indicate that the plaintiff realizes its case is
very weak or even frivolous” and that the amount of
damages “may be indicative of the good-faith nature with
which the case is brought.” J.A. 4. It found Raylon’s
damages model “not large for a patent case” such that
“the earlier settlements were not so unreasonable as to
indicate that Raylon believed its case was weak or frivo-
lous.” Id. Based on these findings as to Raylon’s motives,
the district court denied defendants’ motion. In its view,
Rule 11 sanctions only apply “[w]here it is clear that a
case lacks any credible infringement theory and has been
brought only to coerce a nuisance value settlement.” J.A.
5 (emphasis added). But, this is not the proper standard.
The Fifth Circuit “has been emphatic” that the Rule 11
analysis is a strictly objective inquiry and “expressly
rejected any inquiries into the motivation behind a filing.”
Maxxam, 523 F.3d at 580; Jenkins v. Methodist Hosp. of
Dallas, 478 F.3d 255, 264 (5th Circuit 2007). Thus, an
evaluation of Raylon’s litigation motives—whether it
brought suit in good faith or to obtain nuisance value
settlements—contradicts Fifth Circuit law and has no
place in the Rule 11 analysis. The district court denied
3 The district court mentioned Raylon’s claim con-
struction positions—stating “[w]hile Raylon’s claim con-
struction arguments and infringement theory do stretch
the bounds of reasonableness, and the [c]ourt rejected
Raylon’s positions, they do not cross that line”—but
provided no analysis or explanation for this conclusion.
13 RAYLON v. COMPLUS DATA
Rule 11 sanctions through the lens of an erroneous view
of the law, and thus abused its discretion. Skidmore, 455
F.3d at 566.
Applying the objectively reasonable standard, we
agree with defendants that Raylon’s claim construction
(and thus infringement contentions) were frivolous.
Claim construction is a matter of law, so that an attor-
ney’s proposed claim construction is subject to Rule
11(b)(2)’s requirement that all legal arguments be non-
frivolous. Antonious v. Spalding & Evenflo Cos., Inc., 275
F.3d 1066, 1071 (Fed. Cir. 2002). Reasonable minds can
differ as to claim construction positions and losing con-
structions can nevertheless be nonfrivolous. But, there is
a threshold below which a claim construction is “so un-
reasonable that no reasonable litigant could believe it
would succeed,” iLor, LLC v. Google, Inc., 631 F.3d 1372,
1378 (Fed. Cir. 2011), and thus warrants Rule 11 sanc-
tions.
Raylon’s claim construction of “display pivotally
mounted on said housing” is a prime example of a con-
struction that falls below this threshold. Raylon,
throughout the litigation, argued that this term should be
construed as requiring a “display being capable of being
moved or pivoted relative to the viewer’s perspective.” J.A.
1477 (emphasis added). Its construction encompasses any
portable device with a display, regardless of how it is
mounted to the housing. See, e.g., J.A. 3671 (Raylon’s
example of a device not covered by the claim term is “a
printer with a fixed display” because a printer cannot be
pivoted relative to the user). In support of this broad
construction, Raylon relies on a single sentence in the
specification. That sentence states: “Even still another
object of the present invention is to provide a new identi-
fication investigating and ticket issuing system that
RAYLON v. COMPLUS DATA 14
permits a police officer to maintain visual contact of a
stopped person while investigating whether the person
has any warrants or suspended license.” ’589 patent col.3
ll.42-46.
Neither this sentence nor any other intrinsic evidence
supports Raylon’s position that the term “pivotally
mounted” is relative to the user rather than to the de-
vice’s housing. Rather, each and every claim of the ’589
patent requires a “display being pivotally mounted on
said housing.” ’589 patent col.7 ll.29-31; col.8 ll.55-57;
col.9 ll.20-22 (emphasis added). Throughout the specifica-
tion, the patentee describes the invention as containing a
display that “is pivotally mounted on the housing.” Id.
