Eon-Net Lp v. Flagstar Bancorp

United States Court of Appeals
for the Federal Circuit
__________________________
EON-NET LP,
Plaintiff/Sanctioned Party-Appellant,
and
ZIMMERMAN & LEVI, L.L.P.
AND JEAN-MARC ZIMMERMAN,
Sanctioned Parties-Appellants,
v.
FLAGSTAR BANCORP,
Defendant-Appellee.
__________________________
2009-1308
__________________________
Appeal from the United States District Court for the
Western District of Washington in Case No. 05-CV-2129,
Judge Ricardo S. Martinez.
____________________________
Decided: July 29, 2011
____________________________
JEAN -M ARC ZIMMERMAN , Zimmerman, Levi & Korsin-
sky, LLP, of Westfield, New Jersey, argued for sanctioned
party-appellant and sanctioned parties-appellants.

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EON- NET LP v. FLAGSTAR BANCORP 2
M ELISSA J. BAILY , Quinn Emanuel Urquhart & Sulli-
van, LLP, of San Francisco, California, argued for defen-
dant-appellee. Of counsel was KEVIN A. SMITH .
__________________________
Before LOURIE, M AYER , and O’MALLEY, Circuit Judges.
LOURIE, Circuit Judge.
Eon-Net LP (“Eon-Net”), along with its counsel, Zim-
merman & Levi, L.L.P. and Jean-Marc Zimmerman
(collectively, “Zimmerman”), appeal from the final judg-
ment of the United States District Court for the Western
District of Washington in favor of Flagstar Bancorp
(“Flagstar”). See Eon-Net LP v. Flagstar Bancorp, No.
2:05-CV-2129, Judgment (ECF No. 200) (W.D. Wash. Jun.
21, 2010) (“Final Judgment”). The judgment follows the
district court’s entry of the parties’ stipulated order of
noninfringement of Eon-Net’s patents, specifically U.S.
Patents 6,683,697 (“the ’697 patent”), 7,075,673 (“the ’673
patent”), and 7,184,162 (“the ’162 patent”), Eon-Net LP v.
Flagstar Bancorp, No. 2:05-CV-2129, Stipulation and
Order (ECF No. 166) (W.D. Wash. Apr. 6, 2009) (“Nonin-
fringement Order”), which the district court entered after
it construed the claims of the asserted patents, Eon-Net
LP v. Flagstar Bancorp, No. 2:05-CV-2129, Order on
Claim Construction (ECF No. 162) (W.D. Wash. Mar. 4,
2009) (“Claim Construction Opinion”). After entering the
stipulation, the district court also found the case to be
exceptional under 35 U.S.C. § 285, Eon-Net LP v. Flagstar
Bancorp, No. 2:05-CV-2129, Order (ECF No. 188) (W.D.
Wash. Jan. 4, 2010) (“Exceptional Case Order”), and that
Eon-Net and Zimmerman violated Federal Rule of Civil
Procedure 11, Eon-Net LP v. Flagstar Bancorp, No. 2:05-
CV-2129, Supplemental Order (ECF No. 195) (W.D.
Wash. May 17, 2010) (“Supplemental Order on Fees and
Costs”); Eon-Net LP v. Flagstar Bancorp, No. 2:05-CV-

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EON- NET LP v. FLAGSTAR BANCORP 3
2129, Order (ECF No. 79) (W.D. Wash. Oct. 4, 2006)
(“Rule 11 Sanctions Order”). The district court awarded
Flagstar $489,150.48 in attorney fees and costs pursuant
to § 285 and $141,984.70 in sanctions for Eon-Net’s and
Zimmerman’s violation of Rule 11. Supplemental Order
on Fees and Costs, at 11.
Because the district court correctly construed the
claims of the asserted patents, did not commit clear error
in its exceptional case finding under 35 U.S.C. § 285, and
did not abuse its discretion in invoking Rule 11 sanctions,
we affirm.
BACKGROUND
This patent case relates to document processing sys-
tems. Eon-Net owns the ’697, ’673, and ’162 patents,
which are part of a larger patent family that issued from
continuation and divisional applications of a parent
patent application filed in 1991 (the “Patent Portfolio”).
The listed inventors include Mitchell Medina, Robert
Leech, and Catherine Elias, and the inventors are princi-
pals of Eon-Net, which is one of a number of patent-
holding companies formed to enforce various patents
within the Patent Portfolio. Exceptional Case Order, at 1.
The first five patents that issued were assigned to Eon-
Net’s companion corporation, Millennium L.P. (“Millen-
nium”), the ’697, ’673, and ’162 patents were assigned to
Eon-Net, and subsequent patents were assigned to an-
other related entity, Glory Licensing LLC (“Glory”). Id. at
1–2.
A. The Asserted Patents
The asserted patents are entitled “Information Proc-
essing Methodology” and disclose a system and method
for inputting information from a document, storing cer-
tain portions of the inputted document information in

