The opinion of the court was delivered by: JOHN GRADY, Senior District Judge
Before the court is Shell Oil Company's motion for attorney's
fees and costs. For the reasons explained below, the motion is
This is a patent infringement action brought by Armament
Systems and Procedures, Inc. ("Armament"). Armament originally
brought this action against a single defendant, Shell Oil Company
("Shell").*fn1 Armament manufactures and sells handheld
miniature LED flashlights and owns a "Miniature LED Flashlight"
patent, U.S. Patent No. 6,190,018. Armament alleged that Shell
"is offering for sale and selling in the United States . . .
miniature LED flashlights" that infringe Armament's patent.
(Second Amended Complaint, ¶¶ 12, 17.) Armament's claim arises from a merchandise
offer included in an attachment to the envelope included with a
Shell credit card billing statement.
On October 30, 2003, we entered summary judgment in favor of
Shell and against Armament. Shell now moves for attorney's fees
Shell contends that there are four bases for an award of
attorney's fees and costs in this case: (1) it is an "exceptional
case" under patent law; (2) Armament's conduct was vexatious and
unreasonable under 28 U.S.C. § 1927; (3) Armament submitted an
inaccurate and misleading declaration in response to Shell's
motion for summary judgment, constituting sanctionable conduct
under Fed.R.Civ.P. 56(g); and (4) the inherent power of the
court permits us to deter abuse of the judicial process.
A. "Exceptional Case" and 28 U.S.C. § 1927
35 U.S.C. § 285 provides that "[t]he court in exceptional cases
may award reasonable attorney fees to the prevailing party." The
prevailing party must prove the exceptional nature of the case by
clear and convincing evidence. See Forest Labs, Inc. v. Abbott
Labs., 339 F.3d 1324, 1327 (Fed. Cir. 2003). The Federal Circuit
identifies as "exceptional" those cases "involving `inequitable
conduct before the [Patent Office]; litigation misconduct;
vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement.'" Id. at 1329. Where
"the patentee is manifestly unreasonable in assessing
infringement, while continuing to assert infringement in court,
an inference is proper of bad faith, whether grounded in or
denominated wrongful intent, recklessness, or gross negligence.'"
Eltech Sys. Corp. v. PPG Indus., 903 F.2d 805, 811 (Fed. Cir.
Shell asserts that sanctions pursuant to 28 U.S.C. § 1927 are
appropriate as well. 28 U.S.C. § 1927 provides that "[a]ny
attorney . . . who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and attorneys'
fees reasonably incurred because of such conduct." "If a lawyer
pursues a path that a reasonably careful attorney would have
known, after appropriate inquiry, to be unsound, the conduct is
objectively unreasonable and vexatious." In re TCI Ltd.,
769 F.2d 441, 445 (7th Cir. 1985).
Shell argues that this suit was frivolous as against it, that
it was prosecuted in bad faith, and that Armament's counsel
engaged in litigation misconduct by failing to investigate the
pertinent facts, opposing Shell's motion for summary judgment
without basis, and serving poorly drafted subpoenas on Shell.
We believe that Armament's pursuit of this action as against
Shell was frivolous, thus warranting reasonable fees and costs
under both 35 U.S.C. § 285 and 28 U.S.C. § 1927. First of all,
the merchandise offer on which Armament's claim is based contains the
Capital City Marketing, Inc. (CCMI) and its
providers, as applicable, are responsible for this
merchandise offer. Citibank (South Dakota), N.A. and
its related companies, and Shell are not affiliated
with CCMI and are not responsible for this
(Shell's Motion for Summary Judgment, Statement of Uncontroverted
Facts, Ex. A.) Of course, this disclaimer would not have been the
end of the story were Armament to have had evidence to the
contrary (that Shell was responsible for the offer of the
miniature LED flashlight). But Armament admits that it had no
such evidence when it filed suit, and it did not even attempt to
discover any such evidence before filing suit. Armament describes
its pre-filing inquiry, or lack thereof, as follows:
Philip S. Wolin [a member of the law firm
representing Armament] owns a credit card from Shell
Oil Company ("Shell"). Along with his April, 2002
statement from Shell, Mr. Wolin received a return
envelope addressed to Shell with offers to sell
various products printed on it. The offer to sell
products included a "Blue Crystal LED Light and Key
Organizer. . . .". . .
Mr. Wolin . . . filled out the offer to purchase and
ordered the LED light, at all times believing he was
ordering a product offered for sale by Shell. . . .
He did not notice any language in the offer that it
was made by any entity other than Shell. . . .
Prior to the filing of this lawsuit, [Armament's]
counsel had the LED light Mr. Wolin ordered from
Shell examined by a patent lawyer, who determined
that it infringed [the '018 patent]. [Armament's]
counsel also determined that it would be very
difficult to obtain verifiable information, other
than self-serving statements from Shell and the
mailing received by Mr. Wolin, about Shell's
involvement in the design, manufacture, importation, or sale of the infringing
lights, including offers for sale other than the
mailing Mr. Wolin received, without the discovery
powers that would be available to [Armament] after
suit was filed. On July 26, 2002, [Armament] filed
the instant Complaint . . . alleging patent
infringement "upon information and belief" against
(Armament's Response at 1-3 (citations omitted).) It appears,
then, that Armament failed to do any pre-filing inquiry,
especially of Shell, regarding the identity of the offeror of the
flashlight. That Mr. Wolin claims to have not noticed the
disclaimer, and that Armament's counsel "determined that it would
be very difficult to obtain verifiable information," did not
render a pre-filing inquiry unnecessary. Armament also states
that it "could not easily or objectively determine whether Shell
had actionable involvement with the infringing lights without
bringing suit and attempting to institute discovery." (Response
at 10-11.) This is no justification for a complete lack of a
Throughout the course of the litigation, Armament never did
obtain any information that tended to show that Shell was the
offeror. In December 2002, a conference was held in chambers
pursuant to Rule 16 of the Federal Rules of Civil
Procedure.*fn2 During the Rule 16 conference, Shell
contended that it was not the offeror of the flashlight. The parties agreed that they would
take some time to "investigate the various responsibilities
involved here and determine whether Shell should be dismissed and
perhaps some other defendant added." (Minute Order of December
17, 2002.) The parties were given leave to conduct discovery on
the issue, and they did so.
In March 2003, Shell filed a motion for summary judgment,
arguing that it was not the offeror of the flashlight. Armament
opposed the motion on two grounds. First, it relied on Mr.
Wolin's belief, upon reviewing the merchandise offer, that Shell
was the offeror. Second, Armament argued that Shell was the
offeror because its subsidiary exercised control over the content
of the offer and acted as Shell's alter ego. We ruled that Mr.
Wolin's impression of the merchandise offer was "neither here nor
there" and that the argument was unsupported by law. We also
found that Armament failed to submit any evidence that Shell's
subsidiary acted as its alter ego or that the subsidiary was ...