CAFC Rejects Bid for Attorney Fees in Cannabis Patent Suit

“Pure Hemp fundamentally misunderstands our role as a court of appeals…. We reject Pure Hemp’s invitation to invade the province of the district court and make our own findings of fact.” – CAFC U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision Monday affirming a district court’s ruling that denied attorney fees and sanctions to Pure Hemp Collective, Inc. over a patent infringement suit brought against it by United Cannabis Corporation.

The patent at issue, U.S. Patent No. 9730911, covers “Cannabis Extracts and Methods of Preparing and Using Same.” United Cannabis sued Pure Hemp for infringement in July 2018, but, following United Cannabis’ bankruptcy proceedings, the parties stipulated to the dismissal of the patent case. United Cannabis’ infringement claims were dismissed with prejudice while Pure Hemp’s invalidity and inequitable conduct counterclaims were dismissed without prejudice.

In April 2021, Pure Hemp moved for attorney fees on the bases that 1) United Cannabis’ counsel committed inequitable conduct when she copied text from prior art into the specification of the ‘911 patent without disclosing it as prior art to the U.S. Patent and Trademark Office (USPTO) and 2) that United Cannabis’ litigation counsel, Cooley, took conflicting positions in its representation of United Cannabis and another client, GW Pharma. The district court denied the motions on the existing record, as Pure Hemp did not seek further proceedings on its motion. The district court in part said that Pure Hemp had failed to establish itself as the “prevailing party” in the litigation.

Harmless Error

In its discussion, the CAFC explained that the district court did in fact err in not finding that Pure Hemp was the prevailing party, but said the error was harmless because the court identified other reasons it would have denied the motion. The fact that the case ended with dismissal of United Cannabis’ patent infringement claims with prejudice meant that “Pure Hemp successfully rebuffed UCANN’s lawsuit and ensured that UCANN can never again assert the same patents against Pure Hemp’s same accused products,” which makes Pure Hemp the prevailing party, said the CAFC. However, the district court then went on to determine that Pure Hemp failed to meet its burden to prove the case was exceptional, since its inequitable conduct allegations were unsupported by any findings of fact. While Pure Hemp argued that the CAFC could make its own findings on intent to deceive and materiality of the prior art in question on the inequitable conduct allegations, the CAFC said that “Pure Hemp fundamentally misunderstands our role as a court of appeals…. We reject Pure Hemp’s invitation to invade the province of the district court and make our own findings of fact.”

The Federal Circuit also rejected Pure Hemp’s argument that the district court failed to provide a thorough analysis of its inequitable conduct findings, explaining that “[b]ecause of the high level of deference owed to district courts on this issue and the limited circumstances that could qualify as exceptional, this court has not imposed a blanket requirement that a district court provide its reasoning in attorney fee cases,” quoting from Wedgetail Ltd. v. Huddleston Deluxe, Inc.

Finally, Pure Hemp attempted to argue that the case was exceptional due to a conflict of interest among United Cannabis’ attorneys that warranted sanctions, but the CAFC said this argument was waived. In addition to failing to cite Rule 1.7 of the Model Rules of Professional Conduct—the basis for the conflict contention—to the district court, the Federal Circuit also said that the argument lacked merit. “Here, the predominant feature of the context is the lack of evidence,” said the CAFC, adding:

“While Pure Hemp alleges that Cooley simultaneously took conflicting positions for two of its clients, by prosecuting identical patents for both UCANN and GW Pharma,…it has presented no evidence that the patents Cooley prosecuted and obtained are identical. Pure Hemp also failed to show that anything Cooley did in its representation of UCANN was directly adverse to the interests of GW Pharma, or vice versa.”

Almost, But Not Quite, Frivolous

On the subject of whether Pure Hemp’s appeal should be deemed frivolous, “although a close call,” the court said that “[w]hile Pure Hemp’s position is extremely weak, it is neither ‘frivolous as filed’ nor ‘frivolous as argued,’” mainly because Pure Hemp prevailed on the argument that the district court erred in not finding it to be the prevailing party.

The opinion went on to list the ways in which Pure Hemp was at fault in its arguments, rebuking its counsel: “We take this opportunity to remind counsel of their obligation not to lightly launch attacks on one another’s integrity and most certainly not to do so without a sound basis and solid evidence.” However, having sua sponte raised the issue of frivolousness, the court ultimately concluded it was not and affirmed the district court’s ruling dismissing the bid for attorney fees and sanctions.

Image Source: Deposit Photos
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Author: jpgon 



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