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

Epic Tech v. Pen-Tech Associates, decided September 30th, 2026. A precedential panel of the Federal Circuit, in an opinion by Chief Judge Moore, vacated a district court's refusal to sanction a patent owner or award fees after its patent was held ineligible under section 101. Faced with multiple signs that its claims were invalid, the court said, a patentee may not rely only on the presumption of validity. And the district court had not explained why those signs did not matter. Here's the brief.

Epic Tech owns the ’317 patent, directed to an electronic sweepstakes system that connects gaming terminals on a server network. The patent issued in October 2013.

Six months after an office action in a related application, the Supreme Court decided Alice v. CLS Bank. After Alice, the Patent and Trademark Office rejected claims in three related applications under section 101. It had found claims in two of them patentably indistinct from claims of the ’317 patent. Epic Tech abandoned all three without overcoming those rejections.

In June 2020, Epic Tech sued Pen-Tech for infringing the ’317 patent. Meanwhile, in separate litigation, a Texas district court in the Fusion Skill case held claims of a related Epic Tech patent, the ’315 patent, ineligible under section 101. Relying in part on that ruling, Pen-Tech won summary judgment that the asserted ’317 claims were invalid under section 101.

Pen-Tech then moved for Rule 11 sanctions against Epic Tech and its law firm, and for fees under section 285, section 1927, and the court's inherent power. The district court denied every motion, finding the conduct not so unreasonable as to be frivolous and the case not exceptional. Pen-Tech appealed.

Pen-Tech's theory was notice. Alice, the Patent Office's rejections, and the Fusion Skill decision, it argued, should have prompted Epic Tech to investigate validity before it sued.

Rule 11 denials are reviewed under regional circuit law, here the Eleventh Circuit, for abuse of discretion. Fee denials under section 285 are reviewed under Federal Circuit law, also for abuse of discretion. Under either standard, meaningful appellate review requires that the trial court explain its reasoning.

The court first described the record before suit was filed: Alice, a decision involving a software patent; the section 101 rejections in all three related applications; and the Fusion Skill ruling on the related patent.

The district court's order did not engage with that theory. It relied on Epic Tech's pre-suit infringement investigation, which, the court of appeals said, does not address the distinct question of validity. It dismissed the office actions on the ground that later prosecution history cannot limit an earlier patent's claims, but Pen-Tech had not offered them as claim-limiting prosecution history. And it set aside Fusion Skill because the issues were not the exact same.

The court was explicit about the limits of its ruling. It did not decide whether Epic Tech or its counsel violated Rule 11, whether Pen-Tech is entitled to fees, or when notice of potential invalidity makes continued assertion of a presumptively valid patent unreasonable. It held only that the order did not permit meaningful review, and it applied the same conclusion to the fee motions.

Epic Tech v. Pen-Tech confirms that a trial court rejecting sanctions or fees must confront the moving party's actual theory, and that a validity-based notice theory is distinct from the adequacy of a pre-suit infringement investigation. Where unusually strong indicators point to invalidity, including Patent Office rejections of related claims, the presumption of validity alone does not end the inquiry. The court must explain why the claim nonetheless had a reasonable chance of success.

Epic Tech, LLC v. Pen-Tech Associates, Inc., No. 2025-1624, decided September 30th, 2026. I'm Kyle Coleman. Thanks for watching.