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EON- NET LP v. FLAGSTAR BANCORP 4
memory according to content instructions, and formatting
the stored document information for use by a computer
program, effectuating a paperless office. Claim 1 of the
’697 patent is representative of the claims on appeal,
claiming a “multimode information processing system for
inputting information from a document or file on a com-
puter into at least one application program according to
transmission format instructions.” Specifically, claim 1
reads:
1. A multimode information processing system for
inputting information from a document or file
on a computer into at least one application
program according to customizable transmis-
sion format instructions, and to operate in at
least one of:
a. a definition mode wherein content in-
structions are used to define input
information from within said
document or file required by said at
least one application program; and
b. an extraction mode to parse at least a
portion of said document or file to
automatically extract at least one
field of information required by said
at least one application program
and to transfer said at least one
field of information to said at least
one application program according
to said customizable transmission
format instructions.
’697 patent, col.15, ll.46–61 (emphases added). The
claimed invention is directed to a “system for efficiently
processing information originating from hard copy docu-

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EON- NET LP v. FLAGSTAR BANCORP 5
ments,” id. col.1 ll.15–17,1 and Figure 1 of the written
description shows a preferred embodiment where the
document (100) is scanned into memory for processing by
a computer that contains a number of application units
that utilize the information obtained from the scanned
document:
In Figure 1, the scanner extracts information from a
hard copy document and stores that information in either
its memory (220) or the computer’s main memory (250).
Id. col.4 ll.55–67. The computer then reads the document
information from either memory and selects portions of
1 Because the ’697, ’673, and ’162 patents share a
common written description, we cite only the ’697 patent
and refer to the three written descriptions in the singular.

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EON- NET LP v. FLAGSTAR BANCORP 6
the document information according to content instruc-
tions, which define the portions of the document informa-
tion that a particular application unit requires. Id. col.5
ll.8–15. After the computer has obtained the selected
portions of the document, it formats the selected portions
into the format required by a particular application unit
according to transmission format instructions and creates
an input file for use by the application unit. Id. col.5
ll.16–51.
The written description provides an example that
more concretely describes the patented system. In the
example, a small business can create electronic copies of
its business records and use computer applications such
as Quicken® to manipulate information contained in
those hard copy documents. Id. col.14 l.53–col.15 l.5. In
this example, the system first obtains information from
hard copy business records using content instructions
that indicate the portions of the documents that contain
information that can be used by Quicken®, such as the
portions of an invoice that contain the payee address or
invoice amount. Id. col.5 ll.8–15, col.14 ll.53–63. The
computer then formats the selected information into a
format recognized by Quicken® and creates an input file
that a user can open in the Quicken® application. Id.
col.5 ll.16–51, col.14 ll.53–63. After launching Quicken®
and opening the input file, the user can manipulate the
information obtained from the hard copy documents to
manage accounts, write checks, and prepare business
records. Id. col.14 l.53–col.15 l.5.
B. The Litigation
The Patent Portfolio has a long litigation history, be-
ginning in 1996. Exceptional Case Order, at 2. Between
1996 and 2001, Millennium filed four lawsuits asserting
various claims of the Patent Portfolio. Id. at 2 n.3. After

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EON- NET LP v. FLAGSTAR BANCORP 7
2001, Zimmerman began to represent Millennium as its
litigation counsel, and, in the course of his representation,
Zimmerman filed a large number of lawsuits alleging
infringement of the Patent Portfolio. Id. at 3–4. By the
time the district court found that Eon-Net’s conduct
presented an exceptional case under 35 U.S.C. § 285,
Zimmerman had filed over 100 lawsuits on behalf of Eon-
Net or its related entities asserting infringement of the
Patent Portfolio. Id. at 2–4. Almost all of these cases
resulted in early settlements or dismissals. Id. at 4.
Eon-Net sued Flagstar in 2005, alleging that the proc-
essing of information entered by customers on Flagstar’s
website infringed various claims of the ’697 patent. Early
in the case, Flagstar moved for summary judgment of
noninfringement because it utilized document processing
technology provided by Kofax Image Products, Inc., who
held a license to the ’697 patent. Id. At the same time,
Flagstar filed a motion for sanctions pursuant to Federal
Rule of Civil Procedure 11 on the basis that Eon-Net
failed to investigate or identify allegedly infringing prod-
ucts and that Eon-Net asserted baseless infringement
claims. Id. at 5. The district court granted both motions,
concluding that the written description limited the as-
serted claims to processing information originating from a
hard copy document, that Eon-Net’s position that the
claims covered the processing of information entered on a
website was baseless, and that Eon-Net failed to investi-
gate or identify allegedly infringing products prior to
filing suit. Id. at 4–7. The district court accordingly
assessed attorney fees and costs against Eon-Net and
Zimmerman for their violation of Rule 11. Id. at 5; see
also Eon-Net LP v. Flagstar Bancorp, No. 2:05-CV-2129,
Judgment by Court (ECF No. 89) (W.D. Wash. Dec. 19,
2006).

