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Intellect Wireless, Inc. v. HTC Corp.

United States District Court, Northern District of Illinois, Eastern Division

January 8, 2015

INTELLECT WIRELESS, INC., Plaintiff,
v.
HTC CORPORATION and HTC AMERICA, INC., Defendants.

OPINION AND ORDER

This case is before the court after trial to determine whether defendants HTC Corporation and HTC America, Inc. ("HTC") are entitled to recover attorney fees and costs from plaintiff's attorneys Raymond Niro, Paul Vickrey, Paul Gibbons, and David Mahalek (hereinafter "Niro"), as well as from plaintiff Intellect Wireless, Inc. ("IW"). IW has withdrawn its initial opposition and conceded that this case is exceptional within the meaning of the Patent Act's fee-shifting provision which authorizes the award of attorney fees and costs to prevailing parties in exceptional cases. 35 U.S.C. § 285. IW does continue to dispute the amount of fees that should be awarded. HTC contends that a finding should also be made that the attorneys for IW are jointly and personally required to satisfy HTC's attorney fees and costs because IW's attorneys unreasonably and vexatiously multiplied the proceedings within the meaning of 28 U.S.C. § 1927; because their litigation conduct was in violation of Fed.R.Civ.P. 11; and/or based on the court's inherent power to punish litigation misconduct.

The Niro attorneys have filed declarations stating that they were never informed of false declarations the inventor made to the United States Patent and Trademark Office ("PTO") in February 2007, and they have stated that they are not guilty of any misrepresentations in this litigation. HTC and the Niro attorneys agree that the issue of the attorneys' liability can be decided on the papers that have been presented.

I. Attorney Liability

The key issue that must be determined is what and when did IW's attorneys in the infringement litigation know about the inventor's multiple false statements to the PTO and any false statements in litigation in this court concerning the patents.[1] This determination first requires a review of the facts which led to a declaration that the patents-in-suit were unenforceable due to inequitable conduct before the PTO. See Intellect Wireless, Inc. v. HTC Corp., 910 F.Supp.2d 1056 (N.D. Ill. 2012), affirmed, 732 F.3d 1339 (Fed. Cir. 2013). In summary, it was held that patents disclosing technology enabling wireless devices to receive and display caller identification, video messages, and caller pictures were unenforceable because false statements were made to the PTO. The statements related to invention, demonstration, and actual reduction to practice in order to overcome prior art references cited by the patent examiner. Also, false statements were made in order to claim diligence from an alleged date of invention to the date of filing a patent application.

Subsequent to the affirmance of the judgment finding the patents-in-suit unenforceable, HTC sought discovery from the attorney who represented the inventor before the PTO. This discovery establishes that, in February 2007, the inventor clearly knew his statements to the PTO were false. HTC argues that Niro also knew the statements were false.

A post-trial discovery request produced an email message from Daniel Henderson, the inventor, to Robert Tendler, the attorney then representing him before the PTO, dated February 10, 2007, and stating in part:

I want to address what I perceive is a potentially lethal blow to the integrity and validity of my patent portfolio from the incorrect declaration faxed to the PTO on Friday. I was asked to read a patent that before Friday I had never seen, and give a thumbnail analysis about it within an hour, which I did. I also found support for a prior invention date by me, which I also did. I followed your instruction and signed the declaration prepared by you in haste without reviewing it, as you felt speed was of the essence. And now it seems that we may be confronted with a very difficult situation as a result.
I am quite upset about the money and time that I have spent to arrive at this point without any clear indication that there will EVER be any other patents allowed. The damage generated by the factually inaccurate declaration I signed is potentially devastating in the event that any patents do issue. I am quite certain that 1 will be deposed ad infinitum about the declaration during litigation and I do not see any way around this.
My concern is that the incorrect declaration will create a weak flank for attack by even marginally-competent litigation counsel on the other side. Since the PTO has already received the incorrect declaration signed by me, we cannot uncrack the egg.
To suggest to the PTO that they disregard a fax received would be worse than the fact that they received it at all. However, we cannot let this go unaddressed. It will come out in litigation that the intellect device shown to Hashimoto in July 1993 HAD NO WAY of displaying a picture on a two line alphanumeric display, contrary to my recent inaccurate declaration. This of course will cause problems in the file wrapper with two contradictory statements by me and will subject me to intense questioning during deposition and impact my credibility as a witness.
The questions will go like this:
"Do you know of your duty of candor and good faith with the PTO?"
"Do you read documents before you sign them?"
"Are you a careless person when it comes to stating important facts?"
"How do we know that you have not been careless with other factual statements made to the PTO during prosecution?"
"What did you really invent that you showed to Hashimoto?"
''The intellect device shown to Hashimoto and now in the Smithsonian wasn't capable of showing a picture, was it, despite what you swore under penalty of perjury in your 131 affidavit. . . ." etc. etc. etc.
I have lived through many of these depositions, and my concerns are tempered by the experience of such hostile scrutiny. These are not imaginary issues. The improper declaration and allegations of fraud on the patent office will now be the easiest way to invalidate the entire patent portfolio ana impeach my credibility as a witness. I fully expect that it will also introduce serious concerns for my litigation counsel, given the potential invalidity arguments that will be posed by the other side.
Please contact Examiner Anwah Monday and report to me where we are in this matter. Also contact Cliff Kraft at Niro's office to see what their take is on this development. As you suggested, it makes sense to discuss with them what they may recommend in terms of the road blocks by [Examiner] Fan Tsang that continue to thwart my efforts in securing ...

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