Epic Tech, LLC v. Pen-Tech Associates, Inc.

Case: 25-1624 Document: 47 Page: 1 Filed: 09/30/2026 United States Court of Appeals for the Federal Circuit ______________________ EPIC TECH, LLC, Plaintiff-Appellee v. PEN-TECH ASSOCIATES, INC., Defendant-Appellant ______________________ 2025-1624 ______________________ Appeal from the United States District Court for the Northern District of Georgia in No. 1:20-cv-02428-VMC, Judge Victoria M. Calvert. ______________________ Decided: September 30, 2026 ______________________ L. CLINT CROSBY, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Atlanta, GA, argued for plaintiff-appel- lee. Also represented by TYLER BISHOP. RICHARD M. LEHRER, FisherBroyles LLP, Atlanta, GA, argued for defendant-appellant. Also represented by ALASTAIR JAMES WARR, Chicago, IL. ______________________ Case: 25-1624 Document: 47 Page: 2 Filed: 09/30/2026 2 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. Before MOORE, Chief Judge, CUNNINGHAM, Circuit Judge, and SUBRAMANIAN, District Judge. 1 MOORE, Chief Judge. Pen-Tech Associates, Inc. (Pen-Tech) appeals an order of the United States District Court for the Northern Dis- trict of Georgia denying Pen-Tech’s motion for sanctions under Federal Rule of Civil Procedure 11 and motion for attorneys’ fees and costs under 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent power. Because the court’s order provides insufficient detail to permit meaningful re- view, we vacate and remand for further proceedings. BACKGROUND Epic Tech, LLC (Epic Tech) owns U.S. Patent No. 8,545,317, directed to an electronic sweepstakes sys- tem and method for connecting electronic gaming termi- nals on a server network to facilitate an initial game with a secondary game operating in the background. ’317 pa- tent at Abstract, Figs. 1, 5. The ’317 patent issued in Oc- tober 2013. J.A. 67. In a December 2013 office action, the United States Patent and Trademark Office (PTO) rejected claims in a related application on nonstatutory double pa- tenting grounds over claims of the ’317 patent. J.A. 340–46. The Supreme Court decided Alice six months later, describing a two-step test for assessing patent sub- ject matter eligibility under 35 U.S.C. § 101. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 217–18 (2014). Following Alice, the PTO reopened prosecution of the re- lated application and rejected claims under § 101. J.A. 369–70. Twice more, the PTO issued office actions re- jecting claims in other related applications as unpatentable under § 101. J.A. 398–401; J.A. 2226–35; see J.A. 1613–14. 1 Honorable Arun S. Subramanian, District Judge, United States District Court for the Southern District of New York, sitting by designation. Case: 25-1624 Document: 47 Page: 3 Filed: 09/30/2026 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. 3 The § 101 rejections issued after Alice but before Epic Tech filed the suit below. Epic Tech abandoned all three related applications without overcoming the PTO’s § 101 rejec- tions. J.A. 309; J.A. 311; J.A. 2136. In June 2020, six years after Alice and two years after Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (Baker Donelson) began prosecuting Epic Tech’s patent ap- plications, Epic Tech sued Pen-Tech for allegedly infring- ing claims 1–2, 4–5, 7–10, and 18 (asserted claims) of the ’317 patent. J.A. 86–103; J.A. 689. Pen-Tech counter- claimed seeking declaratory judgment that the asserted claims of the ’317 patent are invalid under § 101. J.A. 128; see J.A. 2524–25. At that time, Epic Tech had already as- serted a related patent against a different party, U.S. Pa- tent No. 8,545,315, 2 in the United States District Court for the Southern District of Texas. First Am. Compl. at 34–37, Epic Tech, LLC v. Fusion Skill, Inc., 4:19-cv-02400 (S.D. Tex. Oct. 10, 2019), ECF No. 79 (“Fusion Skill”). The Southern District of Texas, applying Alice, held the as- serted claims of the ’315 patent ineligible under § 101. Epic Tech, LLC v. Fusion Skill, Inc., 534 F. Supp. 3d 741, 746–47 (S.D. Tex. 2021), vacated, No. 4:19-cv-02400, 2022 WL 22887728 (S.D. Tex. June 6, 2022). 3 Relying on that order, Pen-Tech sought summary judgment of invalidity as to the asserted claims of the ’317 patent before the court below, in part, because those claims were allegedly similar to the claims of the ’315 patent invalidated in Fusion Skill. Pen-Tech’s Mot. for Summ. J. at 14–18, Epic Tech, LLC v. Pen-Tech Assocs., Inc., No. 1:20-cv-02428 (N.D. Ga. Sep. 25, 2023), ECF No. 79-2; see Fusion Skill, 534 2 The ’317 patent claims priority as a continuation- in-part to the application that issued as the ’315 patent. J.A. 67; J.A. 1613–14. 