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EON- NET LP v. FLAGSTAR BANCORP 8
Eon-Net and Zimmerman appealed. On appeal, we
vacated and remanded both the summary judgment
ruling and the imposition of sanctions because the district
court failed to afford Eon-Net notice and the opportunity
to present its infringement and claim construction argu-
ments during the briefing on the motions. Eon-Net LP v.
Flagstar Bancorp, 249 F. App’x 189, 198 (Fed. Cir. 2007)
(“Eon-Net I”). Without a full claim construction analysis,
including a consideration of Eon-Net’s claim construction
arguments, we held that it was impossible to determine if
Eon-Net’s claim construction and infringement positions
were without merit. Id. at 193, 196. We expressly de-
clined, however, to “pass[] judgment on what the appro-
priate construction of the ’697 patent should be.” Id. at
196.
On remand, the district judge who initially handled
the case recused herself. Exceptional Case Order, at 7–8.
Upon reassignment to a second district judge, Eon-Net
amended its complaint to add infringement allegations for
the ’673 and ’162 patents, and the parties engaged in the
claim construction process. Id. at 8. After reviewing the
parties’ briefs and holding a hearing, the district court
construed the disputed claim terms. Claim Construction
Opinion, at 1. Central to this appeal, the district court
concluded that the terms “document,” “file,” “extract,” and
“template” were limited to information originating from a
hard copy document. Id. at 17–19. Based on these con-
structions, Eon-Net stipulated to noninfringement of the
asserted claims. Noninfringement Order, at 1.
Flagstar subsequently moved for attorney fees pursu-
ant to 35 U.S.C. § 285, and the district court granted
Flagstar’s motion. Exceptional Case Order, at 22. The
district court based its exceptional case finding on what it
found were Eon-Net’s pursuit of baseless infringement
claims, Eon-Net’s improper purpose of bringing the law-

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EON- NET LP v. FLAGSTAR BANCORP 9
suit against Flagstar to obtain a nuisance value settle-
ment, Eon-Net’s destruction of evidence, and Eon-Net’s
offensive litigation tactics. Id. at 13–21. The district
court invited Flagstar to renew its motion to impose Rule
11 sanctions. Id. at 22.
Flagstar thereafter renewed its motion for sanctions
pursuant to Rule 11 and submitted a statement of attor-
ney fees and costs expended on the litigation. The district
court granted Flagstar’s motion for sanctions, concluding
that Eon-Net and its counsel failed to perform a reason-
able pre-filing investigation and that their claim construc-
tion positions were unsupportable. Supplemental Order
on Fees and Costs, at 6–8. Thus, the district court rein-
stated in full the $141,984.70 in attorney fees and costs
against Eon-Net and Zimmerman for their violation of
Rule 11. Id. at 8. Regarding § 285, the court awarded
Flagstar $489,150.48 in attorney fees and costs for litigat-
ing the case following remand. Id. at 11.
Eon-Net and Zimmerman timely appealed. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
D ISCUSSION
Eon-Net appeals the district court’s construction of
the terms “document,” “file,” “extract,” and “template.”
Eon-Net also appeals the district court’s imposition of
Rule 11 sanctions and the district court’s exceptional case
finding.2 We address each issue below.
2 Eon-Net also requests that, on remand, we order
the reassignment of this case to another district judge in
another judicial district. Because we affirm the district
court’s final judgment, we deny Eon-Net’s request.

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EON- NET LP v. FLAGSTAR BANCORP 10
A. Claim Construction
We review a district court’s claim construction de
novo. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448,
1454–55 (Fed. Cir. 1998) (en banc). To ascertain the scope
and meaning of the asserted claims, we look to the words
of the claims themselves, the written description, the
prosecution history, and, lastly, any relevant extrinsic
evidence. Phillips v. AWH Corp., 415 F.3d 1303, 1312–19
(Fed. Cir. 2005) (en banc).
As a general rule, claim terms should be given their
ordinary and customary meaning to persons of skill in the
art as of the effective date of the patent application. Id. at
1312–13. Although the claims of a patent define the
invention for which the patentee is entitled to an exclu-
sionary right, we must read the claims “in view of the
specification, of which they are a part.” Id. at 1315 (quot-
ing Markman v. Westview Instruments, Inc., 52 F.3d 967,
979 (Fed. Cir. 1995) (en banc)). The specification is “the
single best guide to the meaning of a disputed claim
term,” and, usually, the specification’s use of a claim term
is dispositive. Phillip, 415 F.3d at 1315 (quoting Vitron-
ics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed.
Cir. 1996)); see also ICU Med., Inc. v. Alaris Med. Sys.,
Inc., 558 F.3d 1368, 1374–75 (Fed. Cir. 2009). Thus, the
specification is “always highly relevant to the claim
construction analysis.” Phillips, 415 F.3d at 1315 (quot-
ing Vitronics, 90 F.3d at 1582).
Eon-Net appeals the district court’s construction of
the terms “document,” “file,” “extract,” and “template.”
Eon-Net argues that the ordinary meanings of “file” and
“document” are not limited to information derived from a

