When Does a Rule 68 "Offer of Judgment" Makes Sense in a False Patent Marking Case?
By: Jim Lennon
Offers of judgment under Rule 68 of the Federal Rules of Civil Procedure are rarely used, according to Professor Eaton of Mercer University School of Law, who describes the Rule as not providing "enough of a carrot or stick to move the parties to the prompt resolution of their dispute." Thomas A. Eaton, Rule 68 Offers of Judgment, ADVOCATE, Spring/Summer 2007, at 4. Essentially, "costs" are viewed as too insignificant to warrant making an offer under the Rule.
In essence Rule 68 allows a defendant to make an offer of judgment at any point earlier than 10 days before trial. If the plaintiff/offeree does not accept the offer and obtains a judgment that is not "more favorable" than the offer, the plaintiff/offeree must pay the defendant/offeror's costs incurred after the offer was made. In Marek v. Chesny, 473 U.S. 1 (1985), the Supreme Court construed "costs" to include the attorney's fees the plaintiff/offeree might otherwise be entitled to as part of the judgment. This interpretation has little impact on most federal civil litigation where there is no statutory basis for an award of attorney's fees.
A statutory basis for attorney's fees does exist, for "exceptional cases", in the Patent Statutes. See 35 U.S.C. § 285. These awards generally require a finding of "inequitable conduct" in the procurement of a patent or a pattern of litigation misconduct.
Many False Patent Marking complaints under 35 U.S.C. § 292 seek an award of the plaintiff/qui tam relator's attorney's fees as part of the requested relief, some explicitly referencing 35 U.S.C. § 285. Most False Marking defendants rightfully discount the threat of such an award when assessing their case. In fact no reported decisions could be found, in our research, showing an award of attorney's fees to a False Marking relator. Nonetheless, the threat may exist in certain circumstances. For example, late last week in U.S. Rubber Recycling, Inc. v. Encore International Inc., et. al., 2-09-cv-09516 (CACD January 7, 2011, Order), the Central District of California expressly retained jurisdiction to potentially award attorney's fees. The court dismissed a declaratory judgment of patent invalidity and unenforceability in light of the patentee's covenants not to sue on the patents at issue. But the court refused to dismiss plaintiff's claim for attorney's fees under 35 U.S.C. § 285, finding that "it would be premature and inappropriate for the Court to hold that Plaintiff, as a matter of law, cannot be a 'prevailing' party [under § 285] for its claim of false patent marking[.]" Id. at 12.
In essence Rule 68 allows a defendant to make an offer of judgment at any point earlier than 10 days before trial. If the plaintiff/offeree does not accept the offer and obtains a judgment that is not "more favorable" than the offer, the plaintiff/offeree must pay the defendant/offeror's costs incurred after the offer was made. In Marek v. Chesny, 473 U.S. 1 (1985), the Supreme Court construed "costs" to include the attorney's fees the plaintiff/offeree might otherwise be entitled to as part of the judgment. This interpretation has little impact on most federal civil litigation where there is no statutory basis for an award of attorney's fees.
A statutory basis for attorney's fees does exist, for "exceptional cases", in the Patent Statutes. See 35 U.S.C. § 285. These awards generally require a finding of "inequitable conduct" in the procurement of a patent or a pattern of litigation misconduct.
Many False Patent Marking complaints under 35 U.S.C. § 292 seek an award of the plaintiff/qui tam relator's attorney's fees as part of the requested relief, some explicitly referencing 35 U.S.C. § 285. Most False Marking defendants rightfully discount the threat of such an award when assessing their case. In fact no reported decisions could be found, in our research, showing an award of attorney's fees to a False Marking relator. Nonetheless, the threat may exist in certain circumstances. For example, late last week in U.S. Rubber Recycling, Inc. v. Encore International Inc., et. al., 2-09-cv-09516 (CACD January 7, 2011, Order), the Central District of California expressly retained jurisdiction to potentially award attorney's fees. The court dismissed a declaratory judgment of patent invalidity and unenforceability in light of the patentee's covenants not to sue on the patents at issue. But the court refused to dismiss plaintiff's claim for attorney's fees under 35 U.S.C. § 285, finding that "it would be premature and inappropriate for the Court to hold that Plaintiff, as a matter of law, cannot be a 'prevailing' party [under § 285] for its claim of false patent marking[.]" Id. at 12.
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