3 The court later vacated its summary judgment rul- ing as part of the parties’ settlement. J.A. 273–77. Case: 25-1624 Document: 47 Page: 4 Filed: 09/30/2026 4 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. F. Supp. 3d at 746. Epic Tech filed a cross-motion for sum- mary judgment of infringement. See J.A. 2522. The court granted Pen-Tech’s motion, denied Epic Tech’s motion, and entered judgment declaring the asserted claims of the ’317 patent invalid under § 101. J.A. 2524–25. Before the court entered summary judgment, Pen-Tech moved for Rule 11 sanctions, contending Epic Tech and Baker Donelson should be held jointly and severally liable for Pen-Tech’s attorneys’ fees and costs incurred in Pen- Tech’s defense against allegedly frivolous infringement claims. J.A. 3, 10. According to Pen-Tech, Epic Tech re- ceived notice of the asserted claims’ potential invalidity be- fore and after filing its complaint when (1) Alice issued, Pen-Tech’s Rule 11 Mot. at 2–3, Epic Tech v. Pen-Tech As- socs., Inc., No. 1:20-cv-02428 (N.D. Ga. July 18, 2024), ECF No. 120-1; (2) the PTO rejected patentably indistinct claims under § 101 in three related applications, id. at 14– 21; and (3) the Fusion Skill court held similar claims of the ’315 patent invalid under § 101, id. at 4 n.6. These notices, in Pen-Tech’s view, should have prompted Epic Tech to in- vestigate the asserted claims’ validity before filing suit. Pen-Tech also moved for attorneys’ fees and costs under § 285, § 1927, and the court’s inherent power based on the same facts as its Rule 11 motion. J.A. 3; see Appellant’s Br. 6. The court recognized its summary judgment of invalid- ity lent Pen-Tech’s allegations of frivolity “considerable cre- dence.” J.A. 11. The court nevertheless denied Pen-Tech’s Rule 11 motion, determining neither “Epic Tech [nor] Baker Donelson’s conduct was so unreasonable as to be frivolous.” J.A. 12. The court also declined to award attor- neys’ fees and costs under § 285, § 1927, and the court’s in- herent power because it determined the case was not exceptional and Epic Tech had not unreasonably or vexa- tiously litigated its case. J.A. 18, 20–21. Pen-Tech ap- peals. We have jurisdiction under 28 U.S.C. § 1295(a)(1). Case: 25-1624 Document: 47 Page: 5 Filed: 09/30/2026 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. 5 DISCUSSION Pen-Tech argues we should (1) reverse the court’s de- nial of Pen-Tech’s Rule 11 motion and motion for fees un- der § 285, § 1927, and the court’s inherent power, and (2) remand for a determination of fees owed. Because the court did not sufficiently explain its rationale for rejecting Pen-Tech’s theory of unreasonable conduct based on notice of potential invalidity, we vacate and remand for further proceedings. I. Denial of Rule 11 Sanctions We review denial of a motion for Rule 11 sanctions un- der the law of the regional circuit, here the Eleventh Cir- cuit. Source Vagabond Sys. Ltd. v. Hydrapak, Inc., 753 F.3d 1291, 1298 (Fed. Cir. 2014). The Eleventh Circuit re- views such denials for abuse of discretion. Thompson v. RelationServe Media, Inc., 610 F.3d 628, 636 (11th Cir. 2010). “Rule 11 sanctions are warranted when a party files a pleading that (1) has no reasonable factual basis; (2) is based on a legal theory that has no reasonable chance of success and that cannot be advanced as a reasonable argu- ment to change existing law; and (3) is filed in bad faith for an improper purpose.” Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998). Meaningful appellate review of a court’s order denying a Rule 11 sanctions motion is possible only if the court provides adequate explanation. See Har- ris v. Heinrich, 919 F.2d 1515, 1516–17 (11th Cir. 1990). Pen-Tech argues the court abused its discretion in denying Rule 11 sanctions by discounting the notice sup- plied by Alice, the PTO’s § 101 rejections in three related applications, and the Fusion Skill order invalidating claims in a related patent. Appellant’s Br. 22–32. We hold only that the court’s order does not permit meaningful re- view of its denial in light of Pen-Tech’s validity-based no- tice theory. Case: 25-1624 Document: 47 Page: 6 Filed: 09/30/2026 6 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. There were a number of strong indicators prior to the filing of the suit at issue that the asserted claims were in- valid under § 101. First, the Supreme Court decided Alice, which not only affected patent subject matter eligibility un- der § 101 after the ’317 patent issued, but also involved a software patent. Second, the PTO determined claims in two of the three related applications were patentably indis- tinct from independent claims of the ’317 patent, J.A. 342–46; J.A. 390–94, and rejected claims in all three related applications under § 101 post-Alice. J.A. 369–70; J.A. 398–401; J.A. 2226–35. Third, and again post-Alice, the court in Fusion Skill held claims of the related ’315 pa- tent ineligible under § 101. 