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Category: Fee Jurisprudence

Article: US Claims Court Grants Fee-Shifting in Patent Litigation

September 9, 2019

A recent Law 360 article by Lionel Lavenue and Benjamin Cassady, “Claims Court Clears Cowebs for Fee-Shifting in Patent Litigation,” report on fee-shifting provision in patent litigation.  This article was posted with permission.  The article reads:

The U.S. Court of Federal Claims may grant attorney fees to certain patent owners who successfully litigate infringement claims against the federal government.  The claims court obtained this authority in 1996 but did not exercise it until March 2019, when it granted Hitkansut LLC $4.4 million in fees on top of a $200,000 damages judgment.

And though more than two decades elapsed before that first fee award, the second followed just three months later.  On June 27, 2019, on the back of a $12.4 million damages judgment, the claims court granted FastShip LLC $7.1 million in fees and costs.  Do these decisions herald a new era of patent litigation at the claims court?  That may be premature.  But it should make patent owners, attorneys and litigation finance companies take notice.

28 U.S.C. Section 1498(a)

When Uncle Sam infringes a patent, 28 U.S.C. Section 1498(a) limits the patent owner’s legal recourse to suit in the claims court for “reasonable and entire compensation” — typically a reasonable royalty.  No matter how egregious its infringement, the government is immune from enjoinder and enhanced damages.

Pursuant to a 1996 amendment, however, “reasonable and entire compensation” includes attorney and expert fees for some subset of prevailing patent owners — independent inventors, nonprofit organizations and entities with no more than 500 employees. (FastShip and Hitkansut both qualified.) For this subset of patent owners, Section 1498(a) presumes the plaintiff’s entitlement to fees.

But it forecloses their recovery in two situations: where recovery would be unjust or where the government-defendant’s position was “substantially justified.”  Before Hitkansut, the government always satisfied the latter exception, defeating the plaintiff-favoring presumption.

FastShip v. United States

The FastShip decision touches on a gamut of Section1498(a) topics in its ranging 34 pages.  Two of the more consequential issues include: litigation financing’s effect on a patent owner’s standing to request fees; and the fee-shifting inquiry’s occupation with prelitigation conduct.

As to litigation financing, FastShip’s receipt of funds from an entity controlled by one of its own counselors of record did not disrupt its standing to requests fees under §1498(a).  One of FastShip’s attorneys, Donald Stout both represented FastShip at critical junctures and managed a company that invested $600,000 in FastShip’s case.

Stout is better known as the co-founder of NTP Inc., the beneficiary of a $612 million infringement settlement from Research in Motion Ltd. in 2006.  Court of Federal Claims Judge Charles Lettow found Stout’s financing arrangement with FastShip immaterial to the plaintiff’s standing to request fees.  To hold otherwise would frustrate Congress’ purpose in enacting Section 1498(a)’s fee-shifting provision: incentivizing the prosecution of meritorious infringement claims against the government.

With standing established, the claims court proceeded to evaluate the government’s position, concluding that it was not “substantially justified,” partly due to prelitigation conduct.  The claims court highlighted some unreasonable government conduct during litigation: presenting expert analysis with errors that ranged from convenient to nonsensical, mischaracterizing an extraordinarily skilled expert as ordinary and misstating the law of enablement.  But the court was particularly concerned with the government’s willful infringement and its unresponsiveness to the plaintiff’s initial administrative complaint.

Specifically, FastShip’s suit originated from its solicitation of a subcontract from a U.S. Navy contractor.  As part of its pitch, FastShip divulged its invention: a semi-planing monohull ship.  Though no subcontract materialized, FastShip soon discovered that the contractor had incorporated its designs into navy vessels.

FastShip filed an administrative claim with the navy; two years of silence followed, culminating in the navy’s two-page, perfunctory denial of wrongdoing.  These actions, supplemented by its questionable litigation conduct, rendered the government’s overall position not “substantially justified,” even though the claims court found the government’s conduct reasonable in other respects.

Patent Trends in FastShip

FastShip and Hitkansut may hint at Octane Fitness LLC v. ICON Health & Fitness Inc.'s indirect influence on the claims court.  Moreover, both decisions raise issues, likely to be addressed on appeal, relevant to patents’ status as property — an issue that continues to percolate to the U.S. Court of Appeals for the Federal Circuit’s docket.

With Hitkansut, and now FastShip, the claims court has, like federal district courts, proved amenable to fee-shifting in the patent context.  Federal district courts now shift attorney fees in one-third of patent infringement cases.  That represents a stark increase from, for example, 2011, a few years before Octane Fitness, where the U.S. Supreme Court returned broad discretion to trial judges to determine which cases justify fee-shifting.