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EON- NET LP v. FLAGSTAR BANCORP 11
hard copy document.* Eon-Net asserts that the written
description discloses a “computer file embodiment,” and
that the asserted claims are directed to this embodiment.
Finally, Eon-Net argues that the United States Patent &
Trademark Office has allowed claims in related patent
applications that expressly recite that the claimed “docu-
ment” or “file” is “not derived from scanning a hard copy
document,” which, according to Eon-Net, shows that the
“document” and “file” terms are not limited to information
originating from a hard copy document.
Flagstar responds that the written description defines
the claimed invention as a system for processing informa-
tion that originates from hard copy documents. Flagstar
also argues that Eon-Net’s claim differentiation argument
fails because the clear import of the written description is
that the patents are limited to processing information
that originates from hard copy documents.
We agree with Flagstar that the disputed claim terms
are limited to information that originates from a hard
copy document. The written description repeatedly and
consistently defines the invention as a system that proc-
esses information derived from hard copy documents. The
Background of the Invention section explains that “con-
ventional systems have limitations which decrease the
efficiency of processing information from a hard copy
document.” ’697 patent, col.1 ll.34–36. Thus, “[t]he
invention is directed to a system for efficiently processing
information originating from hard copy documents,” more
specifically to “a hard copy document application program
interface which minimizes the need to manually process
hard copy documents.” Id. col.1 ll.15–20.
* Our disposition of Eon-Net’s arguments regarding
“extract” and “template” is the same as that for “docu-
ment” and “file” for the same reasons.

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EON- NET LP v. FLAGSTAR BANCORP 12
Consistent with that defined field, the Summary of
Invention section defines the “invention” as providing “an
application program interface which inputs a diversity of
hard copy documents using an automated digitizing unit
and which stores information from the hard copy docu-
ments in a memory as stored document information.” Id.
col.2 ll.48–52. This definition furthers the objects of the
invention, which include to “provide an application pro-
gram interface which allows a user to select specific
portions of information extracted from a diversity of hard
copy documents”; “provide an application program inter-
face which will allow the extraction, selection, formatting,
routing, and storage of information from a hard copy
document”; and “provide a cost effective system for input-
ting hard copy documents which can accommodate hard
copy documents in a diversity of formats.” Id. col.2 ll.19–
47.
Similarly, in describing the invention in detail, the
written description explains that “the invention provides
an interface between information originating from a hard
copy document and a computer application unit which
uses the information.” Id. col.4 ll.13–15. As part of this
disclosure, the written description teaches that the
claimed “file” contains information that originated from a
hard copy document, explaining that the “instant inven-
tion” provides for parsing information extracted from a
hard copy document and transmitting that information as
an “input file” to a user or application. Id. col.4 ll.46–52.
The written description concludes that “the instant inven-
tion provides an integrated and comprehensive system for
handling information from a hard copy document, thus
permitting a paperless office.” Id. col.14 ll.64–66. In
total, the term “hard copy document” appears over 100
times in the common disclosure of the ’697, ’673, and ’162
patents.

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EON- NET LP v. FLAGSTAR BANCORP 13
These statements about the invention are not limited
to specific embodiments or examples but describe and
define the invention overall. Thus, Eon-Net’s argument
that the written description provides support for a “com-
puter file embodiment” is without merit.
Eon-Net primarily points to Figure 5 of the written
description and the accompanying text to argue that they
disclose an embodiment wherein the processed “docu-
ment” or “file” is not limited to information originating
from a hard copy document. Figure 5, however, details
the input process for the preferred embodiment of the
invention described in Figure 1, id. col.7 ll.23–57, which,
as described above, illustrates the system for processing
information from a hard copy document “according to the
instant invention,” id. col.4 ll.53–55. The input data flow
process performed by this system, as depicted in Figure 5
below, shows that the “input document” can include text
information from a character input (1.1) or character
recognition hardware (1.3), image information provided
by a scanner (1.2), and information from a communication
interface connected to an external device (4.0):

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EON- NET LP v. FLAGSTAR BANCORP 14
The written description explains that the character
input module (1.1) “inputs textual information, such as
alphanumeric characters, from an input device such as [a]
keyboard.” Id. col.7 ll.45–47 (internal reference numbers
omitted). Eon-Net argues that because the character
input module allows a user to enter textual information
for processing as an “input document,” this disclosure
shows that the invention is not limited to information
originating from a hard copy document.
The written description, however, states that Figure 5
describes the data flow process for a system that proc-
esses information originating from a hard copy document.
Id. col.4 ll.53–55, col.7 ll.23–57. Indeed, the written
description explains that “[t]he hard copy document may
contain textual information or image information or
both.” Id. col.2 ll.60–62. Absent from the specification is
any teaching that the textual information is information

