Khan v. Hemosphere Inc., 2019-1952

NAZIR KHAN, IFTIKHAR KHAN, Plaintiffs-Appellants v. HEMOSPHERE INC., ET AL., Defendants-AppelleesMERIT MEDICAL SYSTEMS INC., Defendant-Cross-AppellantHOSPITALS AND DOCTORS IMPLANTINGUNPATENTED HERO GRAFT TO DOCTORS, ET AL., Defendants

2019-1952

2019-2394

United States Court of Appeals for the Federal Circuit

August 13, 2020

NOTE: This disposition is nonprecedential.

Appeals from the United States District Court for the Northern District of Illinois in No. 1:18-cv-05368, Judge Virginia M. Kendall.

NAZIR KHAN, IFTIKHAR KHAN, Burr Ridge, IL, pro se.

BRENT P. LORIMER, Workman Nydegger, Salt Lake City, UT, for defendant-cross-appellant and defendants-appellees Willaim J. Tapscott, James W. Campbell, Heather LeBlanc, Lee Forestiere, Edward Kim, Joy Garg Kaiser Permanente, Marius Saines, Gustavo Torres, Charles M. Eichler, Eric Ladenheim, Robert S. Brooks, Anne Lally, Matthew G. Brown, Abilio Coello, Howard E. Katzman, Stephen Wise Unger, Fernando Kafie, Robert Hoyne, Robert Brumberg, Murray L. Shames, Victor Bowers, Heidi A. Pearson, Jeffrey Pearce, Michael Klychakin, William Schroder, Jonathan R. Molnar, Christopher Wixon, Julio Vasquez, William Soper, Jeffrey Silver, Stephen Jensik, Gary Lemmon, Raghu L. Motagnahalli, Ruban Nirmalan, Chase Tattersall, William Ducey, Michael Willerth, Dennis Fry, Jeffrey Cameron, David Smith, Amit Dwivedi, Joseph Griffin, Albert Sam, Andrew Sherwood, Larry D. Flanagan, Thomas Reifsnyder, David B. Leeser, Andres Schanzer, Robert Molnar, Peter Wong, Kourosh Baghelai, Howard L. Saylor, Ty Dunn, William Omlie, James R. Rooks, Timothy C. Hodges, Eddy Luh, Pankaj Bhatnagar, Benjamin Westbrook, Yvon R. Baribeau, George Blessios, Gary Tannenbaum, Jason Dew, Jason Burgess, Paul Orland, James D. Lawson, Todd Early, Randal Bast, Clinton Atkinson, Jeff Stanley, Virginia Wong, Damian Lebamoff, Jonathan Velasco, Boris Paul, Walter Rizzoni, Jon R. Henwood, Carlos Rosales, Ellen Dillavou, Eugene Simoni, Alexander Uribe, Edward Beverly Morrison, Michael Gallichio, Angelo Santos, Chad Laurich, Eric Gardner, Stephen Settle, Blair Jordan, Tuan-Hung Chu, Stephen Hohmann, John C. Kedora, Hector Diaz-Luna, Luis G. Echeverri, Allen Hartsell, Jeffrey Martinez, Gerardo Ortega, Boulos Toursarkissian, Todd Smith, Mountain Medial Physician Specialists, Thomas Ross, Matthew J. Borkon, W. Andrew Tierney, Thomas Hatsukami, Herbert Oye, Thomas Winek, Allan Roza, Ignacio Rua, Sheppard Mondy, Alok K. Gupta, Brad Grimsley. Also represented by DAVID R. TODD, THOMAS R. VUKSINICK.

STEVEN MCMAHON ZELLER, Dykema Gossett PLLC, Chicago, IL, for defendants-appellees Hemosphere Inc., CryoLife Inc.

PATRICK R. JAMES, James, House, Downing & Lueken, PA, Little Rock, AR, for defendant-appellee Louis Elkins.

BRIAN DAVID SCHMALZBACH, McGuireWoods LLP, Richmond, VA, for defendants-appellees Mark Grove, Javier Alvarez-Tostado. Also represented by KATHRYN ANN CAMPBELL, EDWIN E. BROOKS, SARAH RASHID, Chicago, IL.

JENNIFER KURCZ, Baker & Hostetler LLP, Chicago, IL, for defendant-appellee Siddarth Patel. Also represented by ALAINA J. LAKAWICZ, Philadelphia, PA.

DAVID ALAN ROODMAN, Bryan Cave Leighton Paisner LLP, St. Louis, MO, for defendants-appellees Luis Sanchez, Patrick Geraghty. Also represented by BARBARA SMITH, JASON MEYER.

Before PROST, Chief Judge, MOORE and STOLL, Circuit Judges.

STOLL, Circuit Judge.