Though Octane does not control Section 1498(a)’s fee-shifting provision, the claims court has only now exercised said provision in the post-Octane era.  A prevailing sympathy for fee-shifting in the patent context, marked by Octane, may have influenced these recent claims court opinions.

Yet, FastShip’s impact may be short-lived; the government will likely appeal FastShip, as it has the Hitkansut award.  An appeal presents another opportunity for the Federal Circuit to grapple with one of the more significant questions in the field: Are patents property?

Though recent cases have muddled the question,[16] courts have historically construed the government’s unauthorized patent use as an eminent-domain taking of a license. Section 1498(a), then, supplies “just compensation” to affected patent owners.

Twenty years ago, in B.E. Meyers & Co. Inc. v. United States, the claims court reasoned that the government cannot be punished for taking — willfully or otherwise — that which it has the authority to condemn.  Recognizing the government’s authority to take a patent license, Meyers held that the willfulness of a lawful taking can never justify punitive fee-shifting against the government.

FastShip and Hitkansut, of course, implicitly rejected that theory — willfulness supported both awards.  On appeal, the government will likely argue, as it did at trial, that the claims court’s substantially justified inquiry should have ignored any prelitigation conduct, including the nature of the government’s infringement.  The Federal Circuit, thus, has an opportunity to affirm the Meyers theory and its underlying premise that patents are property subject to eminent domain.

The court, however, has more attractive vehicles for resolving this issue, including recently docketed Oil States Energy Services LLC v. Greene's Energy Group LLC follow-on suits that present the patents-as-property question more squarely.  As cases present this question with growing frequency, the Federal Circuit is poised to definitely resolve it (and likely do so in a Section 1498(a) action).

Practical Implications

In clearing the cobwebs from Section 1498(a)’s fee-shifting provision, the claims court has increased the allure of patent suits against the government — including suits where litigation costs would dwarf potential damages.  Hitkansut’s and FastShip’s vindication of litigation financiers and attorneys operating on contingency in this space will only spur their further participation.  And the awards give leverage to licensors negotiating with government agents and contractors.

That said, fee-shifting under Section 1498(a) only benefits the three named classes of patent owners: independent inventors, nonprofit organizations and entities with no more than 500 employees.  Hitkansut and FastShip supply little obvious insight for larger, for-profit plaintiffs litigating infringement against the government, who cannot recover attorney fees under Section 1498(a) or 35 U.S.C. Section 285.

But, because of Hitkansut and FastShip, the potential value of a patent, held by a large, for-profit company and infringed by the government, surges when transferred to a member of one of the named classes.  Some larger patent owners may thus nonetheless still benefit from a strategic transfer made in the shadow of FastShip.

Lionel M. Lavenue is a partner, R. Benjamin Cassady is an associate, and Regan Rundio is a law clerk at Finnegan Henderson Farabow Garrett & Dunner LLP.

NY Court: Attorney Fees Controlled by Circumstances and Equities

September 6, 2019

A recent New York Law Journal story by Jason Grant, “In Fee Dispute Between Personal Injury Firms in Settled Case, Lower Court’s Award, and Discretion, Stands,” reports that a law firm pursuing a contingency fee dispute against a successor law firm in a personal injury action that settled for $50,000 was rightfully awarded only $1,500 in fees, despite its argument to a lower court that it was “entitled to 40% of the net contingency fee recoverable,” a state appeals court has ruled.

“The issue of apportionment of an attorney’s fee is controlled by the circumstances and equities of each particular case, and the trial court is in the best position to assess such factors,” wrote an Appellate Division, Second Department panel, while citing Rodriguez v Ryder Truck Rental, in an opinion that underscored the trial court’s latitude and discretion in arriving at an appropriate fee apportionment where there is a fee dispute between law firms retained on contingency.

The unanimous panel also noted in the opinion that “’when there is a fee dispute between the current and discharged attorneys for the plaintiff in an action to which a contingent fee retainer agreement applies, [t]he discharged attorney may elect to receive compensation immediately based on quantum meruit or on a contingent percentage fee based on his or her proportionate share of the work performed on the whole case,’” citing Ficaro v. Alexander, quoting Wodecki v. Vinogradov.

