SOUTHEAST TEXAS RECORD

A trio of plaintiffs attorneys were recently hit with sanctions totaling more than $450,000 for bringing “frivolous” patent complaints.

In 2009, Raylon, a now insolvent Tyler company, filed three complaints in the Eastern District of Texas, accusing several companies, including Complus Data Innovations, Casio and Symbol Technologies, of infringing U.S. Patent No. 6,655,589, entitled “Identification Investigating and Ticket Issuing System.”

The ’589 Patent relates to hand-held computers that read magnetic tape on an identification card, display and transmit information, and print tickets.

Raylon’s complaint was filed through Dallas attorneys Scott Hemingway and Corby Bell.

Court records show that by August 2010, all three defendants (Complus, Casio and Symbol) had filed either a motion for summary Judgment of non-infringement or a motion for judgment on the pleadings that Raylon’s infringement claims were not plausible.

All three defendants had also filed motions for sanctions against Raylon for asserting frivolous infringement claims.

Following a Dec. 2, 2010, hearing, Judge Leonard Davis granted the motions for summary judgment but denied the defendants’ motions for sanctions.

The U.S. Court of Appeals for the Federal Court disagreed, deeming Raylon’s claims as frivolous and finding that the court abused its discretion by not imposing sanctions, court records show.

After the case was remanded, the defendants abandoned their claims against Raylon, since the company had become insolvent, leaving the court with only one remaining issue to rule on – an appropriate sanction against Raylon’s counsel for bringing a frivolous claim.

The defendants argued they should be reimbursed for their attorney’s fees, which added up to $1.4 million, or at the very least Raylon’s counsel should be deprived of the settlement proceeds (around $300,000) they reaped from other defendants who settled early, court records state.

Conversely, Raylon’s counsel argued the higher court’s published opinion had an adverse impact on their practices and reputations, so much so that no monetary sanction was necessary.

“In light of the foregoing, the Court is of the opinion that the appropriate sanction in this case is disgorgement of Raylon’s counsel’s settlement proceeds ($300,921.25) plus an additional 50 (percent) penalty on that amount ($150,460.63), which together totals $451,381.88 to be paid to Defendants,” writes Davis in his May 4 order.

“This amount in addition to the damage to Raylon’s counsel’s reputations is, in this Court’s opinion, the least severe sanction sufficient to accomplish the deterrence objective of such a sanction. The Court recognizes that although this sanction is relatively severe by typical Rule 11 standards, the sanction amounts to significantly less than the approximately $1.4 million in fees and expenses requested and incurred by Defendants in this case.”

Individually, Hemmingway was ordered to pay $352,486.40, Bell $70,065.78 and a third attorney, identified in the order as Mr. Roth, was ordered to pay $28,829.70.

Case No. 6:09-cv-00355-LED