Tag: Federal

This (Retractable) Needle Is Going to Sting a Bit: Next Chapter in the Adventures of Post-Phillips Claim Construction

Posted on July 31, 2011 in the National Law Review an article by David M. Beckwith and Paul Devinsky of McDermott Will & Emery regarding how the U.S. Court of Appeals for the Federal Circuit addressed the claim construction tension between broadly drafted claims and the written description contained in the patent specification:

The U.S. Court of Appeals for the Federal Circuit addressed the claim construction tension between broadly drafted claims, and the written description contained in the patent specification, revealing a deep split among the panel members. Retractable Technologies, Inc. v. Becton, Dickinson Co., Case No. 07-CV-0250 (Fed. Cir,. July 8, 2011) (Lourie, J.) (Plager, J., concurring) (Rader, J. dissenting-in-part).

Retractable Technologies (RT) sued Becton Dickenson (BD) for infringing three patents related to syringes with retractable needle technology. Following an adverse jury verdict, BD appealed on multiple grounds, including a challenge to the claim construction of the term “body,” which the district court had determined could include a multi-part structure.

The Federal Circuit affirmed in part and reversed in part, specifically rejecting the district court’s broad claim construction the term “body.”  BD argued that the district court erred in ruling the syringe “body” is not limited to a one-piece structure, noting the specifications describes “the invention” as including a one-piece body.  In addition, the background section of the patent criticized prior art syringes that contain a two-piece body.  Finally, BD argued that claim differentiation does not apply in light of the written description’s limiting statements concerning the nature of the invention and the structure of the syringe body.

RT responded that the ordinary meaning of the term “body” should apply and is not limited to a one-piece body.  RT also argued application of the claim differentiation canon based on a dependent claim that included the limitation of a one-piece body.

Judge Lourie wrote for the majority of the panel, agreeing with BD that the claim term “body” is limited to a one-piece structure as described in the specifications. The majority noted that the specification indicates what was invented, holding that the claim language should not be interpreted to extend the invention beyond that set forth in the written description.  The majority also rejected RT’s claim differentiation argument as “weak” in the face of the language of the specification.  The majority noted that no dependent claim recited a non-one piece structure and concluded that the language of the specification that criticized two-piece structures was of greater significance than the dependent claim to a one-piece body.

Judge Plager, concurring, warned courts to turn a deaf ear to the siren song of giving claims wide scope.  In Judge Plager’s opinion, the written description requirement imposes an obligation to make full disclosure of what is actually invented and to claim that and nothing more.  As Judge Plager noted, “I have written elsewhere about the curse of indefinite and ambiguous claims, divorced from the written description, that we are regularly are asked to construe, and the need for more stringent rules to control the curse.”

In dissent, Judge Rader focused on the ordinary meaning of the term “body” and explained that since there was no special meaning provided by the patent specification to supplant the ordinary meaning of the term “body,” it was error to limit the construction to only a one-piece structure.  Rader wrote,  “In this case, neither party contends that ‘body’ has a special, technical meaning in the field of art, and thus claim construction requires ‘little more than the application of the widely accepted meaning of commonly used words.’”

Practice Note:  This decision reflects a fundamental division within the Federal Circuit on the importance of the written description as a limitation on claim scope, as compared to the view that the claim language itself should be of paramount importance in construction. Until there is either some post-Phillips en bancclarification or Supreme Court consideration of the issue, the outcome of contested constructions in such a circumstance may demand on the panel hearing the appeal.

© 2011 McDermott Will & Emery

Unsecured Creditors Beware! The Western District of Texas Bankruptcy Court Declares an Unsecured Creditor Cannot Have Its Cake (Unsecured Claim) and Eat It Too (Post-Petition Legal Fees)

Recently posted in the National Law Review an article by Evan D. Flaschen, Renée M. Dailey, Mark E. Dendinger of Bracewell & Giuliani LLP about the issue of whether an unsecured creditor can recover post-petition legal fees under the Bankruptcy Code:

Bankruptcy courts have long debated the issue of whether an unsecured creditor can recover post-petition legal fees under the Bankruptcy Code. In the recent decision of In re Seda France, Inc. (located here(opens in a new window)), Justice Craig A. Gargotta of the United States Bankruptcy Court for the Western District of Texas denied an unsecured creditor’s claim for post-petition fees. In doing so, the Court has once again left the unsecured creditor with a bad taste in its mouth by declaring that an unsecured creditor seeking post-petition fees is asking permission to have its cake (a claim for principal, interest and pre-petition legal fees under applicable loan documents) and eat it too (a claim for post-petition legal fees).

