By Jenna Greene, From The Litigation Daily

Ruling on sanctions motions that have been pending for nearly six years, a federal judge in Delaware found that Rembrandt Technologies LP engaged in widespread document spoliation, unethical payments to witnesses and fraudulent revival of patents. He ordered the non-practicing entity to pay all legal fees and costs.

The order comes after the court closed the multidistrict litigation involving patents for cable modems and high speed Internet service in September 2011 and ordered all files returned to counsel in February 2014.

Why did it take so long to rule on sanctions? U.S. District Judge Gregory Sleet of the District of Delaware took the blame.

“Unfortunately, the delay in adjudication is primarily the fault of the court,” he wrote in a decision entered on Friday. “Rembrandt is correct that the defendants’ motions having been pending for several years, but not due to any inaction on the part of the defendants. Rather, the delay was regrettably due to the court’s own administrative carelessness.”

Rembrandt sued virtually the entire cable industry for patent infringement in a series of suits that were consolidated in 2007. The cable companies and equipment makers were represented by firms including Kirkland & Ellis; Kaye Scholer; Young Conaway Stargatt & Taylor; and Morris, Nichols Arsht & Tunnell.

The parties produced more than 15 million pages of documents and Rembrandt took more than 75 depositions. But in 2009, Rembrandt moved to dismiss its own case.

Sleet in 2011 said the cable companies could seek attorney and expert witness fees and costs, keeping alive requests they first filed in 2009.

The cable companies argued that they were entitled to fees because the case was “exceptional,” based on Rembrandt’s misconduct and meritless claims.

For example, according to the cable companies, Rembrandt guaranteed three major fact witnesses 3 to 5 percent contingent interests in the litigation outcome. They also said Rembrandt “allowed thousands of boxes of highly relevant documents within its control to be destroyed during this litigation,” and alleged that the company sued based on patents it knew had been procured through inequitable conduct.

And then…not much happened. There was not a single docket entry in 2013.

But in April 2014, the U.S. Supreme Court in Octane Fitness LLC v. ICON Health & Fitness Inc. ruled that when it comes to awarding fees, “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.”

Soon after the decision, the cable companies sent letters to Sleet, arguing that Rembrandt’s case fits the bill.

Rembrandt protested it was too late to resurrect the fee motions after the defendants sat silent for so long, arguing that the motions were abandoned.

Rembrandt also said the case did not rise to the extraordinary level. “While a third party did, non-selectively, discard documents as part of a cost-saving initiative, there is no evidence that Rembrandt ‘approved’ this conduct,” wrote Collins Seitz, Jr. of Seitz Ross Aronstam & Moritz.

In March 2015, Seitz was confirmed to the Delaware Supreme Court. A spokeswoman for the firm (now Ross Aronstam & Moritz) declined comment.

As for inequitable conduct in procuring the patents, Seitz wrote that “the non-lawyer administratively overseeing the third party’s patent program innocentlymisunderstood patent revival timing and fee requirements.”

Rembrandt also said “there is no evidence that any witness was paid to, or did, give false testimony.”

Sleet didn’t buy it. In reasoning laid out entirely in footnotes, he found that Rembrandt “improperly compensated its fact witnesses, in violation of ethical rules of conduct.” Further, he said “the court is convinced that Rembrandt engaged in (or failed to prevent) widespread document spoliation, over a number of years.”

Finally, he said, Rembrandt should have known that the patents were unenforceable and “had sufficient knowledge to learn of the fraud.”

“At a certain point, Rembrandt must take responsibility for its own massive litigation,” Sleet wrote. “If it had only been a single issue, perhaps the court’s view would be different. But the ‘totality of the circumstances’—the wrongful inducements, the spoliation, and the assertion of fraudulently revived patents-supports [the plaintiffs] characterization of this case as ‘exceptional’—it ‘stands out.’”

IMAGE: Gregory Sleet. Credit: University of Delaware

For more on this story go to: http://www.litigationdaily.com/id=1202735446710/Sanctions-Smack-Down-Six-Years-Later?back=law&kw=Sanctions%20Smack%20Down—%20Six%20Years%20Later&cn=20150824&pt=Newswire&src=EMC-Email&et=editorial&bu=Law.com&slreturn=20150724093446