4 Fusion Skill, 534 F. Supp. 3d at 746–47. These facts, taken together, created a compel- ling concern over the validity of the claims before this liti- gation was brought. In such circumstances, it does not suffice for Epic Tech or its counsel to rely only on the pre- sumption of validity when faced with multiple indicators that these claims were unpatentable under § 101. The court failed to address whether Alice put Epic Tech on notice of its asserted claims’ potential invalidity. At best, the court indirectly gestured toward Alice by referenc- ing its earlier summary judgment ruling predicated on § 101. J.A. 11–12 (“In light of this Court’s [summary judg- ment] Order, . . . Pen-Tech’s allegations have considerable credence . . . .”). Despite acknowledging Pen-Tech’s asser- tion that Alice should have prompted a pre-suit validity analysis, J.A. 10, the court relied on testimony from Epic Tech’s Rule 30(b)(6) witness regarding his “good faith, pre- 4 Pen-Tech alleges these claims are substantively similar to those of the ’317 patent, Appellant’s Br. 6 n.2, but neither the court nor the PTO appears to have deter- mined that. See J.A. 13 (court recognizing only that the invalidity holdings below and in Fusion Skill were “simi- lar”). We do not address the issue of substantive similarity in the first instance. Case: 25-1624 Document: 47 Page: 7 Filed: 09/30/2026 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. 7 suit [infringement] investigation” to determine Epic Tech met its pre-suit obligations. J.A. 12 (quoting Epic Tech’s Resp. to Pen-Tech’s Rule 11 Mot. at 7, Epic Tech v. Pen- Tech Assocs., Inc., No. 1:20-cv-02428 (N.D. Ga. Aug. 15, 2024), ECF No. 127). The court also determined Baker Do- nelson met its pre-suit obligations by “creating a claim chart and a cease and desist letter using images from Epic Tech’s pre-suit [infringement] investigation.” J.A. 12. The court’s reliance on Epic Tech’s and Baker Donelson’s pre- suit infringement investigation, however, does not explain why sanctions were unjustified under Pen-Tech’s notice theory centered on validity. Those facts may bear on whether Epic Tech reasonably investigated infringement before filing suit, but they do not address the distinct ques- tion of whether Epic Tech should have investigated validity given the notice of potential invalidity Alice provided, whether alone or in conjunction with the Fusion Skill hold- ing and the PTO’s office actions. The court also failed to adequately address whether the PTO’s office actions served as notice of potential invalidity. The court declined to view them as a form of notice because “no court has found that the prosecution history of a later patent can reach back and limit a claim using the same el- ement in an earlier related patent.” J.A. 14. Yet Pen-Tech did not invoke the office actions as claim-limiting prosecu- tion history. Pen-Tech’s Rule 11 Mot. at 14–21, Epic Tech v. Pen-Tech Assocs., Inc., No. 1:20-cv-02428 (N.D. Ga. July 18, 2024), ECF No. 120-1. Instead, it argued the office actions put Epic Tech on notice that claims in related ap- plications, including claims the PTO determined were pa- tentably indistinct from claims of the ’317 patent, had been rejected under § 101 post-Alice. Id.; see J.A. 342–46 (reject- ing claims in a related application for nonstatutory double patenting); J.A. 369–70 (rejecting claims of the same appli- cation under § 101 post-Alice); J.A. 390–401 (rejecting claims of another related application for nonstatutory dou- ble patenting and unpatentability under § 101 post-Alice); Case: 25-1624 Document: 47 Page: 8 Filed: 09/30/2026 8 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. J.A. 2226–35 (rejecting claims under § 101 post-Alice in an- other related application). The court’s rationale does not squarely confront Pen-Tech’s notice theory. It fails to ex- plain why those office actions, whether considered individ- ually or collectively, were insufficient to serve as notice of potential invalidity despite their substantive relevance to the asserted claims. Given the absence of reasoning, we are unable to meaningfully review the court’s decision. The court’s analysis regarding the Fusion Skill holding likewise fails to provide reviewable reasoning for the court’s decision. Pen-Tech argues that Epic Tech should have known it was unreasonable to pursue this litigation when Fusion Skill invalidated claims in the related ’315 patent under § 101. Appellant’s Br. 34–35; see id. at 13. The court’s only explanation for why that holding would not have put Epic Tech on notice of the serious con- cern over the validity of the related patent claims was that “the issues were not the exact same.” J.A. 13. But the is- sues need not be identical to provide notice of potential in- validity. That is true taking Fusion Skill not only in isolation, but also together with Alice and the PTO’s § 101 rejections in related applications. The court’s reasoning did not suffice under these circumstances to permit mean- ingful review by this court. 