Abstract; col.1 ll.38-39; col.2 l.11; col.3 ll.29-30; col.5 ll.59-
60. A display pivotally mounted on the housing is even
identified by the patentee as one of the important features
of the invention. Id. col.2 ll.14-16. Figure 1, the only
schematic of the preferred embodiment, shows a display
that is mounted to pivot relative to the housing on which
it is attached. Furthermore, throughout the prosecution
history, the patentee described the display as “pivotally
mounted on said housing.” No other placement of the
display relative to the housing is described in the patent
or prosecution history. Thus, Raylon’s claim construc-
tion—that pivotally mounted only requires the display be
pivotable relative to the user—is contrary to all the
intrinsic evidence and does not conform to the standard
canons of claim construction. J.A. 7025-26; see Q-
Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1301
(Fed. Cir. 2004); cf. MarcTec, LLC v. Johnson & Johnson,
664 F.3d 907, 918 (Fed. Cir. 2012) (finding a claim con-
struction position objectively baseless where “no reason-
able application of the principles enunciated in Phillips . .
. supports its position”). This is a clear instance where no
objectively reasonable litigant, relying on the single
15 RAYLON v. COMPLUS DATA
sentence in the specification to support its position, would
believe its claim construction could succeed; therefore,
Raylon’s claim construction is frivolous and thus sanc-
tionable under Rule 11(b)(2).4
In addition to the “pivotally mounted” limitation, de-
fendants—in particular, Symbol—argued that several
other of Raylon’s claim constructions were frivolous based
on similar reasoning.5 Despite the presence of these
arguments in defendants’ Rule 11 briefs, claim construc-
tion briefs, and a motion for judgment on the pleadings,
the district court failed to even touch on these terms in its
Rule 11 analysis. The district court’s failure to consider
these arguments was an abuse of discretion. Copeland v.
Wasserstein, Perella & Co., 278 F.3d 472, 484-85 (5th Cir.
2002) (“It is well settled that, to conduct our review, we
must be able to understand the district court’s disposition
of the sanctions motion.”); S. Bravo Sys., Inc. v. Contain-
ment Techs. Corp., 96 F.3d 1372, 1375 (Fed. Cir. 1996)
4 Raylon’s infringement contentions were based on
its claim construction. Because we find Raylon’s claim
construction of “pivotally mounted” frivolous, we need not
reach whether Raylon’s infringement contentions serve as
an independent basis for imposing Rule 11 sanctions.
5 The limitations at issue were “a printer assembly
being mounted in said interior of said housing” and “said
housing having an elongated slot for selectively receiving
the identification card.” Raylon construed these limita-
tions as covering printer assemblies and elongated slots
that were contained in any housing despite the use of
“said” housing in the claims. Symbol argued that based
on the claims’ use of “said housing” and the specification,
the claims require the printer assembly and elongated
slot to be in the same housing as the other elements of the
device.
RAYLON v. COMPLUS DATA 16
(“When the requesting party makes a strong showing that
Rule 11 violations may have occurred, however, the
district court should provide some explanation for disre-
garding the proffered showing.”); Refac Int’l Ltd. v. Hi-
tachi, Ltd., 921 F.2d 1247, 1257 (Fed. Cir. 1990). Raylon’s
construction of “a printer assembly being mounted in said
interior of said housing” is, if anything, even more unrea-
sonable than the “pivotally mounted” construction. The
claims are clear that the housing has an interior, the
display is pivotally mounted “on said housing,” and the
printer assembly is mounted “in said interior of said
housing.” The specification is completely consistent with
the claims, explaining that an “object of the present
invention” is to provide a system “which includes a hous-
ing that includes an interior.” Id. col.3 ll.17-19. The
printer assembly, in turn, “is mounted in the interior of
the housing.” Id. col.3 ll.30-33; see also col.1 ll.25-41; col.1
l.66-col.2 l.13; col.5 ll.66-67 (same). The only reasonable
construction is that the printer is mounted inside and the
display is mounted on the same housing.
Raylon’s attorney argued that claim construction “is
kind of [an] arcane subject that gets ordinary lawyers like
me in trouble a lot of times.” J.A. 14048. There is noth-
ing arcane about the location of the printer assembly in
the claimed invention. Raylon’s position that the printer
could be in an entirely different housing from the rest of
the components is objectively unreasonable and an inde-
pendent violation of Rule 11 with respect to Symbol,
whose products lack a printer entirely. On remand, the
district court should weigh Raylon’s multiple frivolous
arguments with respect to Symbol’s products when craft-
ing an appropriate sanction.
When a party’s conduct violates Rule 11(b), the court
must impose “an appropriate sanction.” Fed. R. Civ. P.
