Ps Products Inc., Billy Pennington v. Panther Trading Co. Inc.

United States Court of Appeals
for the Federal Circuit
______________________
PS PRODUCTS INC., BILLY PENNINGTON,
Plaintiffs-Appellants
v.
PANTHER TRADING CO. INC.,
Defendant-Appellee
______________________
2023-1665
______________________
Appeal from the United States District Court for the
Eastern District of Arkansas in No. 4:22-cv-00473-JM,
Judge James M. Moody, Jr.
______________________
Decided: December 6, 2024
______________________
CHRIS STEWART, Chris Stewart, PLLC, Little Rock, AR,
argued for plaintiffs-appellants.
STEPHEN D. ZINDA, Cabello Hall Zinda PLLC, Houston,
TX, argued for defendant-appellee. Also represented by J.
DAVID CABELLO.
______________________
Before MOORE, Chief Judge, STOLL and CUNNINGHAM,
Circuit Judges.
MOORE, Chief Judge.
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 2
PS Products, Inc. and Mr. Billy Pennington
(collectively, PSP) appeal an order of the United States
District Court for the Eastern District of Arkansas
granting Panther Trading Company, Inc.’s (Panther)
motion for sanctions. Because the district court did not
apply an incorrect legal standard or abuse its discretion
when awarding sanctions under its inherent power, we
affirm. Panther requests attorney fees and costs for this
appeal, arguing PSP’s appeal is frivolous as argued. We
decline to award attorney fees.
BACKGROUND
PSP owns U.S. Design Patent No. D680,188, directed
to a long-spiked electrode for a stun device. On May 23,
2022, PSP filed the instant suit in the Eastern District of
Arkansas, alleging Panther infringed the D’188 patent.
J.A. 9–18;1 see also J.A. 5. On June 24, 2022, Panther sent
a Rule 11 letter and draft motion for Rule 11 sanctions to
PSP’s attorney of record, Mr. Chris Stewart. The letter
alleged: (1) the infringement allegations were facially
frivolous because the patented design and accused product
were plainly dissimilar, and (2) venue was statutorily
improper and the suit should not have been filed in
Arkansas. That same day, Panther filed a motion to
dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim and 12(b)(3) for
improper venue. PSP did not respond to Panther’s Rule 11
letter or motion to dismiss.
After filing the motion to dismiss, Panther discovered
a prior art marketing brochure from PSP depicting a design
nearly identical to that claimed in the D’188 patent. On
July 6, 2022, Panther sent another letter to Mr. Stewart,
1 “J.A.” refers to the appendix filed with PSP’s
Opening Brief.
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 3
demanding the lawsuit be dismissed in light of the
marketing brochure. PSP did not respond.
On July 11, 2022, PSP moved to voluntarily dismiss the
case with prejudice. J.A. 20. On July 26, 2022, Panther
sent PSP a letter demanding reimbursement for attorney
fees and expenses incurred defending against the frivolous
lawsuit and warning that refusal would lead to Panther
seeking sanctions to dissuade PSP from further frivolous
filings. PSP did not respond.
On August 1, 2022, the district court dismissed the case
with prejudice. J.A. 2. The next day, Panther filed a
motion for attorney fees and costs under 35 U.S.C. § 285
and $100,000 in deterrence sanctions under the court’s
inherent power. J.A. 22–23; see also J.A. 28. At a hearing
on the motion, the district court deemed the case
exceptional under § 285 and granted Panther’s motion for
attorney fees and costs totaling $43,344.88. J.A. 1. PSP
and Mr. Stewart were jointly and severally liable. J.A. 69
¶ 7.
The district court subsequently ordered PSP and Mr.
Stewart to jointly and severally pay $25,000 in deterrence
sanctions to the court. J.A. 1; see also J.A. 3. PSP filed a
motion for reconsideration of deterrence sanctions. J.A.
