Epic Tech v. Pen-Tech: Patent Owners Must Investigate Serious Validity Warning Signs
A patent owner can conduct a careful infringement investigation and still face a sanctions problem if it ignores serious warning signs that the asserted patent may be invalid. The Federal Circuit made that distinction explicit in its September 30, 2026 precedential decision in Epic Tech, LLC v. Pen-Tech Associates, Inc..
The court did not hold that Epic Tech or its lawyers violated Rule 11, nor did it award attorney’s fees. Instead, it vacated the district court’s denial of sanctions and fees because the order did not adequately address Pen-Tech’s separate theory that Epic Tech had notice of substantial patent-validity problems before and during the litigation.
For patent owners, the decision is a practical reminder that pre-suit diligence is not limited to asking whether the accused product infringes. When the prosecution history, intervening precedent, related patents, or prior court rulings raise unusually strong validity concerns, those issues may need their own investigation before suit is filed or continued.
The patent dispute behind Epic Tech v. Pen-Tech
Epic Tech owns U.S. Patent No. 8,545,317, directed to an electronic sweepstakes system connecting gaming terminals on a server network. The patent issued in 2013. Several related applications later encountered eligibility problems at the USPTO after the Supreme Court decided Alice Corp. v. CLS Bank International in 2014.
According to the Federal Circuit, the USPTO rejected claims in three related applications under 35 U.S.C. § 101 after Alice, and Epic Tech abandoned those applications without overcoming the eligibility rejections. Epic Tech nevertheless sued Pen-Tech in 2020 for infringement of several claims of the ’317 patent.
There was another warning sign. Epic Tech had asserted a related patent, U.S. Patent No. 8,545,315, in separate litigation in Texas. The district court in that case held the asserted claims ineligible under § 101, although that judgment was later vacated as part of a settlement.
In the Pen-Tech case, the Northern District of Georgia eventually granted summary judgment declaring the asserted claims of the ’317 patent invalid under § 101. Pen-Tech then pursued sanctions and fee recovery under Rule 11, 35 U.S.C. § 285, 28 U.S.C. § 1927, and the court’s inherent authority.
The Federal Circuit’s precedential opinion focused on whether the district court adequately explained why those requests should be denied.
An infringement investigation does not answer a validity question
The district court had relied in part on evidence that Epic Tech and its counsel investigated infringement before filing suit. Counsel had created a claim chart and cease-and-desist letter using information from that investigation.
The Federal Circuit explained why that was not enough to resolve Pen-Tech’s sanctions theory. An infringement investigation asks whether the accused product or method satisfies the patent claims. A validity investigation asks a different question: whether those claims are legally enforceable in light of governing law and relevant prior proceedings.
That distinction matters. A claim chart showing strong evidence of infringement does not answer whether intervening Supreme Court precedent, adverse USPTO actions, or a related invalidity ruling should have caused the patent owner to reconsider the strength of the asserted claims.
For companies preparing patent litigation, the lesson is to treat infringement and validity as separate workstreams. Both can affect whether filing or continuing the lawsuit is objectively reasonable.
The Federal Circuit identified unusually strong validity warning signs
The panel pointed to three categories of information that, taken together, created what it called a “compelling concern” over validity before the litigation was brought.
First, Alice changed the landscape for software-related patent eligibility after the ’317 patent issued. Second, the USPTO rejected claims in related applications under § 101, including claims the agency had treated as patentably indistinct from claims of the ’317 patent for double-patenting purposes. Third, the Texas court in the related Fusion Skill case had held claims of a related patent ineligible under § 101.
The Federal Circuit did not say that any one of those events automatically made a later lawsuit sanctionable. It also did not decide that the related claims were substantively identical. Rather, the court held that the district court had not adequately explained why those combined warning signs did not require a more serious validity inquiry.
That limit is important. Epic Tech should not be read as a rule that every adverse Office Action in a related application destroys the presumption of validity of an issued patent. The decision instead concerns whether a sanctions ruling can be meaningfully reviewed when the record contains multiple, unusually strong indicators that the asserted position may lack legal support.
Why the presumption of validity was not enough
An issued patent is presumed valid under 35 U.S.C. § 282. But the Federal Circuit cautioned that a patent owner cannot necessarily stop its Rule 11 analysis there when confronted with substantial contrary information.
