On July 14, 2015, in Predator International v. Gamo Outdoor, the US Court of Appeals for the Tenth Circuit reversed the district court’s imposition of a FRCP 11 sanction on an attorney accused of forum shopping, among other things (No. 14-1354, (July 14, 2015)).

Lee Phillips and Tom May filed a provisional patent application for a new type of air-gun pellet that was granted in 2003. They formed Predator International to manufacture and sell the new pellets, but each separately sold his stocks, rights and interests through the years, ultimately to Predator’s current owners in 2007.

In 2009, Predator discovered that another company, Gamo, was marketing an air-gun pellet that was substantially similar to its own pellet. As a result, John Cogswell, attorney for Predator, filed a complaint in federal court for, among other things, trade-dress infringement and patent infringement.

During this time, May assigned his ownership interest in the patent to Predator. However, Predator was unsuccessful in obtaining a written assignment of Phillips’s patent-ownership rights. Because a co-owner of a patent does not have standing to sue for infringement unless all other co-owners join the suit, Cogswell decided to amend the complaint and exclude the patent-infringement claim to litigate patent ownership in state court. Predator’s motion to amend stated that it voluntarily dismissed its patent infringement claim because it could not prove that it had standing to pursue them without assignment from Phillips. Predator then filed a separate suit against Phillips in Colorado state court, after which Phillips assigned his purported patent interest to Gamo and Gamo intervened in the state case.

In July 2011, Predator filed a motion for leave to file a supplemental complaint in federal court, asserting a patent-ownership claim against Gamo, and reasserting the patent-infringement claim that it originally voluntarily dismissed. The district court took issue with this motion and sanctioned Cogswell for forum shopping, waiting too long to file the motion to supplement after learning of Phillips’s sale of patent interest, and for not having any new evidence to assert standing for the patent-infringement claim. Cogswell appealed.

The Tenth Circuit reversed the Rule 11 sanction, finding that the district court had abused its discretion. The court first looked at whether it had jurisdiction over the case and found that it did because the most recent amended complaint did not contain a patent-infringement claim. Next, the court looked at Cogswell’s actions and found them all to be objectively reasonable. It concluded that the district court misconceived the doctrine on forum shopping, finding that forum shopping is not improper if there is a ground for federal jurisdiction and that a party is also permitted to pursue the same claim simultaneously in state and federal courts. The court further noted that there were no abstention doctrines (where a federal court cannot hear the same claims before a state court) that applied here. Finding legal error, the court held that the district court abused its discretion in relying on forum shopping as a ground for the Rule 11 sanction.

Finally, the court noted that the district court’s two remaining grounds were even less compelling for a Rule 11 sanction. It found that the delay did not make it objectively unreasonable for Predator to seek to add the claims. Additionally, the Tenth Circuit found that Predator had no obligation to prove standing conclusively at the pleading stage. Predator’s standing was adequately supported by the complaint and there were proper grounds for it to change its mind when it did. The motion to supplement and amend was therefore not unwarranted.