The Federal Circuit has vacated a district court's decision not to impose Rule 11 sanctions on a patent owner and its law firm, ruling that the presumption of patent validity does not automatically shield plaintiffs who sue despite clear warning signs. The case is Epic Tech v. Pen-Tech, which involves a patent on an electronic sweepstakes gaming system. The appellate court did not decide whether sanctions are actually warranted; it remanded for a more thorough explanation from the lower court.
According to the ruling, Epic Tech's patent issued in 2013, before the Supreme Court's Alice decision. After Alice, examiners rejected claims in three related applications under Section 101, and Epic Tech abandoned all three. In two of those applications, examiners found the pending claims patentably indistinct from the asserted patent's claims. The law firm representing Epic Tech in litigation, Baker Donelson, had handled the prosecution since 2018, so those rejections were within its knowledge.
The Federal Circuit held that, on this record, the presumption alone "does not suffice" when there are multiple indicators that the claims are unpatentable. The court vacated the order denying sanctions and attorney fees and sent the case back for a better explanation. The ruling suggests that patentees and their counsel may need to conduct a pre-suit validity investigation when the PTO has flagged related claims as ineligible.