17 RAYLON v. COMPLUS DATA
11(c)(2). Rule 11 sanctions “may be set at a level ‘suffi-
cient to deter repetition of such conduct or comparable
conduct by others similarly situated.’” Clinton v. Jones,
520 U.S. 681, 710 n.42 (1997) (quoting Fed. R. Civ. P.
11(c)(2)). Determining what sanction to impose is initially
a matter within the discretion of the district court. Judin
v. United States, 110 F.3d 780, 785 (Fed. Cir. 1997). We
remand these cases for a determination of an appropriate
sanction.
B. Attorneys’ Fees and Costs
Defendants argue that the district court improperly
denied attorneys’ fees and costs under 35 U.S.C. § 285,
and that these cases qualify as exceptional under the
statute. A case is exceptional under § 285 if there has
been some inappropriate conduct relating to the matter in
litigation. Brooks Furniture Mfg., Inc. v. Dutailier Int’l,
Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). Absent litiga-
tion misconduct or misconduct in securing the patent, a
case is exceptional under § 285 if “(1) the litigation is
brought in subjective bad faith, and (2) the litigation is
objectively baseless.” Id. Similar to the evaluation under
Rule 11, for litigation to be objectively baseless, the
allegations “must be such that no reasonable litigant
could reasonably expect success on the merits.” Dominant
Semiconductors Sdn. Bhd. v. Osram Gmbh, 524 F.3d
1254, 1260 (Fed. Cir. 2008). The district court found that
there was no litigation misconduct. In evaluating
whether the cases were otherwise exceptional, the court
relied exclusively on it Rule 11 order to find that the
litigation was not “objectively baseless.” Since we reverse
the district court’s holding with regards to a Rule 11
violation, the district court can no longer rely on its Rule
11 analysis to find the objectively baseless prong not met.
We remand to the district court to reconsider, in light of
RAYLON v. COMPLUS DATA 18
our decision, whether these cases are exceptional under §
285.6 In doing so, the court should consider all of Raylon’s
conduct, including its assertions with regard to limita-
tions other than “pivotally mounted,” as raised by defen-
dant Symbol.
CONCLUSION
The district court abused its discretion in denying de-
fendants’ Rule 11 motions. We reverse the district court’s
holding that there was no Rule 11 violation and remand
to the district court to determine, in the first instance, a
proper sanction. Because the court’s evaluation of § 285
relied on its Rule 11 analysis, we vacate the district
court’s denial of attorneys’ fees and costs, and remand for
the court to reconsider defendants’ motions in light of our
decision.
AFFIRMED-IN-PART, VACATED-IN-PART, AND
REMANDED
6 We leave the district court’s denial of attorneys’
fees and costs under 28 U.S.C. § 1927 undisturbed.
Establishing attorney misconduct under § 1927 implicates
a higher level of culpability than Rule 11, and defendants
have not established that Raylon’s misconduct rises to the
level required by § 1927. See Bryant v. Military Dep’t of
Miss., 597 F.3d 678, 694 (5th Cir. 2010).
United States Court of Appeals
for the Federal Circuit
__________________________
RAYLON, LLC,
Plaintiff-Appellee,
v.
COMPLUS DATA INNOVATIONS, INC.,
Defendant-Appellant,
AND
CASIO AMERICA, INC. AND CASIO COMPUTER
CO., LTD.,
Defendants-Appellants,
AND
SYMBOL TECHNOLOGIES, INC.,
Defendant-Appellant,
AND
ADVANCED PUBLIC SAFETY, INC., TRIPOD DATA
SYSTEMS, ZEBRA
TECHNOLOGIES CORPORATION, EZ TAG
CORPORATION, FUJITSU AMERICA,
INC. AND FUJITSU JAPAN LTD.,
Defendants.
__________________________
2011-1355, -1356, -1357, -1358, -1359
__________________________
RAYLON v. COMPLUS DATA 2
Appeals from the United States District Court for the
Eastern District of Texas in No. 09-CV-0355, 09-CV-0356,
09-CV-0357, Judge Leonard Davis.
__________________________
REYNA, Circuit Judge, concurring.
