United Cannabis Corporation v. Pure Hemp Collective Inc.

66 F.4th 1362
Court of Appeals for the Federal Circuit·Decided May 8, 2023·No. 22-1363·Published·Cited by 13 cases

Opinion

United States Court of Appeals for the Federal Circuit

UNITED CANNABIS CORPORATION, Plaintiff-Appellee

v.

PURE HEMP COLLECTIVE INC., Defendant-Appellant

2022-1363

Appeal from the United States District Court for the District of Colorado in No. 1:18-cv-01922-WJM-NYW, Judge William J. Martinez.

Decided: May 8, 2023

ORION ARMON, Cooley LLP, Denver, CO, argued for plaintiff-appellee.

JAMES R. GOURLEY, Carstens, Allen, & Gourley, LLP, Plano, TX, argued for defendant-appellant.

Before LOURIE, CUNNINGHAM, and STARK, Circuit Judges.

2 UNITED CANNABIS CORPORATION v.

PURE HEMP COLLECTIVE INC.

STARK, Circuit Judge.

United Cannabis Corporation (“UCANN”) sued Pure Hemp Collective (“Pure Hemp”) for infringement of U.S. Patent No. 9,730,911 (the “’911 patent”) in the United States District Court for the District of Colorado. After prolonged litigation, UCANN and Pure Hemp stipulated to the dismissal of their claims and counterclaims. Pure Hemp then moved for attorney fees and sanctions, which the district court denied. Pure Hemp asks us to reverse and declare this case exceptional. We affirm.

I

UCANN filed suit in the District of Colorado in July 2018, accusing Pure Hemp of infringing the ’911 patent. The ’911 patent, entitled “Cannabis Extracts and Methods of Preparing and Using the Same,” discloses the “extraction of pharmaceutically active components . . . more particularly . . . botanical drug substance (BDS) comprising cannabinoids obtained by extraction from cannabis.” ’911 patent 1:14-17. In April 2020, UCANN filed for bankruptcy , which automatically stayed this litigation. After the bankruptcy petition was dismissed in January 2021, the parties stipulated to the dismissal of this patent case. UCANN’s infringement claims were dismissed with prejudice while Pure Hemp’s invalidity and inequitable conduct counterclaims were dismissed without prejudice. The stipulation was silent on the issue of attorney fees.

Subsequently, on April 14, 2021, Pure Hemp moved for an award of attorney fees pursuant to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the district court’s inherent authority . Pure Hemp asserted two bases for its requested relief: (1) UCANN’s prosecution counsel had allegedly committed inequitable conduct by copying text from a piece of prior art, U.S. Patent Publication No. 2004/0033280 (“Whittle”), into the specification of the ’911 patent and then not disclosing Whittle to the Patent and Trademark Office (“PTO”) as prior art; and (2) UCANN’s litigation counsel,

UNITED CANNABIS CORPORATION v. 3 PURE HEMP COLLECTIVE INC.

Cooley LLP, purportedly took conflicting positions in its representation of UCANN and another client, GW Pharma (the owner of Whittle). Pure Hemp expressly notified the district court that it did not seek any further proceedings, including a trial or evidentiary hearing, in connection with its motion. See, e.g., ECF No. 12 at 2 (Pure Hemp reiterating to this court it “did not request an evidentiary hearing at the district court, and is not requesting one here”). Consequently , the district court resolved and denied the motion for attorney fees based on the existing record. In doing so, the district court explained:

Ultimately, the Court finds that Defendant has failed to establish that it is the prevailing party under section 285, that this is an “exceptional” case warranting an attorney’s fee award, or that Plaintiff ’s counsel has acted in a vexatious or otherwise unreasonable manner. In making this determination , the Court notes that the parties stipulated to dismissal of this case before many of the factual disputes Defendant cites were adjudicated on the merits . (ECF No. 91.) The record on the substantive merits and the materiality of Plaintiff’s purportedly inequitable conduct is woefully undeveloped, and as such, does not paint a persuasive picture for awarding fees.

J.A. 2-3 (emphasis in original). Pure Hemp timely appealed . We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II

Pure Hemp sought to recover its attorney fees under three different legal authorities, so we set out the legal standards applicable to our review of each of them.

First, pursuant to 35 U.S.C. § 285, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” An exceptional case is “simply one that 4 UNITED CANNABIS CORPORATION v.

PURE HEMP COLLECTIVE INC.

stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014). Relevant considerations may include “frivolousness , motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 554 n.6. In determining if a case is exceptional within the meaning of the statute, district courts, “in the case-by-case exercise of their discretion, consider[] the totality of the circumstances.” Id. at 554. The “fee-seeking party must show that it is entitled to § 285 fees by a ‘preponderance of evidence.’” Bayer Crop- Science AG v. Dow AgroSciences LLC, 851 F.3d 1302, 1305 (Fed. Cir. 2017) (quoting Octane Fitness, 572 U.S. at 557- 58).

We apply “an abuse-of-discretion standard in reviewing all aspects of a district court’s § 285 determination.” Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 564 (2014). “To meet the abuse-of-discretion standard, the [appellant] must show that the district court made a clear error of judgment in weighing relevant factors or in basing its decision on an error of law or on clearly erroneous factual findings.” Bayer CropScience, 851 F.3d at 1306 (internal quotation marks omitted).

Second, 28 U.S.C. § 1927 states: Any attorney . . . admitted to conduct cases in any court of the United States . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct. We review § 1927 motions under the law of the regional circuit. See Gust, Inc. v. Alphacap Ventures, LLC, 905 F.3d

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1321, 1327 (Fed. Cir. 2018). The Tenth Circuit has cautioned that § 1927 is an “extreme standard” and allows for relief only when conduct “manifests either intentional or reckless disregard of the attorney’s duties to the court.” White v. Am. Airlines, Inc., 915 F.2d 1414, 1427 (10th Cir. 1990). The Tenth Circuit reviews “an award of sanctions under § 1927 only for abuse of discretion,” but where the exercise of discretion depends “on the resolution of a purely legal issue, . . . we approach such a question de novo.” Hamilton v. Boise Cascade Express, 519 F.3d 1197, 1202 (10th Cir. 2008). “A district court abuses its discretion when it renders an arbitrary, capricious, whimsical, or manifestly unreasonable judgment.” United States v. Silva, 889 F.3d 704, 709 (10th Cir. 2018).

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United Cannabis Corporation v. Pure Hemp Collective Inc., 66 F.4th 1362 (Fed. Cir. 2023).

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