62–67. The district court denied the motion. J.A. 7. PSP
appeals. We have jurisdiction pursuant to 28 U.S.C.
§ 1295(a)(1).
DISCUSSION
PSP has not appealed the district court’s finding that
this is an exceptional case or its decision to grant attorney
fees and costs, and PSP does not dispute the amount
awarded. Oral Arg. at 0:39–0:48, available at
https://oralarguments.cafc.uscourts.gov/default.aspx?fl=23
-1665_10102024.mp3. PSP’s appeal is limited to a claim
that the district court erred in awarding an additional
$25,000 in sanctions under its inherent power. Id. PSP
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 4
argues the district court erred by awarding sanctions for
several reasons. First, PSP argues the district court is
without authority to award sanctions when it has already
awarded attorney fees and costs. Appellants’ Br. 7–11.
Second, PSP argues the district court applied the incorrect
legal standard because the order did not state the sanctions
were being imposed due to bad faith or fraudulent conduct.
Oral Arg. at 3:22–3:37, 37:52–38:23. Finally, PSP argues
the district court abused its discretion when it imposed
deterrence sanctions under its inherent power. Appellants’
Br. 12–25.
Panther requests attorney fees and costs for defending
this appeal, alleging that PSP’s appeal is frivolous as
argued. We decline to award attorney fees for the appeal.
I.
“District courts have the inherent power to control
litigation by imposing sanctions appropriate to rectify
improper conduct by litigants.” Micron Tech., Inc. v.
Rambus Inc., 645 F.3d 1311, 1326 (Fed. Cir. 2011) (internal
citation and quotation marks omitted). Whether the
district court imposed sanctions under the correct legal
standard is a question of law we review de novo. See
Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1032
(Fed. Cir. 2006).
“When reviewing the imposition of sanctions under a
district court’s inherent powers, we apply the law of the
regional circuit in which the district court sits, here the
Eighth Circuit.” Monsanto Co. v. E.I. Du Pont de Nemours
& Co., 748 F.3d 1189, 1196 (Fed. Cir. 2014). Under Eighth
Circuit law, a court may use its inherent power to sanction
parties’ bad faith conduct during litigation. Schlafly v.
Eagle F., 970 F.3d 924, 936–37 (8th Cir. 2020). The Eighth
Circuit reviews a district court’s imposition of sanctions
under its inherent powers for an abuse of discretion.
Chrysler Corp. v. Carey, 186 F.3d 1016, 1019 (8th Cir.
1999). This standard applies to a court’s “decision to
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 5
impose a sanction, the nature of the sanction imposed, and
the factual basis for the court’s decision.” Id. A district
court abuses its discretion when its decision rests on
clearly erroneous factual findings or legal conclusions.
Miller v. Honkamp Krueger Fin. Servs., Inc., 9 F.4th 1011,
1013–14 (8th Cir. 2021).
A.
PSP argues the district court legally erred by imposing
deterrence sanctions under its inherent power when it had
already awarded attorney fees and costs under 35 U.S.C.
§ 285. Appellants’ Br. 7–11. It is well-settled that § 285
does not preclude a district court from separately imposing
sanctions or fees under another authority. See, e.g., Eon-
Net LP v. Flagstar Bancorp, 653 F.3d 1314, 1317 (Fed. Cir.
2011) (affirming district court award of attorney fees and
costs under § 285 and sanctions for Rule 11 violation);
Takeda Chem. Indus., Ltd. v. Mylan Lab’ys, Inc., 549 F.3d
1381, 1391 (Fed. Cir. 2008) (affirming district court award
of attorney fees and costs under § 285 and expert fees
under the court’s inherent power). We see no reason to
treat sanctions under the court’s inherent power differently
from sanctions under Rule 11 or expert fees under the
court’s inherent power. We hold the district court can
impose sanctions under its inherent power in addition to
awarding attorney fees and costs under § 285.
B.