I concur with the majority opinion and the result
reached. I write separately to make clear that when a
court finds a Rule 11 sanction based on conduct involving
the allegation and pursuit of patent infringement claims
that have been found objectively unreasonable, the court
is compelled, if so moved by a party, to undertake a
detailed and thorough § 285 inquiry and analysis. I
deviate slightly from my collegues in the majority in that,
given the record in this case, I would reverse and declare
this an exceptional case and limit the remand to determi-
nation of appropriate sanctions.
I. LEGAL LANDSCAPE
In three separate suits that were later consolidated,
Raylon, LLC (“Raylon”) alleged that numerous defendants
infringed U.S. Patent No. 6,655,589 (“the ’589 patent”).
At the conclusion of a hearing addressing claim construc-
tion, summary judgment, and motions for sanctions, eight
defendants, including appellants Complus Data Innova-
tions, Inc., Casio America, Inc. and Casio Computer Co.,
Ltd., (collectively “Casio”), and Symbol Technologies, Inc.
(“Symbol”) (collectively, “defendants”), prevailed on their
respective motions for summary judgment of non-
infringement.
Casio argued a Rule 11 motion on behalf of defen-
dants. Casio asserted that the accused devices were
missing certain limitations claimed in the ’589 patent.
Casio stressed that it gave Raylon advance notice that its
3 RAYLON v. COMPLUS DATA
infringement allegations were without merit, further,
were objectively unreasonable.
Symbol joined Casio’s argument regarding the pivotal
mounting of the display, but also moved for sanctions
under Rule 11 because Raylon had disregarded claim
language requiring that a printer be inside of the housing
to which the pivotally mounted display is attached.
In the face of defendants’ strongly argued assertions
of objective unreasonableness, Raylon maintained that its
allegations were objectively reasonable, including on
grounds that it relied on expert advice of patent attorneys
who conducted a pre-suit investigation. At the claim
construction hearing, instead of advancing arguments
based on the plain language of its asserted claims, Raylon
offered that its claim construction proposals were prem-
ised on the “rather unusual interpretations that are
sometimes put on claim terms by the Federal Circuit and
practitioners.” J.A. 14049.
The district court denied the motions for sanctions.
At the hearing, and later in a written order, the district
court determined that Raylon’s positions “stretched the
bounds of reasonableness,” but were not “objectively
frivolous.” J.A. 4; J.A. 14052. Rather than analyzing the
reasonableness of Raylon’s proposed claim constructions
in the context of the intrinsic record, the district court
supported its ruling by weighing the reasonableness of
Raylon’s settlement agreements against a damages
model. See Majority Op. 8 (citing J.A. 6); J.A. 14053–
14054. The district court’s written order concluded that
Rule 11 sanctions would only be warranted “[w]here it is
clear that a case lacks any credible infringement theory
and has been brought only to coerce a nuisance value
settlement.” J.A. 5 (emphasis added).
RAYLON v. COMPLUS DATA 4
Prevailing parties Casio, Complus, and Symbol moved
for an award of fees and a declaration that this case is
exceptional pursuant to 35 U.S.C. § 285. The district
court tied its § 285 objective inquiry to the earlier Rule 11
sanctions inquiry and declined to find the case excep-
tional. The district court did not provide detailed findings
regarding whether the litigation was objectively baseless
or whether Raylon brought the litigation in subjective bad
faith. The ruling generally concluded that Raylon’s
pivotally mounted display positions were not objectively
baseless and there was no litigation misconduct that
warranted an inference of bad faith. J.A. 13.
II. DISTINCT RULE 11 AND § 285 INQUIRIES
Rule 11 of the Federal Rules of Civil Procedure and 35
U.S.C. § 285 of the Patent Act offer courts distinct, yet
overlapping, rationales for awarding an injured party
relief. In asking whether a party violated Rule 11, courts
in the Fifth Circuit look only to “objectively ascertainable
circumstances.” FDIC v. Maxxam, Inc., 523 F.3d 566, 586
(5th Cir. 2008). By contrast, our § 285 precedent asks (1)
whether the litigation is brought in subjective bad faith,
and (2) whether the litigation is objectively baseless.
Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393
F.3d 1378, 1381 (Fed. Cir. 2005).