Proponents of the view that an unsecured creditor cannot recover post-petition legal fees point to section 506(b) of the Bankruptcy Code, which allows as part of a creditor’s secured claim the reasonable attorneys’ fees and costs incurred during the post-petition period, and note the Bankruptcy Code is silent on anunsecured creditor’s right to post-petition legal fees. Essentially, the argument is since Congress provided for post-petition fees for secured creditors, it could have explicitly provided for post-petition fees for unsecured creditors but chose not to. Proponents of the alternative view cite the Second Circuit decision United Merchants and its progeny, where those courts refused to read the plain language of section 506(b) as a limitation on an unsecured creditor’s claim for recovery of post-petition legal expenses. The theory is that while the Bankruptcy Code does not expressly permit the recovery of an unsecured creditor’s claim for post-petition attorneys’ fees, it does not expressly exclude them either. The basic tenant is that if Congress intended to disallow an unsecured creditor’s claim for post-petition legal fees it could have done so explicitly.

In Seda, Aegis Texas Venture Fund II, LP (“Aegis”) timely filed a proof of claim in Seda’s Chapter 11 bankruptcy case claiming its entitlement to principal, interest and pre-petition attorneys’ fees under its loan documents with Seda as well as post-petition attorneys’ fees for the duration of the case. Aegis made various arguments in support of the allowance of its post-petition legal expenses including: (1) the explicit award of post-petition fees to secured creditors under section 506(b) does not mean that such a provision should not be implicitly read into section 502(b) (i.e., unim est exclusion alterius (“the express mention of one thing excludes all others”) does not apply), (2) the United States Supreme Court decision in Timbers does not control as Timbers denied claims of anundersecured creditor for unmatured interest caused by a delay in foreclosing on its collateral, (3) the right to payment of attorneys’ fees and costs exists pre-petition and it should be irrelevant to the analysis that such fees are technically incurred post-petition, (4) because the Bankruptcy Code is silent on the disallowance of an unsecured creditor’s post-petition attorneys’ fees, these claims should remain intact, and (5) recovery of post-petition attorneys’ fees and costs is particularly appropriate where, as in Seda, the debtor’s estate is solvent and all unsecured creditors are to be paid in full as part of a confirmed Chapter 11 plan.

The Seda Court rejected Aegis’ arguments and held that an unsecured creditor is not entitled to post-petition attorneys’ fees even where there is an underlying contractual right to such fees and unsecured creditors are being paid in full. With respect to Aegis’ argument on the proper interpretation of sections 506(b) and 502(b), the Court cited the many instances in the Bankruptcy Code where Congress expressed its desire to award post-petition attorneys’ fees (e.g., section 506(b)), and found that Congress could have easily provided for the recovery of attorneys’ fees for unsecured creditors had that been its intent. Regarding Aegis’ argument that Timbers does not control, the Court held that in reaching its decision on the disallowance of a claim for unmatured interest the Timbers Court found support in the notion that section 506(b) of the Bankruptcy Code does not expressly permit post-petition interest to be paid to unsecured creditors. The SedaCourt held this ruling should apply equally to attorneys’ fees to prohibit recovery of post-petition fees and expenses by unsecured creditors. The Court further held that section 502(b) of the Bankruptcy Code provides that a court should determine claim amounts “as of the date of the filing of the petition,” and therefore attorneys’ fees incurred after the petition date would not be recoverable by an unsecured creditor. In response to Aegis’ argument that non-bankruptcy rights, including the right to recover post-petition attorneys’ fees should be protected, the Seda Court noted that the central purpose of the bankruptcy system is “to secure equality among creditors of a bankrupt” and that an unsecured creditor’s recovery of post-petition legal fees, even based on a contractual right, would prejudice other unsecured creditors. The Court held this is true even in the case where the debtor was solvent and paying all unsecured creditors in full. The Court noted that a debtor’s right to seek protection under the Bankruptcy Code is not premised on the solvency or insolvency of the debtor and, therefore, the solvency of the debtor has no bearing on the allowance of unsecured creditors’ post-petition legal fees.

Seda is the latest installment in the continued debate among the courts whether to allow an unsecured creditor’s post-petition attorneys’ fees. The Seda Court is of the view that an unsecured creditor cannot recover post-petition legal fees for the foregoing reasons, most notably that the Bankruptcy Code is silent on their provision and public policy disfavors the recovery of one unsecured creditor’s legal expenses incurred during the post-petition period to the prejudice of other unsecured creditors. Depending on the venue of the case, there will undoubtedly be many more instances of unsecured creditors seeking recovery of their post-petition attorneys’ fees in a bankruptcy case until the Supreme Court definitively rules on the issue. Until then, keep asking for that cake . . . .

© 2011 Bracewell & Giuliani LLP