Khan v. Hemosphere Inc.
Nonprecedential disposition (2020)
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Rule of Law:
A district court has broad discretion to dismiss an action for want of prosecution due to insufficient and untimely service, to impose Rule 11 sanctions for frivolous legal positions maintained despite court warnings, and to determine whether a case is 'exceptional' for the purpose of awarding attorney fees under 35 U.S.C. § 285.
Facts:
- Drs. Nazir Khan and Iftikhar Khan (the Khans) possessed exclusive rights to U.S. Patent No. 8,747,344 (the ’344 patent), which described an arteriovenous shunt.
- The Khans believed that Hemosphere Inc., CryoLife Inc., Merit Medical Systems, Inc., along with over 300 hospitals and individual physicians, infringed claim 13 of the ’344 patent by manufacturing or implanting the HeRO® Graft shunt into patients.
- The Khans attempted to formally notify these defendants of the lawsuit by mailing waiver of service of summons forms and their complaint to each of them.
- The vast majority of the defendants resided and practiced outside of Illinois.
- All but three of the more than 300 defendants did not return a completed waiver form.
Procedural Posture:
- The Khans filed a patent infringement complaint against Hemosphere Inc., CryoLife Inc., Merit Medical Systems, Inc., and over 300 other defendants in the U.S. District Court for the Northern District of Illinois on August 7, 2018.
- In November 2018, the district court dismissed claims against Merit Medical, CryoLife, and three physicians without prejudice for improper venue.
- The district court denied the Khans’ motion to reconsider the initial dismissal in February 2019.
- More than 100 of the remaining defendants filed motions to dismiss on various grounds, including insufficient and untimely service, improper venue, misjoinder, and lack of personal jurisdiction.
- A subset of non-Illinois-resident defendants also moved for Rule 11 sanctions against the Khans for repeated assertions of proper venue and service.
- The district court granted the defendants' motions to dismiss for want of prosecution, citing insufficient and untimely service, improper venue, and improper joinder.
- The district court granted the defendants’ motion for Rule 11 sanctions against the Khans, ordering them to pay $95,966.90 in attorney fees.
- The district court denied the Khans’ cross-motion for Rule 11 sanctions against the physician defendants and their attorneys.
- The district court later denied the Khans’ motion for reconsideration of the dismissal and sanctions orders.
- Merit Medical then moved the district court to declare the case exceptional and to award attorney fees under 35 U.S.C. § 285 in the amount of $292,693, which the district court denied.
- The Khans appealed the district court's decisions (dismissal, grant of sanctions against them, denial of their sanctions motion) and Merit Medical cross-appealed the denial of its § 285 attorney fees motion to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Did the U.S. District Court for the Northern District of Illinois abuse its discretion by dismissing a patent infringement action with prejudice for insufficient and untimely service of process and improper venue, granting Rule 11 sanctions against the plaintiffs for maintaining frivolous positions, denying the plaintiffs’ cross-motion for Rule 11 sanctions, and denying the defendants’ motion for attorney fees under 35 U.S.C. § 285?
Opinions:
Majority - Stoll, Circuit Judge
No, the district court did not abuse its discretion in dismissing the action, granting the defendants' sanctions motion, denying the Khans' sanctions motion, or denying Merit Medical's motion for attorney fees. The Khans failed to properly serve defendants under Federal Rule of Civil Procedure 4 (Rule 4). Requesting a waiver of service is not itself service; defendants must return the waivers or be served by other Rule 4(e) methods (personal delivery, leaving at a dwelling, or according to state law). The Khans' mailing of the complaint and summons did not constitute service under Rule 4(e) or applicable Illinois law. Furthermore, the Khans failed to comply with Rule 4(m)'s timeliness requirement, as nearly all defendants were not properly served within the 90-day period, and the Khans showed no good cause for this extreme delay (over 250 days). Thus, dismissal for want of prosecution was within the district court's discretion. Regarding venue, the district court correctly concluded that venue was improper under 28 U.S.C. § 1400(b) for patent infringement actions. The Khans did not plausibly allege that most defendants resided in the Northern District of Illinois, or that they had infringed in the district and maintained a 'regular and established place of business' there, as required by In re Cray Inc. The presence of sales representatives does not establish a defendant's own place of business. Section 1404(a), governing transfers for convenience, does not establish venue. The district court also properly exercised its discretion in sanctioning the Khans under Rule 11(b) for their frivolous arguments regarding venue and service of process. The Khans repeatedly asserted baseless positions despite warnings from the court and binding Supreme Court precedent (TC Heartland LLC v. Kraft Foods Grp. Brands LLC), and their own complaint contradicted their venue claims. The defendants satisfied Rule 11(c)(2)'s safe harbor by providing notice of their intent to seek sanctions months before filing the motion. The Khans' reliance on Rule 41(b) and Moeck v. Pleasant Valley School District was misplaced, as these do not preclude sanctions for frivolous procedural assertions. Moreover, the district court did not abuse its discretion in denying the Khans' cross-motion for Rule 11 sanctions, as the Khans failed to comply with Rule 11(c)'s safe harbor provisions and the local rules for motion presentment. Finally, the district court did not abuse its discretion in denying Merit Medical's motion for attorney fees under 35 U.S.C. § 285. The court considered the totality of the circumstances as required by Octane Fitness, LLC v. Icon Health & Fitness, Inc., finding that the conduct Merit Medical cited was largely the same as that which led to the earlier Rule 11 sanctions. While the Khans' litigation was 'unorthodox' and sanctionable, the court determined it was not 'exceptional' enough to warrant a three-fold increase in fees, distinguishing its reasoning from Rothschild Connected Devices Innovations LLC v. Guardian Protection Services, Inc.
Analysis:
This case strongly reaffirms the critical importance of adhering to federal procedural rules, particularly concerning service of process and venue, and highlights the district court's broad discretion in enforcing these rules and managing its docket. It underscores that even pro se litigants, while afforded some leniency, are not exempt from fundamental procedural requirements and face severe consequences, including dismissal with prejudice and monetary sanctions, for persistent non-compliance and frivolous arguments after repeated warnings. The decision also clarifies the nuanced distinction between Rule 11 sanctions and 'exceptional case' fee awards under § 285, emphasizing that while certain conduct may warrant one, it does not automatically necessitate the other, thereby preserving the district court's discretion in assessing the overall 'exceptionalness' of a case.
