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Raniere v. Microsoft Corp.

United States Court of Appeals, Federal Circuit

April 18, 2018

KEITH RANIERE, Plaintiff-Appellant
v.
MICROSOFT CORPORATION, AT&T CORP., Defendants-Appellees

          Appeals from the United States District Court for the Northern District of Texas in Nos. 3:15-cv-00540-M, 3:15-cv-02298-M, Chief Judge Barbara M.G. Lynn.

          Robert Dale Crockett, Crockett & Associates, Santa Clarita, CA, argued for plaintiff-appellant. Also represented by Chase Tajima, Lisa Dearden Trepanier.

          Stephen Blake Kinnaird, Paul Hastings LLP, Washington, DC, argued for defendants-appellees. Defendant-appellee AT&T Corp. also represented by Igor Victor Timofeyev; Christopher Wood Kennerly, Palo Alto, CA.

          Constantine L. Trela, Jr., Sidley Austin LLP, Chicago, IL, for defendant-appellee Microsoft Corporation. Also represented by Richard Alan Cederoth, Douglas Lewis; Joshua John Fougere, Washington, DC.

          Before Lourie, O'Malley, and Wallach, Circuit Judges.

          O'Malley, Circuit Judge.

         Keith Raniere ("Raniere") appeals from the district court's decisions awarding attorney fees and costs to Microsoft Corporation and AT&T Corporation (together, "Appellees"). Raniere v. Microsoft Corp., Nos. 15-0540 & 15-2298, 2016 WL 4626584 (N.D. Tex. Sept. 2, 2016) (Fees Decision); Raniere v. Microsoft Corp., Nos. 15-0540 & 15-2298, slip op. (N.D. Tex. Dec. 22, 2016) (J.A. 34-40). Because the district court did not err in finding that Appellees are prevailing parties under 35 U.S.C. § 285 (2012), and did not abuse its discretion in awarding attorney fees and costs under that provision, we affirm.

         Background

         Raniere sued Appellees for patent infringement, asserting five patents against AT&T (U.S. Patent Nos. 6, 373, 936, 6, 819, 752, 7, 215, 752 ("the '5752 patent"), 7, 391, 856, and 7, 844, 041 ("the '041 patent")) and two of these five patents against Microsoft (the '5752 patent and the '041 patent). Fees Decision, 2016 WL 4626584, at *1.

         In 1995, Raniere and the other named inventors of the patents at issue assigned all rights in these patents to Global Technologies, Inc. ("GTI"). Id. at *2. Raniere is not listed on GTI's incorporation documents as an officer, director, or shareholder. GTI was administratively dissolved in May 1996. Id.

         In December 2014, Raniere executed a document on behalf of GTI, claiming to be its "sole owner, " that purportedly transferred the asserted patents from GTI to himself. Id. Raniere's suits against Appellees identified himself as the owner of the patents at issue.

         In 2015, Microsoft moved to dismiss Raniere's suit for lack of standing, noting that the PTO's records indicated that Raniere did not own the patents at issue. Raniere's counsel represented to the district court that GTI's ownership passed to Raniere in its entirety at some point, and that Raniere properly transferred ownership of the patents from GTI to himself. Id. The court ordered Raniere to produce documentation proving these representations. Id. Raniere produced various documents that, according to the district court, failed to indicate that Raniere had an ownership interest in GTI at any time or that Raniere had the right to assign the patents at issue from GTI to himself. Id. at *3. Given Raniere's failure to produce evidence to support his standing, the district court permitted Appellees to conduct limited discovery into the standing issue and stayed the cases pending its resolution. Id.

         Appellees suspended discovery when the parties began negotiating terms of settlement, but Raniere refused to finalize the settlement. Id. AT&T then filed a motion for an order to show cause why the action should not be dismissed under Federal Rule of Civil Procedure 41(b) for lack of standing. Id. AT&T also noted that Raniere was seeking third-party discovery in violation of the district court's discovery order. Id. Raniere informed the district court that he could produce evidence to establish his standing, but he required a subpoena to obtain evidence from Alan Rubens, a Washington state attorney. Id. The district court permitted this limited discovery request and ordered Rubens to produce all relevant documentation. Id. Rubens's documents showed the GTI shareholders' consent to a transfer of shares from Raniere's ex-girlfriend-who owned 75% of GTI's shares-to Raniere. The documents Raniere proffered did not indicate that any such transfer was ever completed, however, and did not establish that Raniere owned the patents at issue.

         In light of these documents, Appellees filed a renewed motion to dismiss for lack of standing. Id. In response, Raniere filed a motion seeking the court's permission to submit additional evidence showing that he had sole ownership over GTI. Id. The district court granted-in-part and denied-in-part this motion, stating that Raniere had received "more than a fair opportunity to adduce evidence to establish his standing." J.A. 2340.