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EON- NET LP v. FLAGSTAR BANCORP 15
other than information originating from a hard copy
document. Thus, Figure 5 and the related disclosure are
consistent with the remainder of the written description,
which repeatedly defines the invention as a system for
processing information originating from hard copy docu-
ments.
Eon-Net’s claim differentiation argument is also un-
availing. First, “claim differentiation is a rule of thumb
that does not trump the clear import of the specification,”
Edwards Lifesciences, LLC v. Cook Inc., 582 F.3d 1322,
1331 (Fed. Cir. 2009), and, in this case, the written de-
scription defines the invention as a system for processing
information that originates from a hard copy document.
Second, the claims in the Patent Portfolio that Eon-Net
points to recite that the claimed “file” or “document file” is
not derived from “scanning a hard copy document.” E.g.,
U.S. Patent 7,570,383, claim 3; U.S. Patent 7,672,007,
claim 6. The specification discloses that “scanning” is
only one of many methods to obtain information from a
hard copy document, such as using an electrical or optical
device to extract information from a hard copy document.
’697 patent, col.15 ll.17–24. Thus, while these claims may
show that the claimed invention encompasses the process-
ing of information originating from a hard copy document
that was obtained by a method other than scanning, the
claim language does not address whether the construction
of “document” or “file” may expand beyond encompassing
information originating from a hard copy document.
In sum, we agree with the district court’s construction
of the “document,” “file,” “extract,” and “template” terms.
This is not a case where a district court improperly im-
ported a limitation from the specification or where the
question of what the specification teaches about the
claims presents a close call; here, the specification un-
equivocally compels the constructions adopted by the

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EON- NET LP v. FLAGSTAR BANCORP 16
district court. Accordingly, because Eon-Net stipulated to
noninfringement of the asserted claims of the ’697, ’673,
and ’162 patents under the district court’s claim construc-
tion, we affirm the court’s judgment of noninfringement.
B. Exceptional Case Finding
A district court is vested with the authority to award
attorney fees to a prevailing party in patent litigation if it
determines that the case is “exceptional.” 35 U.S.C.
§ 285. A determination whether to award attorney fees
under § 285 involves a two-step process. First, a district
court must determine whether the prevailing party has
proved by clear and convincing evidence that the case is
exceptional. Forest Labs., Inc. v. Abbott Labs., 339 F.3d
1324, 1327 (Fed. Cir. 2003). We review de novo whether
the district court applied the proper legal standard, and
we review the court’s exceptional case finding for clear
error. Id. at 1328. Second, if the district court finds the
case to be exceptional, the court must then determine
whether an award of attorney fees is appropriate and, if
fees are appropriate, the amount of the award. Cybor,
138 F.3d at 1460. We review that determination for an
abuse of discretion. Id.
When reviewing an exceptional case finding for clear
error, we are mindful that the district court has lived with
the case and the lawyers for an extended period. Having
only the briefs and the cold record, and with counsel
appearing before us for only a short period of time, we are
not in the position to second-guess the trial court’s judg-
ment. However, because of the substantial economic and
reputational impact of an award of attorney fees, we
examine the record with care to determine whether the
trial court clearly erred in its exceptional case finding.
Medtronic Navigation, Inc. v. BrainLAB Medizinische

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EON- NET LP v. FLAGSTAR BANCORP 17
Computersysteme GmbH, 603 F.3d 943, 953 (Fed. Cir.
2010).
Here, Eon-Net only appeals the district court’s excep-
tional case finding and has not appealed the district
court’s determination of the amount of attorney fees and
costs. Eon-Net argues that the district court clearly erred
in its exceptional case finding, asserting that Eon-Net
proffered reasonable claim construction positions, that the
purpose of its lawsuit—to obtain licensing revenue—was
proper, that Eon-Net did not destroy any relevant docu-
ments, and that Eon-Net’s litigation tactics were not
offensive or vexatious. Thus, argues Eon-Net, the district
court committed clear error and its exceptional case
finding should be reversed.
We disagree. It is undisputed that the district court
applied the correct legal standard under 35 U.S.C. § 285.
Regarding the court’s factual finding, as a general matter,
we have observed that many varieties of misconduct can
support a district court’s exceptional case finding, includ-
ing lodging frivolous filings and engaging in vexatious or
unjustified litigation. See Takeda Chem. Indus., Ltd. v.
Mylan Labs., Inc., 549 F.3d 1381, 1387–88 (Fed. Cir.
2008). Indeed, “[l]itigation misconduct and unprofes-
sional behavior may suffice, by themselves, to make a
case exceptional under § 285.” Rambus Inc. v. Infineon
Techs. AG, 318 F.3d 1081, 1106 (Fed. Cir. 2003). Absent
litigation misconduct or misconduct in securing the pat-
ent, sanctions under § 285 may be imposed against the
patentee only if both (1) the patentee brought the litiga-
tion in bad faith; and (2) the litigation is objectively
baseless. Brooks Furniture Mfg., Inc. v. Dutailer Int’l,
Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).
Here, the district court found that Eon-Net’s litigation
misconduct and its filing of a baseless infringement action