Rule 11 directs attorneys to focus on their obligations
and responsibilities as officers of the court in making
representations, while also operating as an enforcement
mechanism to correct any “unusual circumstances” where
a party “pursued an illegitimate purpose to increase costs
or to harass a party regardless of the weight of that
purpose in filing suit.” Maxxam, 523 F.3d at 586 (explain-
ing that Rule 11 reaches those pleadings which constitute
an abuse of legal purpose by discouraging dilatory or
abusive tactics); see also Jenkins v. Methodist Hosp. of
5 RAYLON v. COMPLUS DATA
Dallas, Inc., 478 F.3d 255, 265 (5th Cir. 2007) (“As stated
by the Advisory Committee Note to Rule 11, a lawyer is
required to ‘stop-and-think’ before . . . making legal or
factual contentions.”) (quoting Advisory Committee Notes
on FED. R. CIV. P. 11 (1993 Amendments)). Sanctionable
Rule 11 conduct is distinguishable from a judgment on the
merits because Rule 11 addresses the collateral issue of
“whether the attorney has abused the judicial process,
and, if so, what sanction would be appropriate.” Cooter &
Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990).
Section 285 was enacted to address a patent-specific
policy rationale, awarding fees in “exceptional cases” in
which sanctions were necessary to deter the “improper
bringing of clearly unwarranted suits.” Automated Bus.
Cos., v. NEC Am., Inc., 202 F.3d 1353, 1354 (Fed. Cir.
2000) (quoting Mathis v. Spears, 857 F.2d 749, 753–54
(Fed. Cir. 1988)). The purpose of the statute has been
described by this court as compensation to the prevailing
party for its monetary outlays in the prosecution or de-
fense of the suit. See Cent. Soya Co. v. Geo. A. Hormel &
Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983). Such a purpose
is distinguishable from Rule 11, which addresses conduct
in general, because § 285 recognizes the particular strain
that meritless patent litigation bears on judicial and
party resources. Eon-Net LP v. Flagstar Bancorp, 653
F.3d 1314, 1327 (Fed. Cir. 2011) (noting the burden of
unnecessarily requiring a “district court to engage in
excessive claim construction before it is able to see the
lack of merit of the patentee’s infringement allegations”);
Mathis, 857 F.2d at 758 (explaining that Congress codi-
fied § 285 to make a prevailing defendant “whole” follow-
ing a gross injustice).
In non-patent contexts, a litigant is sometimes sanc-
tioned for misleading the court, e.g., Precision Specialty
RAYLON v. COMPLUS DATA 6
Metals, Inc. v. U.S., 315 F.3d 1346, 1357 (Fed. Cir. 2003),
or for exhibiting sloppiness during the course of the
proceedings, Spiller v. Ella Smithers Geriatric Ctr., 919
F.2d 339, 347 (5th Cir. 1990) (“slipshod and unprofes-
sional work”). But in patent cases invoking Rule 11,
courts are often asked to weigh whether the substantive
allegations are so weak that they are not grounded in fact
and legally tenable. See, e.g., View Eng’g, Inc. v. Robotic
Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000).
Here, notwithstanding whether sanctions are issued
pursuant to Rule 11, § 285, or both, the offending conduct
is intertwined with governing patent law. I believe that if
the circumstances in a patent case result in finding that
Rule 11 has been violated on grounds related to substan-
tive positions taken or advanced, then the district court
must also, when so moved by the parties, engage in a
comprehensive § 285 inquiry. In my view, a § 285 inquiry
is compelling where the case progresses beyond the plead-
ing stages and a party’s unwillingness to abide by prece-
dent controlling claim construction lends to escalation of
avoidable costs.
III. RECORD INFERENCES OF BAD FAITH
Having determined that the challenged litigation is
objectively meritless,1 a court may examine the litigant’s
subjective motivation. Prof’l Real Estate Investors, Inc. v.
1 This court recently held that objective baseless-
ness is a question of law based on underlying mixed
question of law and fact. Highmark, Inc. v. Allcare
Health Mgmt. Sys., Inc., 687 F.3d 1300, 1309 (Fed. Cir.
2012). The Highmark decision did not issue until after
the district court denied the § 285 motion. Because I find
Raylon’s claim construction and infringement positions
meritless, the objective analysis would compel the same
result regardless of whether we reviewed de novo or for
clear error.
7 RAYLON v. COMPLUS DATA
Columbia Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993).