The court stated that, under the circumstances presented, it did not suffice for Epic Tech or counsel to rely only on the presumption of validity in the face of multiple indicators of potential § 101 invalidity.
That point does not eliminate the statutory presumption. It addresses litigation conduct. Rule 11 asks whether the legal contentions presented to a court are warranted by existing law or by a nonfrivolous argument for changing the law after a reasonable inquiry under the circumstances.
Patent owners therefore should document not just the existence of an issued patent, but the analysis supporting continued assertion when later events call the patent’s validity into serious question.
The court did not decide that sanctions were warranted
The procedural posture is critical. The Federal Circuit vacated the denial of sanctions because the district court’s reasoning did not permit meaningful appellate review. It expressly declined to decide whether Epic Tech or its law firm violated Rule 11.
The court likewise did not hold that Pen-Tech was entitled to attorney’s fees under § 285, sanctions under § 1927, or relief under the district court’s inherent power. Those rulings were vacated and remanded because the district court’s explanation did not sufficiently address the same validity-based notice theory.
That means the precedential value of Epic Tech lies more in the required analysis than in any ultimate sanctions outcome. A district court considering such a request must grapple with the concrete warning signs raised by the accused infringer and explain why the patentee’s position was or was not objectively reasonable.
Section 285 presents a related but different inquiry
Rule 11 and § 285 are not identical. Section 285 permits a court to award reasonable attorney’s fees to the prevailing party in an “exceptional” patent case. Under Octane Fitness, a case may stand out because of the substantive weakness of a party’s litigating position or the unreasonable manner in which the case was litigated.
The Federal Circuit vacated the § 285 ruling for essentially the same reviewability problem: the district court had not adequately explained how it evaluated the alleged notice of invalidity when deciding the case was not exceptional.
This creates an important strategic distinction for accused infringers. A weak patent case may potentially implicate Rule 11, § 285, § 1927, or inherent-power sanctions, but those authorities have different standards, governing law, and procedural requirements. They should not be collapsed into one generic request for “sanctions.”
What patent owners should do before filing suit
A strong pre-suit review should ordinarily include more than infringement mapping. Counsel should examine the asserted patent’s prosecution history, relevant post-issuance proceedings, related applications and patents, material intervening precedent, and known judicial rulings involving closely related claim language.
If those sources reveal a potential validity problem, the analysis should be documented. There may be sound reasons why an adverse event involving a related application does not control an issued patent. The claims may differ materially, the governing record may differ, or there may be a reasonable argument for distinguishing or changing existing law. The important point is that the issue should be analyzed rather than ignored.
Tucker Law’s patent practice evaluates claim scope, infringement, prosecution history, and validity together because they often interact. A broad construction that captures an accused product may also strengthen an eligibility, enablement, or prior-art defense.
The same duty continues after the complaint is filed
Pre-suit diligence is not necessarily the end of the inquiry. Litigation can produce new information: claim-construction rulings, adverse PTAB decisions, new prior art, admissions, expert analysis, or intervening appellate precedent.
A party that had a reasonable basis to sue on day one may need to reassess its position later. Conversely, an adverse development does not automatically make continued litigation sanctionable if there remains a reasonable legal or factual basis for the claim.
The practical approach is to identify material developments and reassess them as the case evolves. That is especially important in software-patent disputes where § 101 doctrine can materially affect claim viability.
The takeaway from Epic Tech v. Pen-Tech
Epic Tech does not create automatic sanctions whenever an asserted patent is ultimately held invalid. Nor does it say that adverse prosecution events involving related applications automatically defeat the presumption of validity.
It does, however, reinforce a meaningful diligence principle: when multiple strong indicators raise a serious validity concern, a patent owner and its counsel may need to investigate that concern separately from infringement. And when a court rejects a sanctions or fee request based on those facts, it must explain its reasoning well enough for appellate review.
Tucker Law represents patent owners and businesses in patent disputes, including pre-suit infringement and validity analysis. To discuss an enforcement strategy, an infringement accusation, or a potential fee or sanctions issue in patent litigation, contact Tucker Law.
This article provides general legal information and is not legal advice. Sanctions and attorney-fee issues depend on the specific record, governing circuit law, litigation conduct, and procedural posture.
