## Facts

- Fortinet, Inc. manufactured and sold network security products to enterprise and government customers.
- Network Protection Sciences, LLC (NPS) was a small patent-holding entity formed by attorneys who had pursued numerous patent suits; it maintained minimal operations and staff.
- The patent-in-suit was purportedly assigned from Mount Hamilton Partners (MHP) to NPS by an agreement dated April 30, 2010.
- Although MHP executed and notarized the agreement on April 30, 2010, the “accepted by” signature line for NPS was not signed before NPS sued.
- NPS filed a patent infringement complaint against Fortinet on July 6, 2010.
- NPS’s representative signed the assignment on NPS’s behalf 22 days after the complaint was filed.
- During the litigation, the court found that NPS delayed production of assignment-related documents and made misleading statements about the assignment’s timing and completeness.
- Prior orders criticized NPS for imposing extraordinary discovery burdens, including requiring extensive prior-art work across more than fifty claims.

## Issues

1. Whether NPS had Article III standing to sue for patent infringement when it filed the complaint, given that it had not executed the written assignment on its side before filing.
2. Whether NPS’s concealment of the standing defect and other litigation conduct warranted terminating sanctions.
3. Whether Fortinet was entitled to attorney’s fees and sanctions under 28 U.S.C. § 1927, the court’s inherent authority, and/or 35 U.S.C. § 285.

## Decision

- The court concluded NPS lacked standing when it filed suit because it had not acquired legal title to the patent at that time.
- The court held that a post-filing execution of the assignment could not retroactively cure the standing defect existing at filing.
- The court found NPS engaged in improper conduct by attempting to conceal or minimize the assignment defect and by litigating in a manner that unreasonably expanded the proceedings.
- The court terminated NPS’s infringement claims and granted Fortinet substantial attorney’s fees and sanctions, with implementation and amounts addressed through subsequent proceedings.

## Legal Principles

- A patent infringement plaintiff must own the asserted patent or hold the required enforceable rights at the time the complaint is filed; later-acquired rights generally do not relate back to create standing.
- A transfer of patent title requires a written instrument; an incomplete or unexecuted assignment may be insufficient to convey legal title for standing purposes.
- Courts may impose sanctions and fee awards for bad-faith litigation conduct, including misleading the court or an adversary, concealing material facts, and imposing disproportionate litigation burdens.
- Attorney’s fees and sanctions may be awarded under 28 U.S.C. § 1927 for unreasonably and vexatiously multiplying proceedings, under a court’s inherent powers for bad faith, and under 35 U.S.C. § 285 in exceptional patent cases.

## Conclusion

The court terminated the infringement action because NPS did not hold the patent rights required for standing when it sued, and it awarded Fortinet attorney’s fees and sanctions based on NPS’s concealment of the standing defect and abusive litigation conduct.


Network Protection Scis., LLC v. Fortinet, Inc., No. C 12-01106 WHA, 2013 WL 4479336 (N.D. Cal. Aug. 16, 2013)