There is a presumption that the assertion of infringement
is made in good faith, Brooks Furniture, 393 F.3d at 1382
(internal citation omitted), but even so, we examine the
record with care to determine, among other things,
whether a party demonstrated good faith during the claim
construction process. See Eon-Net, 653 F.3d at 1325. If
the record indicates by clear and convincing evidence that
a patentee is manifestly unreasonable in assessing and
pressing its infringement allegations, then a court may
infer that the claims were brought in bad faith. Eltech
Sys. Corp. v. PPG Indus., Inc., 903 F.2d 805, 810–11 (Fed.
Cir. 1990).
Our cases have not established a precise definition for
“bad faith” in the exceptional case context. We recognize
the enactment of § 285 as a “bad faith equitable excep-
tion” to the American Rule on awarding fees to an alleged
infringer, Mathis, 857 F.2d at 758 (internal citation
omitted), and discuss “bad faith” as closely aligned with “a
finding of unfairness”:
[T]he payment of attorney’s fees for the victor is
not to be regarded as a penalty for failure to win a
patent infringement suit. The exercise of discre-
tion in favor of such an allowance should be bot-
tomed upon a finding of unfairness or bad
faith in the conduct of the losing party, or some
other equitable consideration of similar force,
which makes it grossly unjust that the winner of
the particular law suit be left to bear the burden
of his own counsel fees which prevailing litigants
normally bear.
Rohm & Haas Co. v. Crystal Chemical Co., 736 F.2d 688,
691 (Fed. Cir. 1984) (emphases added) (discussing 1952
RAYLON v. COMPLUS DATA 8
Patent Act) (quoting Park-in Theatres, Inc. v. Perkins, 190
F.2d 137, 142 (9th Cir. 1951)). Against this backdrop, I
interpret “bad faith” as synonymous with a patent
holder’s unreasonable continued pursuit of an infringe-
ment claim that has been demonstrably shown to be
based on “wrongful intent, recklessness, or gross negli-
gence.” Phonometrics, Inc. v. Westin Hotel Co., 350 F.3d
1242, 1246 (Fed. Cir. 2003) (quoting Eltech, 903 F.2d at
811).
As I have noted, I agree with and join the majority’s
strong analysis and result on Rule 11 sanctions. But,
unlike the majority, I believe that the district court, in the
first instance, should have fully explored the existence of
an inference of bad faith.2 These consolidated cases
provide fertile grounds for a determination that Raylon’s
pursuit of objectively unreasonable allegations compelled
the conduct of an exceptional case inquiry. While reason-
able minds can—and often do—differ as to the proper
construction of a given claim term, it is unreasonable
minds that go to extraordinary lengths to conjure and
advance through various stages of a legal proceeding
unsupported arguments that are also inconsistent with
established precedent in order to accuse non-infringing
devices. Here, specific circumstances which, if taken in
the aggregate, potentially give rise to an inference that
2 The district court limited its scant subjective in-
tent analysis to general statements that there was no
material misconduct because of a low probability of the
case having been brought to force a settlement. J.A. 13.
These general statements are incomplete following the
acknowledgement that Raylon’s claim construction posi-
tions “stretched the bounds of reasonableness.” J.A. 4.
Recognition of the objectively weak contentions was basis
enough to further inquire as to bad faith.
9 RAYLON v. COMPLUS DATA
Raylon demonstrated an awareness that its allegations
lacked support.
A. EARLY NOTICE
Here the likelihood of success on infringement could
have been projected simply by examining the accused
devices and comparing those features element-by-element
and claim-by-claim with the disclosures in the ’589 pat-
ent. Rather than acknowledge that its claims could not
survive, Raylon built its case on positions that misapply
Federal Circuit precedent.3 The record establishes that
Raylon was not unaware as to knowledge of its substan-
tive shortcomings because it was faced with early motions
for summary judgment, a motion for judgment on the
pleadings, and motions for sanctions that identified the
flaws in the infringement theories.
Indeed, Casio memorialized its concerns by writing to
Raylon early in the case regarding the merits of its allega-
tions, but it appears that Raylon took no curative meas-
ures and proceeded through claim construction
undeterred. J.A. 3139 (“As we have repeatedly told you
since day one, these infringement allegations are viola-
tions of Rule 11.”); J.A. 3141–43; J.A. 3145–46; J.A. 3153–
54 (counsel correspondence discussing perceived viola-
tions of Rule 11). This early notice at least suggests that
Raylon had a duty to “stop and think,” and to investigate
whether its positions were objectively baseless, but it
opted to ignore grappling with the incongruence raised by
visual comparison of the accused devices with the plain
language of the claims.