We cannot conclude that the district court erred when
it imposed sanctions due to PSP’s bad faith conduct, which
it inferred “[b]ased upon the lack of legal merit of this
action and [PSP’s] history of repeatedly filing meritless
lawsuits in this district.” J.A. 1. Whether PSP acted in bad
faith is a factual determination that the Eighth Circuit
reviews for clear error. Black Hills Inst. of Geological
Rsch., Inc. v. Williams, 88 F.3d 614, 616 (8th Cir. 1996).
The facts of this case support the district court’s award of
sanctions.
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 6
First, PSP’s complaint did not state a plausible claim
for design patent infringement. To establish design patent
infringement, a plaintiff must show an “ordinary observer”
would be deceived into believing the accused product is the
same as the patented design. Crocs, Inc. v. Int’l Trade
Comm’n, 598 F.3d 1294, 1303 (Fed. Cir. 2010). In some
cases, however, the accused product and the patented
design are “plainly dissimilar” such that it will be clear to
an ordinary observer the two designs are not “substantially
the same.” Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d
665, 678 (Fed. Cir. 2008) (en banc).
J.A. 38.
No ordinary observer would be deceived into believing
Panther’s accused product is the same as the D’188
patented design, see above. No reasonable person could
conclude that the facts of this case create a cause of action
for design patent infringement. The accused product and
patented design are so plainly dissimilar that it appears,
as Panther argues, fairly characterized as a nuisance suit.
Second, PSP’s complaint cited the general venue
statute, 28 U.S.C. § 1391, rather than the patent-specific
venue statute, 28 U.S.C. § 1400. J.A. 9 ¶ 2 (“Pursuant to
28 U.S.C. § 1391, venue in this suit lies in the Eastern
District of Arkansas . . . .”). We have repeatedly warned to
“be mindful of the specific and unambiguous nature of
venue in applying the statute and be careful not to conflate
showings that may be sufficient for other purposes, e.g.,
personal jurisdiction or the general venue statute, with the
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 7
necessary showing to establish proper venue in patent
cases.” Valeant Pharms. N. Am. LLC v. Mylan Pharms.
Inc., 978 F.3d 1374, 1380 (Fed. Cir. 2020) (cleaned up); see
also In re Cray Inc., 871 F.3d 1355, 1361 (Fed. Cir. 2017)
(explaining “the regular and established place of business
standard [under § 1400(b)] requires more than the
minimum contacts necessary for establishing personal
jurisdiction or for satisfying the doing business standard
[under § 1391(c)]”).
Under 28 U.S.C. § 1400(b), venue is proper “where the
defendant resides, or where the defendant has committed
acts of infringement and has a regular and established
place of business.” PSP does not dispute that Panther
neither resides in nor has a regular and established place
of business in Arkansas. Panther resides in Maryland
because it is incorporated there. J.A. 30; TC Heartland
LLC v. Kraft Foods Grp. Brands LLC, 581 U.S. 258, 262
(2017) (“We therefore hold that a domestic corporation
‘resides’ only in its State of incorporation for purposes of
the patent venue statute.”). Panther does not have a
regular and established place of business in Arkansas
because it has no physical presence there. J.A. 30; Cray,
871 F.3d at 1360 (explaining § 1400(b) requires, inter alia,
“a physical place in the district”). Thus, venue is not proper
in the Eastern District of Arkansas under the correct venue
statute.
In addition to the serious flaws in the filing of this case,
since 2010, PSP has filed twenty-five patent infringement
lawsuits in the Eastern District of Arkansas. J.A. 31. PSP
dismissed thirteen of those suits before, or soon after,
answers were filed. Id. at n.3. PSP voluntarily dismissed
three of those suits after motions to dismiss were filed by
defendants but before the district court ruled on the
motions. Id. at n.4. In two instances where the district
court adjudicated the motions to dismiss, PSP’s claims
were either dismissed for failure to state a claim or lack of
personal jurisdiction. Id. at n.5. In each of the twenty-five
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 8
lawsuits filed, PSP incorrectly asserted venue based on the
general venue statute, 28 U.S.C. § 1391, rather than the
patent-specific venue statute, 28 U.S.C. § 1400. Oral Arg.
at 9:19–9:53 (PSP’s counsel admitting he used the same
complaint for each of the lawsuits and the complaint did
not cite the correct venue statute).