         The district court held a hearing on Appellees' motion to dismiss. Fees Decision, 2016 WL 4626584, at *4. Rani-ere testified, over Appellees' objection, that the other inventors had disavowed any interest in GTI and given their ownership interests to Raniere. Id. Raniere also testified that his ex-girlfriend held her shares in the corporation in trust for him, based on a side letter executed between these parties, but he did not have possession of that letter nor did he know where the letter could be. Id. The district court found that Raniere's testimony surrounding the alleged transfer contradicted Raniere's earlier representation that the shares had already been transferred to him and was "wholly incredible and untruthful." Id.

         The district court concluded that Raniere was unlikely to be able to cure the standing defect, and dismissed the case with prejudice. Id.; J.A. 2362. The district court also stated that it dismissed with prejudice because it found that Raniere's conduct demonstrated "a clear history of delay and contumacious conduct." Fees Decision, 2016 WL 4626584, at *4.

         Raniere appealed the district court's decision on standing. We summarily affirmed the district court's dismissal with prejudice of Raniere's action for lack of standing. Raniere v. Microsoft Corp., 673 Fed.Appx. 1008 (Fed. Cir. 2017).

         While the merits appeal was pending, Appellees filed a motion seeking attorney fees and costs pursuant to 35 U.S.C. § 285. The district court concluded that, because it dismissed Raniere's claims with prejudice, Appel- lees were prevailing parties for the purposes of § 285. Fees Decision, 2016 WL 4626584, at *4. Although Raniere disputed that dismissal for lack of standing with prejudice was sufficient to confer prevailing-party status on Appellees, the district court explained that "[a] dismissal with prejudice alters the relationship between the parties and is sufficient to confer prevailing party status for purposes of considering a claim for fees under section 285." Id. The district court also concluded that dismissal with prejudice is an appropriate remedy where it is unlikely that the plaintiff will be able to cure the standing defect. On this point, the district court explained that it had given Rani-ere multiple opportunities to cure the identified standing defect, but "[n]one of the evidence produced or arguments advanced by [Raniere] in support of his alleged standing gave the Court any reason to believe that the problem could be cured." Id. at 2.

         The district court next concluded that this case was exceptional because it stood out from other cases "with respect to the unreasonable manner in which it was litigated. [Raniere]'s conduct throughout this litigation, culminating in his untruthful testimony at the hearing on the motion to dismiss, demonstrates a pattern of obfusca-tion and bad faith." Id. at *5. The district court noted that Raniere promised repeatedly that he could produce evidence that would cure the standing defect identified by Appellees and the district court. Id. But Raniere failed to satisfy these promises, according to the district court, as "[d]espite numerous representations, [Raniere] failed to produce any written document or other credible evidence that he had an interest in GTI that would allow him to transfer the patents to himself." Id. Raniere's conduct required Appellees "to expend significant resources to oppose [Raniere]'s arguments, which the Court now finds were made in bad faith to vexatiously multiply these proceedings and avoid early dismissal." Id. The district court rejected Raniere's attempts to recharacterize his conduct as "zealous pursuit of his good faith claim of ownership, " noting its finding that Raniere "made false and misleading representations to Defendants and the Court that resulted in, among other things, prejudice to Defendants in the form of significant legal fees incurred in defending this action." Id. The district court awarded fees and non-taxable costs for the period of time between the Federal Rule of Civil Procedure 16 conference and the district court's order of dismissal. Id.

         In the alternative, the district court sanctioned Rani-ere's conduct under its inherent authority. Id. The district court reiterated that Raniere had "acted in bad faith and vexatiously multiplied these proceedings" by failing to seize on any of the multiple opportunities to correct the standing issue. Id. "From the inception of the litigation, [Raniere] engaged in a pattern of obfuscation, offering inconsistent theories and arguments and promising to produce evidence that never materialized." Id. The district court noted that Raniere failed to voluntarily dismiss the case when confronted with the fatal standing defect, instead imposing expenses on both Appellees and the district court. Id. According to the district court, "[t]his deplorable conduct constitutes an abuse of the judicial process and warrants an imposition of sanctions under the Court's inherent powers." Id.

         Although Raniere argued that his conduct was not sufficiently egregious to justify imposition of sanctions under the district court's inherent powers, the district court rejected Raniere's characterization of his actions, noting that it "requires full candor on all matters from the parties who come to it seeking relief. [Raniere]'s submission of a document that contained a knowingly false representation constitutes an abuse of the judicial process that warrants sanctions." Id. The district court found "that an award of fees is the least ...


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