3 Although Raylon noted at the claim construction
hearing that it considers Federal Circuit teachings
“somewhat unusual,” it is still bound to adhere to those
guidelines—even when such rulings do not suit its litiga-
tion strategy. See J.A. 14049.
RAYLON v. COMPLUS DATA 10
B. “PIVOTALLY MOUNTED DISPLAY”
Raylon contended that the flatly fixed displays of the
accused devices could meet the “pivotally mounted dis-
play” limitation because a person could move the entire
device while it was held in the user’s hand. Yet, as the
majority well clarifies, this position is inconsistent with
the intrinsic disclosures and Raylon cannot rely on a
single, inapposite sentence in the specification to redefine
the meaning of the claim. Majority Op. 13-14. As shown
in Figure 1, the display was mounted on the housing in
such a manner that it could be pivoted up or down with no
movement of the housing. Illustrations of the patent
figures next to the accused devices emphasize the objec-
tive unreasonableness of Raylon’s infringement allega-
tions.
Figure 1 in ’589 patent Casio Accused Devices
(display pivotally mounted to (flat display fixed to housing)
housing)
11 RAYLON v. COMPLUS DATA
The ’589 patent specification teaches that the pivotally
mounted display is attached to the housing and as a
result the housing be made able to pivot up or down. ’589
patent col.5 ll.58-61 (depicted in Figure 1). By contrast, it
is readily apparent that the accused devices are fixed in a
flat position and lack a display that is not, nor is it capa-
ble of, being pivotally mounted on the housing. Given the
clear meaning of the claim elements, no objectively rea-
sonable litigant would believe it could succeed by linking
the “pivot” to the up and down movement of the user’s
arm. 4
C. “INTERIOR PRINTER ASSEMBLY”
Raylon also asserted all seventeen claims in the ’589
patent against printerless Symbol devices by contending
that an external printer attached to a separate housing
would satisfy the limitation requiring the printer assem-
bly be mounted in the interior of the housing. To main-
tain its allegations, Raylon disregarded the meaning of
the word “said” as presented in the claims: “a printer
assembly being mounted in said interior of said housing
for printing a ticket.” ’589 patent col.7 ll.32-33 (claim 1)
(emphases added). As our cases require, “said” refers
back to an earlier use of that term in the claim. Intamin,
Ltd. v. Magnetar Tech. Corp., 483 F.3d 1328, 1333 (Fed.
Cir. 2007); Bell Commc’n Research, Inc. v. Vitalink
Commc’n Corp., 55 F.3d 615, 621 (Fed. Cir. 1995). Here,
“said housing” is referring back to an earlier use of “hous-
ing” that describes “an interior,” “an elongated slot,” and
“an elongated aperture.” ’589 patent col.7 ll.17-20. De-
4 As pointed out in the briefing, Raylon misrepre-
sented the claim language—by substituting “pivotable” in
place of the “pivotally mounted” limitation—and pro-
ceeded to claim construction by relying on an untenable
position that was refuted by the ’589 patent specification.
See J.A. 12239–40; 12247; 12253; 12273–74.
RAYLON v. COMPLUS DATA 12
spite the known requirements, Raylon glosses over the
well-defined relationship between the interior printer, the
housing, and remaining claim elements.
The disconnect between the accused devices and the
claim language should have been apparent, but we have
no indication as to whether Raylon’s expert’s conducted a
visual examination of the Symbol devices and the stand
alone printers. See J.A. 3975–82; 3991–4008. Again, the
above figures clearly show that in the preferred embodi-
ment of the ’589 patent, a printer is housed within the
device. Raylon argues that attaching a stand alone
printer to the Symbol device satisfies the claim that the
printer be located in the housing of the device.
The absence of analysis regarding the Symbol devices
immediately raises doubt as to the credibility of Raylon’s
assertions. For example, in responses to defendants’
motions for summary judgment, counsel for Raylon made
only the limited statement that accused Symbol devices
were analyzed by Raylon’s patent expert and that Symbol
was provided claim charts that “consisted of a good faith,
informed comparison of the claims of a patent against the
accused subject matter.” J.A. 3972, ¶ 9; see also id. at
3969–71, ¶¶ 1–5. Raylon did not supplement the com-
parison with an explanation as to what the expert was
relying upon or how the Symbol devices might infringe.