While the district court did not individually analyze
each of the twenty-five lawsuits, it was reasonable given
these facts for the district court to infer PSP’s many other
lawsuits mirroring this suit’s procedural posture were
similarly meritless. Under these circumstances, the
district court did not clearly err when it inferred bad faith
from PSP’s history of filing meritless lawsuits.
C.
PSP argues the district court abused its discretion
when it imposed sanctions under its inherent power.
Appellants’ Br. 12–25. We do not agree.
PSP argues the quantity of lawsuits filed does not
warrant sanctions. Appellants’ Br. 20–22 (citing SFA Sys.,
LLC v. Newegg Inc., 793 F.3d 1344, 1349–50 (Fed. Cir.
2015)). PSP’s reliance on SFA Systems is misplaced. In
SFA Systems, we affirmed the district court’s judgment
denying fees and holding the case was not exceptional
under § 285, where the sole allegation was the patentee’s
history of filing many lawsuits and settling for low
amounts. 793 F.3d at 1351. Here, the determination of
exceptionality is not challenged on appeal. Oral Arg. at
0:39–0:48. More importantly, the sanction was not solely
based on PSP’s history of filing many lawsuits but on PSP’s
history of filing meritless lawsuits. J.A. 1. There is, for
example, no dispute that PSP filed all twenty-five lawsuits
in the Eastern District of Arkansas pursuant to the wrong
venue statute and, at least in this suit, venue would be
improper under the correct venue statute. Oral Arg. at
8:25–9:02 (PSP’s counsel admitting venue was alleged due
to defendants “selling into the district” under the general
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 9
venue statute because “that is the only way we could have
brought [those lawsuits]”).
PSP further argues its conduct must be “sufficiently
beyond ‘exceptional’” to justify sanctions under the court’s
inherent power. Appellants’ Br. 23 (quoting Amsted Indus.
Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 379 (Fed.
Cir. 1994)). Amsted is inapposite because it involved an
award of expert witness fees beyond the limits of 28 U.S.C.
§ 1821(b), not a sanction paid directly to the court. 23 F.3d
at 379.
PSP does not dispute the district court could have
imposed the sanction under Rule 11. FED. R. CIV. P. 11(c)(4)
(“The sanction may include . . . an order to pay a penalty
into court . . . .”). However, Rule 11 sanctions were
unavailable because PSP dismissed the case before
Panther could file a Rule 11 motion.2 J.A. 32–33. Given
there were no other mechanisms to sanction PSP’s bad
faith conduct except the court’s inherent power, the district
court acted within its discretion by relying on its inherent
power to sanction conduct that would typically fall under
Rule 11. “[W]hen there is bad faith conduct in the course
of litigation that could be adequately sanctioned under the
[Federal Rules of Civil Procedure], the court ordinarily
should rely on the Rules rather than the inherent power.
But if in the informed discretion of the court, neither the
2 Federal Rule of Civil Procedure 11(c)(2) requires a
motion for sanctions based on improper filings be served on
the offending party but not filed with the court for 21 days,
allowing the party to correct or withdraw the offending
document before any sanctions are imposed. Thus,
Panther could not have filed its Rule 11 motion until 21
days after serving a draft of the motion on PSP. Panther
served its draft motion on June 24, 2022, making the 21-
day deadline July 15, but PSP dismissed the case with
prejudice on July 11. J.A. 20.
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 10
statute nor the Rules are up to the task, the court may
safely rely on its inherent power.” Chambers v. NASCO,
Inc., 501 U.S. 32, 50 (1991).
