NPE's Attorneys And Principals May Be On The Hook For Litigation Conduct

On the heels of the seminal 101 win and oft-cited Federal Circuit 101 decision, SAP v. InvestPic, and an award of attorney fees upheld by the Federal Circuit, SAP and Winston & Strawn won yet another important victory.  This week District Court Judge Ed Kinkeade granted SAP's motion to reopen its case to attempt to pierce the corporate veil and pursue attorney-fee claims against non-practicing entity InvestPic's attorneys Shore Chan De Pumpo LLP -- as well as the InvestPic's principals.

Responding to SAP's claims that the attorneys and principals were the "true actors" behind the exceptional conduct, the Court concluded that "post-judgment evidence indicates that InvestPic is a sham or shell entity that is designed and intended to avoid liability. Allowing a party to purposefully use a shell company to pursue patent infringement claims unacceptably circumvents that attorney fee provisions of § 285." 

When SAP was faced with threats from shell company InvestPic, they took matters into their own hands.  Through counsel Winston & Strawn, they brought InvestPic to court in the Northern District of Texas seeking a declaration that they don't infringe and that the patent was directed to ineligible subject matter under 35 U.S.C. § 101. 

After the Federal Circuit affirmed the District Court's finding of patent ineligibility and award of attorney fees in all respects, SAP sought relief from the "true actors" including investors in InvestPic and its lawyers alleging that "InvestPic's attorneys were complicit in the actions that made th[e] case exceptional."  Relying on its position that SAP was seeking an "extraordinary remedy to be used sparingly," InvestPic, who asserted attorney-client privilege to insulate itself from discovery, argued that SAP "cannot show any conduct or misrepresentations in support of this because the allegations are highly speculative."

The Court, citing to the fact that SAP provided authority for awarding attorney fees not only against the named parties but also the "real parties who made the case exceptional," found that the principals "along with Shore Chan De Pumpo LLP, are proper and necessary parties under Rule 19 and Rule 20 based on their alleged actions causing this case to be exceptional."

"SAP trusts in our judicial system and brought the case in the Northern District of Texas with confidence that the court would fairly adjudicate the merits," commented SAP's counsel Tom Melsheimer.  SAP counsel Kathi Vidal added, "we hope this sends a clear message to anyone who is abusing and taxing our judicial system that enough is enough.  If you have a legitimate claim, you are entitled to justice.  Otherwise, you proceed at your own peril."  SAP was also represented by Michael Bittner, William Fox, and Sean Suber all of whom were instrumental. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.