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EON- NET LP v. FLAGSTAR BANCORP 18
in bad faith for an improper purpose warranted an excep-
tional case finding. We conclude that the district court
did not clearly err in so finding and address each category
of conduct below.
1. Litigation Misconduct
The district court’s opinion recounted numerous in-
stances of litigation misconduct. First, the district court
found that Eon-Net and its counsel destroyed relevant
documents prior to the initiation of its lawsuit against
Flagstar and that Eon-Net intentionally did not imple-
ment a document retention plan. Exceptional Case Order,
at 17–18. As recounted by the district court, Eon-Net’s
principal, Mitchell Medina, testified with regard to docu-
ment retention, collection, and production that “I don’t
save anything so I don’t have to look” and further testified
that Eon-Net and Millennium “have adopted a document
retention policy which is that we don’t retain any docu-
ments” because those companies have “evolved into
patent enforcement companies which are involved in the
business of litigation.” Id. at 8–9. Pursuant to this policy,
in 2003, Medina and Zimmerman discarded all documents
from Millennium’s infringement action against Readsoft
involving the Patent Portfolio, even though Millennium
had other pending cases. Id. at 9–10. While Zimmerman
asserts on appeal that, after the Readsoft case settled, he
only “discarded publicly available documents and non-
essential documents such as travel-related receipts” and
retained “all material non-public documents,” Appellant
Br. 52, it is impossible to determine the veracity of that
statement. And, even if Zimmerman’s assertions are true,
it is undisputed that Medina and ultimately Eon-Net had
an independent duty to preserve evidence during the
ongoing lawsuits, see Sensonics, Inc. v. Aerosonic Corp., 81
F.3d 1566, 1575 (Fed. Cir. 1996), and, in light of Medina’s

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EON- NET LP v. FLAGSTAR BANCORP 19
testimony, it was not clear error for the district court to
conclude that Eon-Net did not observe that duty.
The district court also detailed Eon-Net’s litigation
tactics. In particular, the district court found that Eon-
Net failed to engage the claim construction process in
good faith because Eon-Net failed to offer a construction
for any disputed claim terms, lodged incomplete and
misleading extrinsic evidence with the court, and submit-
ted declarations that contradicted earlier deposition
testimony by the declarants. Exceptional Case Order, at
15–16. The district court concluded that Eon-Net “at-
tempted to evade a careful analysis of the claim terms
through the Markman process” after it prevailed in the
Eon-Net I appeal on the basis that the district court
“improperly granted summary judgment without afford-
ing Eon-Net notice and an opportunity to argue its posi-
tion on the scope of the patent claims.” Id. at 14.
Eon-Net argues that it was not improper to argue that
no claim terms of the asserted patents required construc-
tion because the district court was not obligated to con-
strue every recited claim term. See O2 Micro Int’l Ltd. v.
Beyond Innovation Tech. Co., 521 F.3d 1351, 1362 (Fed.
Cir. 2008). While it is certainly true that a district court
is not obligated to construe every claim term, Eon-Net
ignores the district court’s analysis, which is grounded on
Eon-Net’s failure to engage the claim construction process
in good faith, including Eon-Net’s submission of incom-
plete and misleading extrinsic evidence.
Moreover, Eon-Net’s failure to engage the claim con-
struction process in good faith was only one of many
instances of misconduct detailed by the district court.
The district court also found that Medina displayed a
“lack of regard for the judicial system” and that Eon-Net
and Medina had a “cavalier attitude” towards the “patent

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EON- NET LP v. FLAGSTAR BANCORP 20
litigation process as a whole.” Exceptional Case Order, at
18–19. As evidence, the district court cited Eon-Net’s
interrogatory response produced in another case involving
the Patent Portfolio which snidely stated that “the skill in
the art required is that sufficient to converse meaning-
fully with Mitchell Medina.” Id. at 19. In addition, the
district court detailed the deposition testimony of Medina,
where he complained that his deposition was “an incon-
venience and a bother” and fumed that he was “so sick of
this stuff by now. I am so sick of this stuff, especially this
haggling over stupidities and trivialities which is the
name of the game in litigation.” Id. at 18–19.
Eon-Net argues that the district court should not have
considered the interrogatory response as part of its § 285
analysis because the interrogatory response was a “draft”
response and was inadvertently served in a different case.
The response, however, contains Zimmerman’s signature,
and there is no indication that Eon-Net amended or
withdrew the interrogatory response or, prior to the
threat of sanctions in this case, communicated that the
response was mistakenly served. Eon-Net also fails to
address the district court’s findings based on Medina’s
deposition testimony, and while it might be said that
Medina’s remarks were only flippant, facetious remarks
not intended to offend, the trial court heard all the evi-
dence and made its judgment, which we are not inclined
to override. In toto, Eon-Net has failed to show that the
district court’s findings regarding Eon-Net’s litigation
misconduct were clearly erroneous.
2. Filing Objectively Baseless Litigation in
Bad Faith
Eon-Net also challenges the district court’s finding
that Eon-Net pursued baseless infringement allegations
in bad faith and for an improper purpose. In support,