The district court did not abuse its discretion by
imposing sanctions under its inherent power. Panther
requested $100,000 in sanctions, but the district court
found “$25,000.00 is sufficient to deter the repeated filing
of meritless lawsuits in this district.” J.A. 1.
II.
Panther requests attorney fees and costs for defending
this appeal because PSP’s appeal is frivolous as argued.3
Appellee’s Br. 42–46. Although it is a close call, this appeal
is not frivolous.
We have discretion over whether to “award just
damages and single or double costs to the appellee.” FED.
R. APP. P. 38. As we have explained:
[T]here are two senses in which an appeal can be
held frivolous: First, where an appeal is taken in a
case in which “the judgment by the tribunal below
was so plainly correct and the legal authority
contrary to appellant’s position so clear that there
really is no appealable issue,” the appeal is held to
be “frivolous as filed.” Second, even in cases in
which genuinely appealable issues may exist, so
that the taking of an appeal is not frivolous, the
appellant’s misconduct in arguing the appeal may
be such as to justify holding the appeal to be
“frivolous as argued.”
Romala Corp. v. United States, 927 F.2d 1219, 1222 (Fed.
Cir. 1991) (internal citations omitted).
3 Panther does not argue the appeal is frivolous as
filed. Oral Arg. at 31:31–31:41.
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 11
While this appeal, and the arguments made herein, are
entirely without merit, they are not quite frivolous. It was
not, for example, frivolous to argue, as PSP did, that the
district court could not award deterrence sanctions under
its inherent power in addition to attorney fees pursuant to
§ 285. While the argument is without merit, it has not
previously been decided by this court.
Panther presents three reasons why PSP’s conduct on
appeal is sanctionable: PSP (1) misrepresented the record,
(2) continued to misrepresent the law on patent venue and
argue its infringement claims were reasonable, and (3)
ignored Federal Rule of Appellate Procedure 30. Appellee’s
Br. 43–45.
First, PSP does not misrepresent the record by
claiming Panther moved for sanctions under § 285 when
Panther sought sanctions under the district court’s
inherent power. PSP is not arguing that Panther moved
for sanctions under § 285; rather, PSP is arguing that the
district court could not issue deterrence sanctions because
§ 285 is the only authorized remedy and does not allow for
additional sanctions. Appellants’ Reply Br. 6–9.
Second, PSP does continue to make the same meritless
arguments on infringement and venue that it raised before
the district court. See, e.g., Appellants’ Br. 18 (“[T]here
exist legal claims for infringement for a fact-finder
pursuant to an ordinary reasonable observer. Panther had
placed in the stream of commerce on its website a product
that infringed on the Plaintiff’s spiked electrode patent.”
(internal citations omitted)). But merely repeating
meritless arguments, without more, does not make an
appeal frivolous as argued. Romala, 927 F.2d at 1224 (“As
we have on other occasions noted, a meritless appeal is by
no means necessarily a frivolous one . . . .”).
Finally, PSP did not consult with Panther and include
Panther’s designated parts of the record in the appendix,
in violation of Federal Rule of Appellate Procedure 30.
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PS PRODUCTS INC. v. PANTHER TRADING CO. INC. 12
While PSP behaved poorly, this is not the type of conduct
that would make the appeal frivolous as argued. Westech
Aerosol Corp. v. 3M Co., 927 F.3d 1378, 1383 (Fed. Cir.
2019) (“For example, an appeal may be frivolous as argued
when the appellant distorts the record, by disregarding or
misrepresenting the clear authority against its position,
and by attempting to draw illogical deductions from the
facts and the law.” (cleaned up)). Although a close case on
the frivolous as argued standard, we decline to impose
attorney fees.
CONCLUSION
We have considered PSP’s remaining arguments and
find them unpersuasive. For the reasons given above, we
affirm the district court’s order granting deterrence
sanctions.
AFFIRMED
COSTS
Costs to Panther.
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