Unreasonable Claim Constructions That Are Contrary To Intrinsic Evidence Warrant Rule 11 Sanctions

In Raylon, LLC v. Complus Data Innovations, Inc., Nos. 11-1355, -1356, -1357, -1358, -1359 (Fed. Cir. Dec. 7, 2012), the Federal Circuit affirmed the district court's denial of attorneys' fees and costs under 28 U.S.C. § 1927 and vacated the district court's denial of the defendants' motion for Rule 11 sanctions under the Federal Rules of Civil Procedure and attorneys' fees and costs under 35 U.S.C. § 285. The Court remanded for further proceedings in accordance with its opinion.

Raylon, LLC ("Raylon") brought three suits against Complus Data Innovations, Inc. ("Complus"), Casio America, Inc. and Casio Computer Co., Ltd., and Symbol Technologies, Inc. (collectively "Defendants"), alleging that Defendants infringed claims 1-17 of U.S. Patent No. 6,655,589 ("the '589 patent"). The claimed device is a handheld identification-investigating and ticket-issuing system with a display pivotally mounted on the system's housing. In response to the suits, Defendants sent several letters to Raylon, expressing their concern that Raylon's complaints violated Rule 11 because, inter alia, Raylon's claim construction positions were unsupportable and unreasonable.

Raylon disagreed, maintaining that the patent supported broad claim constructions and that the accused products infringed the claims of the '589 patent. Raylon specifically alleged that the accused devices all literally met the requirement of a pivotally mounted display because the systems all had a display that was mounted in a housing and could be pivoted relative to the user, i.e., a device with a fixed-mounted screen met the pivotally mounted limitation when the user pivoted the device by moving his elbow, wrist, or other joint. Defendants' handheld systems had fixed displays, and their proposed constructions excluded from "pivotally mounted" any displays that are fixed or incapable of pivoting.

The district court rejected Raylon's proposed construction of "display pivotally mounted on said housing" to include displays that are fixed or incapable of moving and accepted Defendants' construction. Additionally, the district court granted SJ in Defendants' favor. The district court further denied Defendants' motion for Rule 11 sanctions, concluding that while Raylon's proposed constructions stretched the bounds of reasonableness, they did not cross the line justifying sanctions, and Raylon's settlements and damages model tended to show that Raylon did not believe its case was weak or frivolous. The...