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EON- NET LP v. FLAGSTAR BANCORP 21
Eon-Net points to dictum in our opinion in its prior ap-
peal, where we stated that the written description sup-
ports Eon-Net’s infringement allegations in this case
because it provides “that the hardware for inputting data
can include ‘a keyboard, a light pen, a mouse, a touch
screen, a laser scanner, a microphone, a tablet, a disk
drive, a magnetic tape drive, and a modem.’” Eon-Net I,
249 F. App’x at 196.
We disagree. As explained above, the written descrip-
tion repeatedly defines the invention as a system for
processing information that originates from hard copy
documents, and, under this construction, it is undisputed
that Flagstar does not infringe any asserted claim of the
’697, ’673, and ’162 patents. Thus, because the written
description clearly refutes Eon-Net’s claim construction,
the district court did not clearly err in finding that Eon-
Net pursued objectively baseless infringement claims. Cf.
iLOR v. Google, Inc., 631 F.3d 1372, 1378–79 (Fed. Cir.
2011) (reversing finding that the patentee’s claim con-
struction position was objectively baseless where “[o]n its
face, the claim language does not preclude the patentee’s
construction,” the written description failed to “clearly
refute the patentee’s construction,” and the patentee could
reasonably argue that the prosecution history did not
preclude its construction).
The dictum from Eon-Net I upon which Eon-Net relies
does not alter this result. In Eon-Net I, we noted that one
portion of the written description supported Eon-Net’s
construction because it discloses that the hardware for
inputting document information can include devices other
than a scanner, such as a light pen or other device. 249 F.
App’x at 196. However, as explained above, the cited
passage does not speak to the character of the information
processed, which the written description as a whole
repeatedly and expressly defines as information originat-

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EON- NET LP v. FLAGSTAR BANCORP 22
ing from a hard copy document. See Netcraft Corp. v.
eBay, Inc., 549 F.3d 1394, 1398 (Fed. Cir. 2009) (explain-
ing that disputed claim language “must be read in the
context of the entire specification and prosecution his-
tory”). Indeed, the Eon-Net I opinion expressly leaves
open the possibility that, after a full claim construction
analysis, the district court could conclude that Eon-Net’s
claim construction position was baseless, 249 F. App’x at
196, which is what happened in this case on remand.
In addition to finding that Eon-Net filed an objectively
baseless infringement action, the district court also de-
termined that Eon-Net filed the lawsuit in bad faith and
for an improper purpose. Exceptional Case Order, at 16–
17. In particular, the district court found that Eon-Net’s
case against Flagstar had “indicia of extortion” because it
was part of Eon-Net’s history of filing nearly identical
patent infringement complaints against a plethora of
diverse defendants, where Eon-Net followed each filing
with a demand for a quick settlement at a price far lower
than the cost to defend the litigation. Id.
The record supports the district court’s finding that
Eon-Net acted in bad faith by exploiting the high cost to
defend complex litigation to extract a nuisance value
settlement from Flagstar. At the time that the district
court made its exceptional case finding, Eon-Net and its
related entities, Millennium and Glory, had filed over 100
lawsuits against a number of diverse defendants alleging
infringement of one or more patents from the Patent
Portfolio. Id. at 2–4, 16. Each complaint was followed by
a “demand for a quick settlement at a price far lower than
the cost of litigation, a demand to which most defendants
apparently have agreed.” Id. at 16. In this case, as with
the other cases, Eon-Net offered to settle using a license
fee schedule based on the defendant’s annual sales:
$25,000 for sales less than $3,000,000; $50,000 for sales

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EON- NET LP v. FLAGSTAR BANCORP 23
between $3,000,000 and $20,000,000; and $75,000 for
sales between $20,000,000 and $100,000,000. Rule 11
Sanctions Order, at 3–4.
Meritless cases like this one unnecessarily require the
district court to engage in excessive claim construction
analysis before it is able to see the lack of merit of the
patentee’s infringement allegations. See Allen Eng’g
Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1346 (Fed.
Cir. 2002). In this case, Flagstar expended over $600,000
in attorney fees and costs to litigate this case through
claim construction. Supplemental Order on Fees and
Costs, at 8–11. Viewed against Eon-Net’s $25,000 to
$75,000 settlement offer range, it becomes apparent why
the vast majority of those that Eon-Net accused of in-
fringement chose to settle early in the litigation rather
than expend the resources required to demonstrate to a
court that the asserted patents are limited to processing
information that originates from a hard copy document.
Thus, those low settlement offers—less than ten percent
of the cost that Flagstar expended to defend suit—
effectively ensured that Eon-Net’s baseless infringement
allegations remained unexposed, allowing Eon-Net to
continue to collect additional nuisance value settlements.
In addition, Eon-Net had the ability to impose dispro-
portionate discovery costs on Flagstar. This is, at least in
part, because accused infringers often possess enormous
amounts of potentially relevant documents that are
ultimately collected and produced. See In re Nintendo
Co., 589 F.3d 1194, 1199 (Fed. Cir. 2009). The Federal
Rules of Civil Procedure, as well as the local discovery
rules and policies of a number of district courts, allow for
liberal discovery, and it is not uncommon for an accused
infringer to produce millions of pages of documents,
collected from central repositories and numerous docu-
ment custodians. Those discovery costs are generally paid