These appeals arise from an action for patent infringement. Drs. Nazir Khan and Iftikhar Khan accused Hemosphere Inc., CryoLife Inc., and Merit Medical Systems, Inc., along with over 300 hospitals and individual physicians, of infringing a claim of U.S. Patent No. 8,747,344, directed to an arteriovenous shunt. The Khans challenge the district court's decision dismissing the action with prejudice for want of prosecution due to the Khans' insufficient and untimely service of their complaint and, alternatively, for improper venue and misjoinder. The Khans also challenge the district court's decisions granting the defendants' motion for sanctions and denying the Khans' cross-motion for sanctions. Merit Medical cross-appeals the district court's decision denying its motion to declare the case exceptional and to award attorney fees under 35 U.S.C. § 285. Because the district court did not abuse its discretion in dismissing the action, granting the defendants' sanctions motion, denying the Khans' sanctions motion, or denying Merit Medical's motion for attorney fees under § 285, we affirm.

BACKGROUND

The Khans are Illinois physicians and have exclusive rights to the '344 patent. In their complaint filed on August 7, 2018, the Khans alleged that the defendant corporations, hospitals, and physicians directly and indirectly infringed claim 13 of the '344 patent by manufacturing or implanting into patients the accused HeRO^® Graft shunt. The Khans sent a waiver of service of summons form and their complaint by mail to the over 300 defendants, the vast majority of whom resided and practiced outside of Illinois. With the exception of three physicians, none of the defendants returned a completed waiver form.

Following an initial status conference in November 2018, the district court dismissed without prejudice the Khans' claims against Merit Medical, CryoLife, and three physicians for improper venue. Order at 2-3, Khan v. Hemosphere Inc., No. 18-cv-05368 (N.D. Ill. Jan. 23, 2019), ECF No. 76. According to the district court, the Khans had not contended that any of these defendants resided in the Northern District of Illinois, and the Khans had failed to plausibly allege that any of them infringed the asserted claim in the district and had a "regular and established place of business" in the district, as required under 28 U.S.C. § 1400(b). Id. at 2. The district court "caution[ed] plaintiffs to take heed of the potentially meritorious arguments raised by defendants thus far in considering the proper and most effective way to prosecute their case going forward." Id. at 3. The district court also held its second status conference that same day. While the Khans insisted at the conference that they had completed proper service for all defendants, by that date—more than 150 days after the filing of the complaint—they had filed proof of waiver for only one defendant. In response to the Khans' argument that placing the waiver request in the mail is equivalent to service, the district court informed the Khans that a request to waive service is merely a request and that waiver by the defendants is not mandatory.

The district court subsequently denied the Khans' motion to reconsider the dismissal order because the motion "impermissibly rehash[ed] previously unsuccessful arguments." Order at 2, Khan v. Hemosphere Inc., No. 18-cv-05368 (N.D. Ill. Feb. 13, 2019), ECF No. 84. The district court "again caution[ed] Plaintiffs that prosecuting a patent case of any size, much less one against three hundred defendants, is a complex endeavor," and that they "should carefully evaluate clearly established requirements set forth in governing statutes and other applicable authority so as not to unnecessarily occupy the time and resources of the Court and other involved parties." Id.

Thereafter, more than 100 of the remaining defendants filed 11 separate motions to dismiss on various grounds, including insufficient service, untimely service, improper venue, misjoinder, and lack of personal jurisdiction. A subset of the non-Illinois-resident defendants also moved for sanctions against the Khans pursuant to Rule 11 of the Federal Rules of Civil Procedure for the Khans' repeated assertions that venue was proper and that service was properly completed. The district court granted the motions and dismissed the claims against the defendants for want of prosecution. Khan v. Hemosphere Inc., No. 18-cv-05368, 2019 WL 2137378, at *1 (N.D. Ill. May 16, 2019).

The district court held that dismissal of all remaining defendants was warranted due to the Khans' "insufficient and untimely attempts at service." Id. at *2. The district court rejected the Khans' argument that they had complied with the requirements of Rule 4 of the Federal Rules of Civil Procedure by simply requesting waivers from the defendants. Id. The district court also found that the Khans had not attempted to personally serve any defendant. Id. Instead, the Khans asserted that they completed service by mailing the summons and complaint to the defendants, despite contrary instruction from the district court. The district court explained that Rule 4(e) does not permit personal service via mail and the Khans had not identified any state laws that would otherwise allow service by mail. Id. The district court further found that the Khans had failed to comply with the timeliness requirement of Rule 4(m). Id. at *3. In addition, the district court held that dismissal was warranted on the alternative grounds of improper venue under § 1400(b) and improper joinder under 35 U.S.C. § 299. Id.

Next, the district court granted the non-Illinois-resident defendants' motion for sanctions based on the Khans' assertions regarding venue and service, which they had maintained despite repeated warnings and guidance from the court. Id. at *4-5. The district court recognized that the Khans were proceeding pro se and thus were "entitled to some leniency before being assessed sanctions for frivolous litigation." Id. at *5 (quoting Thomas v. Foster, 138 F. App'x 822, 823 (7th Cir. 2005)). But the district court explained that the Khans "not only acted in direct contravention to clear procedural rules, statutes, and governing law, but continued to do so after being repeatedly warned at hearings by the Court, in written orders, and in correspondence with defense counsel." Id. The district court thus found that it was "more than objectively reasonable to believe that the [Khans] should have known their positions on venue and service were groundless." Id. Accordingly, the district court ordered the Khans to pay attorney fees associated with the defendants...