Legitimate, Creative Advocacy Bars Rule 11 Sanctions

Worldwide Home Products, Inc., v. Bed, Bath and Beyond, Inc., et al.

Case Number: 1:11-cv-03633-MHD

Worldwide sued Bed, Bath and Beyond (BBB) for patent infringement of U.S. Patent No. 7938300 (“Nestable hanger with integrated cascade hook”). Worldwide also accused a BBB buying agent of direct infringement—she was involved with BBB’s decision to sell the accused hanger. And, Worldwide sued Time, the owner of the trademark under which BBB sold the hanger. Defendants requested Worldwide to drop the buyer and Time from the suit. Worldwide refused. Next, BBB sent Worldwide a Rule 11 letter. In response, Worldwide filed an amended complaint, accusing the buyer and Time of pre-issuance contributory infringement and dropping the direct infringement counts. The court found that Worldwide’s allegations against the buyer and Time failed to state a claim, and dismissed those parties.

BBB sought sanctions under Rule 11, arguing that “Worldwide’s only motive in initiating and continuing the litigation as against Time and [the buyer] was to harass and continue its pressure on [the other defendants.]” The court declined to order sanctions. While calling Worldwide’s against the two dropped defendants “never more than thin,” the court said:

the claims were not so lacking in factual or legal support as to render them clearly frivolous to a reasonable attorney. It is notable that Worldwide retreated from its direct infringement claims after receiving Defendants’ correspondence and notices, advancing instead in defense of the re-framed Amended Complaint an indirect infringement argument based on a statutory amendment that permits the award of royalties for pre-infringement conduct under certain circumstances. The argument was not clearly precluded by any controlling case law. The imposition of sanctions under circumstances such as these could tend to chill legitimate, creative advocacy.

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