bad Lanham Act claim, swept up with bad patent claim, triggers Rule 11 sanctions

Raydiant Oximetry, Inc. v. ALC Medical Holdings LLC, --- F.Supp.3d ----, 2025 WL 3022882, No. 25-cv-00392-VC (N.D. Cal. Oct. 29, 2025)

Baseless patent and false advertising claims produce a big Rule 11 award. The patent stuff is eye-popping, and it’s hard to imagine that Rule 11 would have been appropriate just for the false advertising claim, which was baseless only because the challenged statements didn’t occur in “commercial advertising and promotion”/weren’t part of an organized campaign to penetrate the market. But still—a warning!

I’ll let the court introduce the facts:

This dispute began when ALC Medical Holdings sent Raydiant Oximetry a demand letter alleging that Raydiant’s medical device [a uterine device used to treat postpartum hemorrhaging] infringed ALC Medical’s patent. This accusation was false. Raydiant’s device has a “placement marker” that is permanently affixed, while the device claimed in ALC Medical’s patent requires an adjustable placement marker. In fact, the Patent and Trademark Office declined to approve the patent application until it was narrowed to require that the placement marker be adjustable.

Unfortunately, patent plaintiffs send baseless demand letters to defendants with some regularity. But this was no ordinary fishing expedition. To the contrary, all evidence available to ALC Medical and its lawyers at the time they sent the letter pointed strongly towards noninfringement. The sole founder of ALC Medical, Jennifer West, used to work at Raydiant. She helped develop Raydiant’s device and knew that it did not have a moveable placement marker. There was a reason for this design choice: Raydiant concluded that if the device’s placement marker were moveable, it would be dangerous to the patients who use it. Presumably for the same reason, the device West developed after she left Raydiant does not contain a moveable placement marker, even though her company’s patent requires one.

Thus, when Raydiant brought an action in this Court seeking a declaratory judgment of noninfringement, ALC Medical and its lawyers should have apologized and walked away.… Instead, they doubled down. They brought counterclaims against Raydiant, including one for infringement, asserting again that Raydiant’s device possessed a moveable placement marker. They also falsely alleged that West’s own device practiced the invention—that is, that her device had a moveable placement marker.

In support of the infringement counterclaim, ALC Medical and its lawyers submitted several diagrams depicting Raydiant’s device. On each diagram, they cited the YouTube video of a presentation Raydiant gave at an industry conference, indicating that the diagrams originated from the slide deck used in that presentation. But that was not entirely true. The lawyers manipulated one of the diagrams, superimposing dotted lines to make it seem like Raydiant’s device had a moveable placement marker. Nothing in Raydiant’s actual slide deck or the video of the presentation suggested that was the case.

Subsequently, Raydiant allowed ALC Medical and its lawyers to inspect the device. The inspection confirmed what all the evidence had previously suggested: the placement marker was not moveable…. ALC Medical and its lawyers … embarked on a ham-fisted scramble to avoid liability for Raydiant’s attorneys’ fees. First, they refused to dismiss their infringement counterclaim (or their equally frivolous false advertising counterclaim) unless Raydiant also agreed to dismiss its declaratory judgment action, with each side to bear its own fees and costs. Naturally, Raydiant refused. Then, ALC Medical and its lawyers filed a frivolous motion to dismiss Raydiant’s declaratory relief action for lack of jurisdiction, claiming falsely that Raydiant’s device was an “investigational device” immune from infringement claims. Later, they cobbled together a covenant not to sue that they argued mooted Raydiant’s declaratory relief claim, even though it clearly did not. At each step of the way, the position taken by ALC Medical and its lawyers became increasingly disconnected from the reality of the situation ….

Raydiant was awarded over $1.4 million in attorneys’ fees, with ALC Medical and its law firm Womble Bond jointly and severally liable.

The false advertising counterclaim was based on Raydiant’s presentation of its device at the Stanford Medicine Pediatric & Maternal Innovation Showcase, a pitch competition. Sanctions are warranted under Rule 11 if “(1) ‘the [challenged pleading, written motion, or other paper] is legally or factually baseless from an objective perspective,’ and (2) the attorneys failed to conduct ‘a reasonable and competent inquiry before signing and filing [it].’ ” The court found that both counterclaims “easily [met] this test.”

Just a bit from the patent discussion: Womble Bond denied bad faith in submitting the altered exhibit, asserting that the annotated dashed lines were made with a different font and in red color to distinguish the exhibit from the original slide. “This is difficult to swallow, particularly because counsel only submitted a black and white copy of its counterclaims to the Court, and the two fonts apparently used on [the exhibit] are not easily distinguishable. If Womble Bond and ALC Medical had truly been concerned about not misleading the Court, as opposed to disguising the baselessness of the infringement counterclaim, they could have easily included a disclaimer alongside the image clarifying that it had been annotated.” Practice tip ahoy!  

The Lanham Act counterclaim alleged that Raydiant’s discussion at the pitch session of its device’s being “cleared” or “approved” by the FDA was misleading because the device is a Class II device exempt from premarket notification requirements. “ALC Medical and its counsel knew or should have known that the claim was objectively baseless under Ninth Circuit law,” because only “commercial advertising or promotion” is actionable under 15 U.S.C. § 1125(a)(1)(B). This requires: (1) commercial speech; (2) made by a defendant who is in competition with the plaintiff [note that this is not necessary post-Lexmark]; (3) for the purpose of influencing consumers to buy the defendant’s goods or services; and (4) “disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry.” A presentation at a one-off grant competition, “clearly” does not constitute “commercial advertising or promotion” under that definition. The court distinguished cases involving a press release and a conference presentation whose slides were posted on the defendant’s website. The pitch competition was more akin to “private statements made to actual and potential customers” that were insufficient to constitute sufficient dissemination. Thus, the counterclaim was “frivolous from the time it was filed.”