PeriRx sanctioned over false negotiation claims in patent suit
PeriRx has been hit with sanctions over its conduct after its breach of licensing suit failed in a patent licensing dispute against the University of California.
The US District Court for the Eastern District of Pennsylvania ordered the oral diagnostics company to reimburse the Regents of the University of California for costs and attorney fees it had incurred pursuing licensing agreement lawsuits.
While the Regents argued that sanctions be imposed due to several errors, the court held that it had only engaged in sanctionable conduct when it had made “false claims” over negotiations with Temple University over sublicensing.
Overall, the court claimed that PeriRx “lacked a good faith basis” for bringing the licensing claims, holding that PeriRx’s counsel took on the dispute “without a background in patent law” and failed to consult with more experienced patent counsel throughout the proceedings.
While judge Wolson agreed that PeriRx’s conduct was “shoddy”, it ruled that most of the Regents identified “failings” were not so severe as to be sanctionable.
The court said: “For the most part… what the Regents have identified is sloppiness on the part of PeriRx and its counsel. And while the court does not condone lawyers’ sloppiness, the court is also not a roving tribunal of professional ethics.”
“Not every incidence of shoddy lawyering justifies sanctions. Most of the conduct that the Regents has identified in its sanctions motion falls into this latter category.”
Temple Uni ‘negotiation’ claim
While the majority of the Regents’ arguments for sanctions were denied by the court, it decided to impose sanctions on PeriRx over its involvement of Temple University in the proceedings.
PeriRx had said that by 2016 it was “negotiating with several entities, including … Temple University, about developing tests for the detection of insulin resistance”.
However, the court found that PeriRx’s first contact with Temple was in November 2019, “many months” after its licence agreement with the University had terminated.
Wolson said: “It was not some harmless error. It forced the Regents to take discovery from Temple to gather information about PeriRx’s assertion.”
“That discovery wouldn’t have been necessary without those false allegations… PeriRx must bear the expense of forcing the Regents to pursue this false claim in discovery.”
Multiplying proceedings
In its memorandum, the court considered whether PeriRx’s counsel was guilty of “unreasonably and vexatiously” multiplying proceedings in the case.
The court found that PeriRx’s allegations around the assignment of patents were due to the counsel’s “misunderstanding” of documents concerning new inventor oaths and assignments.
It also agreed with the Regent’s that PeriRx’s pleadings were “rambling and duplicative, and even at times internally inconsistent”.
However, Wolson held that this did not multiply proceedings, aside from allegations it had made regarding Temple University, and that the Regents did not prove that these allegations were made in bad faith.
‘Close call’
The Regents also said that PeriRx “chose to ignore” a release signed by the inventor that barred many of the original complaints submitted by the company until the Regents had filed their motions to dismiss.
When the Regents acknowledged the release in its motion to dismiss, PeriRx argued that the release was unenforceable. While the arguments failed, PeriRx’s economic duress arguments were a “close call”.
The Regents claimed that PeriRx chose to ignore the release and defer its economic duress argument to employ later as a “silver bullet” to shoot down the release.
While it agreed that PeriRx should have pled the facts earlier, the court “could not say that PeriRx’s position lacked merit”, therefore denied imposing sanctions on this issue.
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