Is it time for the Federal Circuit to award costs and fees in Rule 36 judgments?

Erich Spangenberg commented on our most recent Rule 36 article, “Does the Federal Circuit’s use of Rule 36 call into question integrity of the judicial process?” He raised a significant and potent question: Logically, when the Federal Circuit uses Rule 36 to affirm without a written opinion should fees and costs be awarded?

“Excellent post. Even when I have benefited from a Rule 36 judgment, it felt wrong at some level as if it was that blatant a losing appeal, why were we not awarded costs? If you want to clear the docket up a bit–and by failing to do so, the court makes erroneous and misguided appellate filings even worse, why not a three-page opinion clearly stating why one side wasted everyone’s time and money along with a granting of costs/fees against the losing side? Even better, impose those costs/fees on losing counsel. That is a better way to clear the docket than a lazy, intellectually dishonest Rule 36 decision.”

Since the Leahy-Smith America Invents Act (AIA) signed into law by President Obama in 2011 the gravity of patent litigation abuse reform has been about moving money around. The Supreme Court agreed with this “follow the money” truth and twice: Highmark/Octane on loser pays fee shifting and Halo/Stryker on willfulness triple damages. Furthermore, Chief Justice Roberts said in his annual year-end report that district court judges do all the real work and deserve more discretion and respect. When the Federal Circuit uses Rule 36 to affirm without a written opinion should fees and costs be awarded? Logically, then Chief Justice Roberts is really asking the same question posed by Spangenberg.

If the Federal Circuit can dispose a case with a one-word judgment because the outcome is so patently obvious and there is nothing other than a rubber stamp on the previous decision necessary, then it seems that the appellant has quite clearly wasted the time of the court. Worse, the appellant, in an unnecessary and unjustified way, forced the appellee to spend thousands of dollars, sometimes many tens of thousands of dollars (or more) to defend a judgment that was already clearly on its face so correct and just that a one-word judgment was sufficient. Are appellants really this rogue and out of control?

If this all seems too dramatic then consider Spangenberg’s question in the context of the appellate rule where you are not supposed to pursue a frivolous appeal. Federal Rule of Appellate Procedure 38 says that the remedy for a frivolous appeal is “just damages and single or double costs to the appellee.” The Federal Circuit practice note on FRAP 38 explains:

“The court’s early decision in Asberry v. United States, 692 F.2d. 1378 (Fed. Cir. 1982), established the policy of enforcing this rule vigorously. Since then, many precedential opinions have included sanctions under the rule. Damages, double costs, and attorney fees, singly or in varying combinations, have been imposed on counsel, parties, and pro se petitioners for pursuing frivolous appeals.”

Indeed. The Federal Circuit appears to be vigorously using Rule 36 to clear out its docket, yet the absence of written decisions produced coupled with extraordinary use of Rule 36 is strangely creating the presence of something else. A court that has by their own admission vigorously enforced rules preventing frivolous appeals seems to on one hand be signaling that roughly 50 percent of its docket is just that – frivolous – but oddly not giving relief to the aggrieved appellees who were forced to spend both time and money fighting to preserve an obvious victory.

Money, gavel, cashThere is no doubt, however, that appeals taken to the Federal Circuit are done so as a matter of right. They can, and often do, relate to a matter over which there is any honest dispute, but where the lower tribunal’s decision could be determined by the Federal Circuit to be correct. For such routine matters, Rule 36 would be appropriate. But does that really account for close to 50 percent of the Federal Circuit’s docket? Especially when other Regional Circuits by comparison infrequently use such a similar summary disposition tool? How is this routine?

Our original article pointed out that the requirements of Rule 36 are that the appealed decision was correct on the facts and then the law and an opinion by the Federal Circuit would have no precedential value. However, in the field of Section101, subject matter eligibility cases where the dispute turns on decisions of district courts or PTAB administrative patent judges trying to interpret the Supreme Court’s Alice decision, ever evolving USPTO guidelines, and the Federal Circuit’s own very recent decisions, everything would seem to be precedential and deserving of a written opinion.

The Federal Circuit is using Rule 36 so often that it has to raise questions even in the mind of the most vocal supporter of the Court. It is entirely predictable that such secrecy would lead people to ask questions, including the dramatic – why is it not appropriate to award at least double costs if the appeal is so easy and nothing could be gained from writing an opinion?

Spangenberg’s comment poignantly illustrates the growing frustration in the IP community with the Federal Circuit’s ongoing refusal to step up to the plate and do the work the current and gravely uncertain circumstances that Section 101 and subject matter eligibility disputes deserve. Too much of the American economy depends upon software and IP protection. The IP bar needs clarification in these vital areas of the law and the Federal Circuit, by using Rule 36, simply fails to provide this critical guidance.



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