In the case before the panel, the originally retained law firm in the underlying motor vehicle accident-based suit, the Law Offices of Andrew Park, moved in March 2018 for a determination of appropriate attorney fees and had “elected to receive a contingent percentage fee at the conclusion of this action,” the panel said.  The firm’s motion came nearly a year and a half after the underlying case, Pyong Woo Ye v. Ebrahem Izak Pasha, had settled.

Panel justices Reinaldo Rivera, Hector LaSalle, Betsy Barros and Angela Iannacci wrote in their opinion that “‘an award of … reasonable attorney’s fee[s] is within the sound discretion of the Supreme Court based upon such factors as the time and labor required, the difficulty of the issues involved, the skill required to handle the matter, and the effectiveness of the legal work performed,’” citing Wodecki v. Vinogradov, quoting Juste v. New York City Tr. Auth.

They added, “Here, Andrew Park elected to receive a contingent percentage fee at the conclusion of this action.  Given the time and labor expended by each attorney in the action, the skill required for the various work performed, and the effectiveness of each counsel’s legal work, we agree with the Supreme Court’s determination to award Andrew Park attorneys’ fees in the sum of $1,500.”

PA Court Awards Attorney Fees for Time Spent Seeking Attorney Fees

August 29, 2019

A recent Legal Intelligencer story by Zack Needles, “Pa. Courts OKs Attorney Fees for Time Spent Seeking Attorney Fees,” reports that attorneys can petition to recover fees under the Unfair Trade Practices and Consumer Protection Law (UTPCPL) for time they spent preparing and litigating fee petitions—but only within reason, the Pennsylvania Superior Court has ruled in a case that could prove instructive for litigators across the state.

In Richards v. Ameriprise Financial, a case involving claims under the UTPCPL against Ameriprise Financial over alleged misrepresentations made by one of its financial advisers, a three-judge panel of the appeals court ruled that fee awards for hours spent pursuing fee awards can be proper.  However, the panel added, the $200,363 an Allegheny County trial judge awarded to plaintiffs counsel, Kenneth Behrend of Behrend & Ernsberger in Pittsburgh, for preparing and litigating two fee petitions was excessive.

Judge Mary Jane Bowes, writing for the panel, noted there was a “dearth of Pennsylvania authority addressing the propriety of a fee award for hours spent preparing and litigating fee petitions.”  She added, however, that “federal courts generally permit such fees, but the hours assigned to that task must be reasonable.”

“We find that an award of reasonable attorney fees under the UTPCPL for preparing fee petitions is consistent with the legislature’s aim of encouraging experienced attorneys to litigate such cases, even where the damages are small,” Bowes said in the precedential Aug. 21 opinion, but added, “Nonetheless, we agree with Ameriprise that Mr. Behrend spent an inordinate number of hours preparing the second and third fee petitions.”

While the panel said there was evidence in the record to support Behrend’s requested hourly rate of $600, Bowes, joined by Judge Jacqueline Shogan and Senior Judge Eugene Strassburger III, said the panel found it to be “presumptively unreasonable” that a seasoned UTPCPL litigator like Behrend would need to spend 85 hours researching entitlement to attorney fees under the statute and conducting bill review.

“Mr. Behrend admittedly has expertise and vast experience in UTPCPL litigation and in preparing fee petitions,” Bowes said.  “Indeed, the attorney affidavits he offered in support of his increased hourly rate, as well as his own affidavit in support of his fees in the underlying litigation, were recycled from a 2013 fee petition previously submitted in Boehm [v. Riversource Life Insurance Co.].”

Ameriprise also objected to four specific entries in the fee petitions, including an entry for 11 hours of research and drafting on the subject of “restitution and treble damages,” which was not at issue in that appeal.  The trial court, however, did not specifically address Ameriprise’s arguments regarding those four line items, which rankled the appellate court.

“It is our expectation that a trial court assessing the reasonableness of attorney fees will thoroughly scrutinize the specific line items that are challenged, generally evaluate the reasonableness of the expenditure of time for the services listed in the fee petition, make adjustments when they are warranted, and explain its reasons for the award,” Bowes said.  ”The broad-brush approach taken by the trial court impedes our ability to perform proper appellate review.  Thus, we vacate the orders awarding attorney fees based on the second and third fee petitions, and remand for reconsideration of those fees in light of the foregoing.”

The panel also reversed the trial court’s decision to award $12,000 in attorney fees to the plaintiffs for time spent drafting an unopposed petition to publish the Superior Court’s memorandum opinion on the case’s first trip up to the appeals court in 2017.

