Lowe v. ShieldMark, decided March 24, 2025

Case Name and Citation: Lowe v. ShieldMark, Inc., No. 2023-1786, 2023-1871, 2023-1893 (Fed. Cir. March 24, 2025) (nonprecedential)

Court: United States Court of Appeals for the Federal Circuit

Judges: Lourie, Bryson, and Reyna (Opinion by Bryson)

Date of Decision: March 24, 2025

Keywords: Patent Infringement, Patent Invalidity (Anticipation), False Advertising (Lanham Act), Standing, Inherent Sanctions Power, 35 U.S.C. § 285 (Attorney's Fees), Inequitable Conduct, Judicial Recusal, Discovery Obligations.

I. Executive Summary:

This Federal Circuit decision addresses multiple appeals arising from a patent infringement lawsuit brought by Clifford A. Lowe and Spota LLC (formerly InSite Solutions, LLC) against ShieldMark, Inc., Crown Equipment Corporation, and Advanced Plastics, Inc. (collectively "ShieldMark") concerning U.S. Patent No. 10,214,664 ("the '664 patent"), which relates to floor marking tape. The court affirmed the district court's rulings on patent invalidity (anticipated by U.S. Patent No. 6,120,395 "Dorenbusch"), false advertising under the Lanham Act, and the denial of attorney's fees based on inequitable conduct. The court affirmed in part the sanctions imposed against the plaintiffs, upholding the award of fees related to bad faith conduct in discovery under the district court's inherent power, but vacated and remanded the portion of sanctions related to a violation of a local patent rule due to a lack of a bad faith finding. The court also affirmed the denial of the plaintiffs' motion to recuse the district judge. Importantly, the court found that while Lowe lost standing after assigning the patent, Spota LLC retained standing to sue.

II. Main Themes and Important Ideas/Facts:

A. Standing to Sue for Patent Infringement:

• Article III Standing: The court clarified the requirements for Article III standing in a patent infringement suit, stating, "[T]he touchstone of constitutional standing in a patent infringement suit is whether a party can establish that it has an exclusionary right in a patent that, if violated by another, would cause the party holding the exclusionary right to suffer legal injury." (citing WiAV Sols. LLC v. Motorola, Inc., 631 F.3d 1257, 1265 (Fed. Cir. 2010)).

• Patentee vs. Licensee: The court distinguished between Article III standing and being a "patentee" under 35 U.S.C. § 281. A "patentee" includes the patentee and successors in title, not mere licensees. The transfer of "all substantial rights" affects who can sue but doesn't necessarily negate Article III standing if an exclusionary right is retained.

• Spota LLC's Standing: Despite Lowe assigning the '664 patent to Spota and Spota granting a non-exclusive license with a right to sublicense to InSite DE, the court held that Spota retained sufficient exclusionary rights to maintain Article III standing. The court emphasized that "[a] patent owner has exclusionary rights as a baseline matter unless it has transferred all exclusionary rights away" (Intell. Tech LLC v. Zebra Techs. Corp., 101 F.4th 807, 816 (Fed. Cir. 2024)). A non-exclusive license is merely "a promise by the licensor not to sue the licensee" (Jim Arnold Corp. v. Hydrotech Sys., Inc., 109 F.3d 1567, 1577 (Fed. Cir. 1997)).

• Lowe's Loss of Standing: Lowe lost standing after assigning his "entire right, title and interest" in the '664 patent to Spota on December 9, 2021, which expressly included "any cause(s) of action and damages accruing prior to this assignment." The court rejected the plaintiffs' argument of an unwritten agreement granting Lowe the exclusive right to sue for past infringement, finding "no clear error in that finding of jurisdictional fact."
  

B. Patent Invalidity (Anticipation):

• Anticipation by Dorenbusch: The court affirmed the district court's summary judgment that the asserted claims of the '664 patent were anticipated by U.S. Patent No. 6,120,395 ("Dorenbusch").

• Waiver of Arguments: The court noted that the plaintiffs only argued against anticipation based on two limitations ("extension of the upper surface" and "limits unintentional lifting") and had therefore "waived any argument that Dorenbusch does not disclose those limitations" found in other claims.

• "Extension of the Upper Surface" Limitation: The court found no error in the district court's determination that Dorenbusch's beveled peripheral edges were an "extension of the upper surface" of the spot markers. The court stated, "[B]ased on that differentiation, a lateral edge that is an 'extension of the upper surface' in claim 1 simply means a lateral edge that is connected to the upper surface."