5 We vacate the court’s denial of Rule 11 sanctions. We do not decide whether Epic Tech or Baker Donelson vio- lated Rule 11. Nor do we decide when notice of potential invalidity renders continued assertion of a presumptively valid patent unreasonable. We hold only that the court 5 At oral argument, Epic Tech was unable to identify anything in the court’s analysis assessing the reasonable- ness of Epic Tech’s validity position given the notice of po- tential invalidity Pen-Tech alleged Epic Tech had received. Oral Arg. at 17:56–20:00. Case: 25-1624 Document: 47 Page: 9 Filed: 09/30/2026 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. 9 failed to provide a sufficiently reasoned explanation for re- jecting Pen-Tech’s validity-based Rule 11 theory given Al- ice, the PTO’s § 101 rejections of similar claims, and the Fusion Skill order. In light of the unusually strong factors pointing to the invalidity of the patent-in-suit, the court needed to address—in some fashion—why Epic Tech’s claim nevertheless had a “reasonable chance of success” or could “be advanced as a reasonable argument to change ex- isting law,” and was not brought “in bad faith for an im- proper purpose.” See Baker, 158 F.3d at 524. II. Denial of Motion for Attorneys’ Fees Federal Circuit law applies to review of a § 285 analy- sis. Waymark Corp. v. Porta Sys. Corp., 334 F.3d 1358, 1362 (Fed. Cir. 2003). Under § 285, “[t]he court in excep- tional cases may award reasonable attorney fees to the pre- vailing party.” 35 U.S.C. § 285. An exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreason- able manner in which the case was litigated.” Octane Fit- ness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545, 554 (2014). We review a court’s exceptionality determina- tion for abuse of discretion. Gaymar Indus., Inc. v. Cincin- nati Sub-Zero Prods., Inc., 790 F.3d 1369, 1372 (Fed. Cir. 2015). A court assessing exceptionality should indicate “the reasoning underlying its decision to provide a basis for meaningful appellate review.” AGI SureTrack LLC v. Farmers Edge Inc., 176 F.4th 1373, 1380 (Fed. Cir. 2026) (quoting Superior Fireplace Co. v. Majestic Prods. Co., 270 F.3d 1358, 1377 (Fed. Cir. 2001)). We apply the law of the regional circuit when reviewing the denial of fees and sanctions under § 1927 and the court’s inherent power. Waymark, 334 F.3d at 1362 (dis- cussing fees under § 1927); PS Prods. Inc. v. Panther Trad- ing Co. Inc., 122 F.4th 893, 898 (Fed. Cir. 2024) (discussing fees under the court’s inherent power). The Eleventh Cir- cuit reviews such denials for abuse of discretion. Peter- son v. BMI Refractories, 124 F.3d 1386, 1390 (11th Cir. Case: 25-1624 Document: 47 Page: 10 Filed: 09/30/2026 10 EPIC TECH, LLC v. PEN-TECH ASSOCIATES, INC. 1997) (reviewing denial under § 1927); Sahyers v. Prugh, Holliday & Karatinos, P.L., 560 F.3d 1241, 1244 (11th Cir. 2009) (reviewing denial under court’s inherent power). A court “must articulate the reasoning behind its . . . de- nial of attorney’s fees in order to permit meaningful re- view.” See United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union AFL- CIO-CLC v. Wise Alloys, LLC, 807 F.3d 1258, 1275 (11th Cir. 2015). Pen-Tech argues the court abused its discretion by denying attorneys’ fees and costs under § 285, § 1927, and the court’s inherent power based on the same facts pre- sented in its Rule 11 motion. Appellant’s Br. 6, 32–37. We hold only that the court’s order does not permit meaningful review of its denial in light of Pen-Tech’s validity-based no- tice theory. CONCLUSION We vacate the court’s denial of Pen-Tech’s Rule 11 mo- tion and motion for attorneys’ fees and costs under § 285, § 1927, and the court’s inherent power. 6 We do not decide whether Pen-Tech is entitled to those fees and costs. We hold only that the court’s decision did not afford this court the opportunity for meaningful review in light of the facts of this case. We therefore vacate and remand for further proceedings. VACATED AND REMANDED COSTS Costs to Pen-Tech. 6 The court’s inherent-power ruling contains no in- dependent analysis. J.A. 21.