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EON- NET LP v. FLAGSTAR BANCORP 24
by the producing party, see Oppenheimer Fund, Inc. v.
Sanders, 437 U.S. 340, 358 (1978), increasing the nui-
sance value that an accused infringer would be willing to
settle for in a patent infringement case. In this case, it is
notable that the district court stayed all discovery that
did not relate to claim construction issues, and, while
Flagstar expended over $600,000 to litigate this case, that
amount would have substantially increased if the district
court had allowed full discovery.
In addition to its ability to impose high costs to defend
against its meritless claims, Eon-Net placed little at risk
when filing suit. As a non-practicing entity, Eon-Net was
generally immune to counterclaims for patent infringe-
ment, antitrust, or unfair competition because it did not
engage in business activities that would potentially give
rise to those claims. And while Eon-Net risked licensing
revenue should its patents be found invalid or if a court
narrowly construed the patents’ claims to exclude valu-
able targets, Eon-Net did not face any business risk
resulting from the loss of patent protection over a product
or process. Its patents protected only settlement receipts,
not its own products.
Eon-Net argues that it is not improper for a patentee
to vigorously enforce its patent rights or offer standard
licensing terms, and Eon-Net is correct. But the appetite
for licensing revenue cannot overpower a litigant’s and its
counsel’s obligation to file cases reasonably based in law
and fact and to litigate those cases in good faith. Here,
the district court did not clearly err when it found that
Eon-Net filed an objectively baseless infringement action
against Flagstar and brought that action in bad faith,
specifically to extract a nuisance value settlement by
exploiting the high cost imposed on Flagstar to defend
against Eon-Net’s baseless claims. It also appears that in
filing this case, Zimmerman merely followed the direction

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EON- NET LP v. FLAGSTAR BANCORP 25
of his client, Medina, who Zimmerman characterized at
oral argument as “difficult to control.” Oral Arg. at 28:05-
28:20, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
09-1308.mp3. But an attorney, in addition to his obliga-
tion to his client, also has an obligation to the court and
should not blindly follow the client’s interests if not
supported by law and facts. In these circumstances,
coupled with the district court’s supported findings re-
garding Eon-Net’s litigation misconduct, we conclude that
the district court did not clearly err in its exceptional case
finding.
C. Rule 11 Sanctions
Eon-Net also appeals the district court’s imposition of
Rule 11 sanctions. We apply the law of the regional
circuit, here the Ninth Circuit, to review an award of Rule
11 sanctions. Power Mosfet Techs., L.L.C. v. Siemens AG,
378 F.3d 1396, 1406–07 (Fed. Cir. 2004). Before a district
court awards Rule 11 sanctions under Ninth Circuit law,
the district court must determine that the complaint is
“legally or factually ‘baseless’ from an objective perspec-
tive” and that the attorney failed to conduct a “reasonable
and competent inquiry” before filing the complaint.
Christian v. Mattel, Inc., 286 F.3d 1118, 1127 (9th Cir.
2002) (quoting Buster v. Greisen, 104 F.3d 1186, 1190 (9th
Cir. 1997)). We review all aspects of a district court’s
imposition of Rule 11 sanctions under an abuse of discre-
tion standard. Cooter & Gell v. Hartmax Corp., 496 U.S.
384, 405 (1990).
The district court imposed Rule 11 sanctions against
Zimmerman and Eon-Net because it found that Eon-Net’s
infringement allegations were legally baseless and that
Eon-Net and Zimmerman failed to perform a reasonable
pre-suit investigation. Eon-Net argues that its claim

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EON- NET LP v. FLAGSTAR BANCORP 26
construction was not objectively baseless. As explained
above, however, the district court did not clearly err in
concluding that Eon-Net’s infringement allegations were
objectively baseless, and, for the same reasons, the dis-
trict court did not abuse its discretion in finding that Eon-
Net’s infringement allegations were legally baseless.
Regarding Eon-Net’s pre-suit investigation, Zimmer-
man claims that he compared Flagstar’s website and the
website’s publicly-available source code to each limitation
of the asserted claims and generated a claim chart. Thus,
Eon-Net and Zimmerman argue that the district court
abused its discretion in finding that Zimmerman failed to
conduct a reasonable pre-suit investigation.
We disagree. We noted in Eon-Net I that “[t]here is
really no dispute that Eon-Net’s counsel did examine
portions of Flagstar’s website and, based on his experi-
ence, concluded that it worked in a manner that infringed
the ’697 patent.” 249 F. App’x at 196. A reasonable pre-
suit investigation, however, also requires counsel to
perform an objective evaluation of the claim terms when
reading those terms on the accused device. See Q-
Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295,
1300–01 (Fed. Cir. 2004); S. Bravo Sys., Inc. v. Contain-
ment Techs. Corp., 96 F.3d 1372, 1375 (Fed. Cir. 1996).
The district court concluded that the written description
expressly defines the invention as a system for processing
information originating from hard copy documents, Claim
Construction Opinion, at 17–19, finding that Eon-Net’s
contrary claim construction position “borders on the
illogical” and that “[t]he specification exposes the frivolity
of Eon-Net’s claim construction position.” Rule 11 Sanc-
tions Order, at 12–13. For the reasons stated above, those
findings were not clearly erroneous. Accordingly, Eon-Net
has failed to meet its high burden to show that the dis-

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EON- NET LP v. FLAGSTAR BANCORP 27
trict court abused its discretion in imposing Rule 11
sanctions.
CONCLUSION
We have considered Eon-Net’s remaining arguments
and conclude that they are without merit. For the forego-
ing reasons, the judgment of the district court is affirmed.
AFFIRMED

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