In the end, Raylon never conceded the unavoidable reality
that Symbol models did not infringe. Notably, Raylon
continued to defend the reasonableness of its allegations
on appeal, including during the oral argument before this
court. Oral Argument, available at http://www.cafc.uscourts.gov/oral-
argument-recordings/all/raylon.html.
13 RAYLON v. COMPLUS DATA
D. UNDUE RELIANCE ON EXPERT DECLARATIONS
Instead of focusing on why its pre-suit investigation
was a reasonable application of Phillips, Raylon argues
that its allegations were made in good faith because it
was informed by pre-suit advice it received from a patent
practitioner it considered an expert. Applicable law,
however, clearly states that a patent practitioner’s state-
ments regarding the meaning of claim terms are entitled
to no weight. Symantec Corp. v. Computer Assocs. Intern.,
Inc., 522 F.3d 1279, 1289 n.3 (Fed. Cir. 2008) (citing
Sinorgchem Co., Shandong v. Int’l Trade Comm’n, 511
F.3d 1132, 1137 n. 3 (Fed. Cir. 2007)). Similarly, patent
practitioners are unqualified to opine on the issue of
infringement. See Sundance, Inc. v. DeMonte Fabricating
Ltd., 550 F.3d 1356, 1362.
The majority has ascertained that Rule 11 sanctions
were necessary because Raylon did not follow standard
canons of claim construction and its arguments were not
reasonably supported by the intrinsic record. To date
there have been no findings as to the adequacy of the pre-
suit investigation and whether it was conducted in a
manner intended to ignore or overlook the weakness of
the infringement allegations. The circumstances sur-
rounding the pre-suit investigation, including whether
plaintiff demonstrated diligence prior to filings its suits,
might be accounted for on remand when determining
whether Raylon’s actions support an inference of bad
faith.
For the post-Complaint analysis, Raylon defers to its
technical expert, Dr. Sharp. Review of Dr. Sharp’s decla-
ration reveals no significant effort to explain why Raylon’s
interpretation of the pivotally mounted display limitation
RAYLON v. COMPLUS DATA 14
is the best understanding of the feature in light of the
patent disclosures. See J.A. 3991–4008. The declaration
simply states Dr. Sharp’s tacit approval of Raylon’s ex-
pansive positions through cursory conclusions indicating
that there is “no restriction” that would stand in the way
of Raylon’s effort to link the claim language to the per-
spective of the viewer. J.A. 4001–02. Dr. Sharp made no
reasonable attempt to create a nexus between the as-
serted patent and the accused devices. Raylon’s heavy
and continued reliance on an uninformative declaration
calls into question whether the statements were predi-
cated in good faith.
Raylon’s elevation of extrinsic declarations again ig-
nores Federal Circuit precedent, which, at minimum,
requires that structural discrepancies that lie at the basis
of an infringement allegation be explained according to
the intrinsic evidence. Bell & Howell Document Mgmt.
Prod. Co. v. Altek Sys., 132 F.3d 701, 706 (Fed. Cir. 1997)
(“Patents should be interpreted on the basis of their
intrinsic record, not on the testimony of such after-the-
fact ‘experts’ that played no part in the creation and
prosecution of the patent.”) (citing Southwall Tech., Inc.
v. Cardinal IG Co., 54 F.3d 1570, 1578 (Fed. Cir. 1995)). I
submit that an inference of bad faith may arise where
expert conclusions are steadfastly relied upon to “inject a
new meaning into terms that is inconsistent with what
the inventor set forth in his or her patent and communi-
cated, first to the patent examiner and ultimately to the
public.” Bell & Howell, 132 F.3d at 706.
IV. CONCLUSION
When a court finds a Rule 11 sanction based on con-
duct involving the allegation and pursuit of patent in-
fringement claims that have been found objectively
unreasonable, the court is compelled, if so moved by a
15 RAYLON v. COMPLUS DATA
party, to undertake a detailed and thorough § 285 inquiry
and analysis. I concur with the majority and would
reverse and declare this an exceptional case and limit the
remand to determination of appropriate sanctions.