• "Limits Unintentional Lifting" Limitation: The court also found that Dorenbusch's disclosure of a "non-slip bottom surface for resisting lateral forces" inherently limits unintentional lifting, even if intentional lifting is facilitated. The court stated, "By its terms, limiting unintentional lifting does not foreclose intentional lifting of the floor marking tape."
  

C. False Advertising under the Lanham Act:

• Statements at Issue: Spota challenged three advertising statements made by ShieldMark regarding its "Mighty Line" floor tape: (1) "[b]eveled edge tape can take a beating from industrial wheel traffic"; (2) "Mighty Line Floor Tape withstands industrial brush scrubbers, forklifts, and heavy industrial wheel traffic"; and (3) "[b]eveled edges increase durability for forklift traffic."

• No Literal Falsity: The court agreed with the district court that these statements were not literally false. The court reasoned that "[o]nly an unambiguous message can be literally false" and that terms like "take a beating," "withstands," and "increase durability" are not unambiguous and accommodate variations in degree. The court also noted that "reasonable consumers know that marketing involves some level of exaggeration—what the law calls ‘puffery.’"

• Waiver of Arguments: The court found that Spota waived arguments raised for the first time in its reply brief, including the assertion that the Mighty Line tape does not even have "beveled edges."
  

D. Motion to Recuse:

• Abuse of Discretion Standard: The Sixth Circuit's standard of "abuse of discretion" was applied to the denial of the recusal motion.

• Liteky Principles: The court cited Liteky v. United States, 510 U.S. 540 (1994), emphasizing that "judicial rulings alone almost never constitute a valid basis for a bias or partiality motion" and that "opinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings . . . do not constitute a basis for a bias or partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible."

• No Abuse of Discretion: The court found that the facts alleged by the plaintiffs (statements made by the court, scheduling orders, etc.) did not demonstrate a clear error of judgment by the district court in denying the recusal motion.
  

E. Sanctions:

• Inherent Power to Sanction: The district court awarded attorney's fees and costs based on both 35 U.S.C. § 285 and its inherent power. The Federal Circuit affirmed the award under the inherent power, making it unnecessary to address § 285. This power can be invoked when a party "has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." (Chambers v. NASCO, Inc., 501 U.S. 32, 45–46 (1991)).

• Bad Faith Conduct in Discovery: The district court found bad faith based on the plaintiffs' failure to supplement discovery responses regarding the assignment and licensing of the '664 patent after December 2021, despite knowing they had responsive documents. The court also noted the plaintiffs' "explicitly misrepresented to Defendants and to this Court the status of the patent" in a Fourth Amended Complaint. The Federal Circuit deferred to the district court's finding that this misrepresentation was not merely an honest mistake, especially considering the ongoing duty to supplement discovery under Rule 26(e).

• Sanctions for Violation of Local Patent Rule: The district court also sanctioned the plaintiffs for filing an expert report marked "Attorney's Eyes Only" on the public docket in violation of a local patent rule. However, because the district court "made no finding that the plaintiffs acted in bad faith when filing that expert report," the Federal Circuit vacated this portion of the sanctions and remanded for the required findings.
  

F. Inequitable Conduct:

• Standard for Inequitable Conduct: The court reiterated that inequitable conduct requires "affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive." (Bd. of Educ. Ex rel. Bd. of Trs. of Fla. State Univ. v. Am. Bioscience, Inc., 333 F.3d 1330, 1343 (Fed. Cir. 2003)). Both materiality and intent to deceive must be proven by clear and convincing evidence.

• No Clear Error in Finding Lack of Intent to Deceive: The district court found that Lowe made "some limited effort to disclose" the existence of prior art (DuraStripe tape) and that the defendants had not established by clear and convincing evidence that Lowe intended to withhold material information when submitting a photograph during patent prosecution. The Federal Circuit found no clear error in these threshold determinations.
  

III. Conclusion:

The Federal Circuit largely affirmed the district court's rulings, finding the '664 patent invalid due to anticipation, rejecting the false advertising claim, and upholding the sanctions based on bad faith discovery conduct. The court also upheld the denial of the recusal motion and the finding of no inequitable conduct. The partial vacatur and remand concerning the sanctions for violating the local patent rule necessitate further findings of bad faith by the district court if those sanctions are to be upheld. This decision underscores the importance of accurate and timely discovery disclosures, the limitations of broad marketing claims under the Lanham Act, and the high bar for proving both anticipation and inequitable conduct in patent litigation.