“The publication of this court’s memorandum opinion in Richards I did not enhance the likelihood that plaintiffs would ultimately prevail or advance the litigation or benefit them in any way,” Bowes said.  “Moreover, the record establishes that plaintiffs’ counsel almost exclusively litigates UTPCPL insurance cases, and may have had at one time as many as 29 cases involving similar facts against Ameriprise.  Publication of our memorandum decision in Richards I rendered it precedential, a benefit to plaintiffs’ counsel and other clients involved in ongoing and future UTPCPL cases, but not plaintiffs herein.”

Ultimately, the appellate court remanded the case to the trial court “for an overall reduction in the hours/fees attendant to preparation of the fee petitions themselves, a circumspect assessment of the accuracy and reasonableness of the complained-of line items, and the entry of a new attorney fee award consistent with this opinion.”  The appellate panel did uphold the trial court’s award of treble damages to the plaintiff in the amount of $102,019, but tossed out an additional $34,006 in “‘restitution’” damages.

“Herein, the trial court found no liability for negligent and fraudulent misrepresentation,” Bowes said. “Damages were awarded solely for violation of the catchall provision of the UTPCPL. Having ascertained that plaintiffs sustained actual damages of $34,006.44 under the UTPCPL, the trial court had the discretion to award damages up to three times that amount, i.e., a maximum of $102,019.32.  By awarding $34,006.44 plus $102,019.32, the trial court erroneously awarded quadruple damages and exceeded its discretion under the UTPCPL.”

Reached for comment on the decision, Behrend said the ruling provided some much-needed guidance on how fee petitions are supposed to be prepared.  He also pointed out that the court’s ruling clarified that fee petitions for work done on appeal can be filed with the trial court, rather than the Superior Court.

The panel found that Pa.R.A.P. 2744 provides only that an appellate court “‘may award’” attorney fees and delay damages as “‘further costs damages … if it determines that an appeal is frivolous or taken solely for delay or that the conduct of the participant against whom costs are to be imposed is dilatory, obdurate or vexatious.’”  “Plaintiffs made no claim that Ameriprise’s first appeal was frivolous or taken solely for purposes of delay,” Bowes said.  “Rather, they based their entitlement to appellate attorney fees solely upon the UTPCPL.”

Ninth Circuit: Judge Properly Cut Attorney Fees in Class Action

August 23, 2019

A recent Metropolitan News story, “Judge Reasonably Pared Attorney Fees From $7.2M to $3.6M in Class Action,” reports that the Ninth U.S. Circuit Court of Appeals, in a 2-1 decision, affirmed an order slashing attorney fees in a class action from the $7.2 million figure agreed upon by the settling parties to $3.6 million, agreeing with the District Court that a 15 percent share of the recovery is more reasonable than 30 percent.  In a memorandum opinion, the majority upheld the decision by Judge Cathy Ann Bencivengo of the Southern District of California who approved the settlement on April 12, 2018 and partially granted the motion for attorney fees and costs.

The plaintiffs alleged securities fraud.  Lead plaintiff was Carl Schwartz and the lead counsel was the West Los Angeles firm of Kaplan, Fox & Kilsheimer, LLP.   At one point in the litigation, the action was dismissed, and Schwartz’s appeal to the Ninth Circuit resulted in a reversal.

Bencivengo said in her 2018 order: “[T]he settlement amount of $24,000,000 confers substantial benefits upon the Settlement Class, particularly in light of the risks associated with continuing this litigation to trial and weighs in favor of the fee amount.  Lead Counsel has achieved success in successfully appealing the dismissal order and the litigation as a whole involved some complicated and labor intensive claims and issues which weighs in favor of the award….The experience of Lead Counsel in litigating class actions of this type also support the request.  Moreover, the reaction of the Class to the settlement has been positive, with only two class members requesting exclusion, which supports the fee application.

“But, while Lead Counsel had responsibility for litigating this case over a seven year period, the Court is mindful of the limited nature of the litigation that occurred in that time period.”  The judge said there was inadequate substantiation for the 6,678.65 hours the law firm claimed it expended on the case.  Kaplan, Fox claimed $251,313.10 in costs.  Bencivengo said the lawyers “provide very little evidence to support” the claim.  Deducting $32,712.33 for “Travel/Meals” and $65,819.00 for “Experts and Consultants,” she awarded $152,781.77.  The judge also denied costs claimed by Schwartz, but ordered payment of a $2,000 incentive award.

The memorandum opinion was signed by Circuit Judges Carlos T. Bea Jacqueline H. Nguyen.  Circuit Judge Johnnie B. Rawlinson agreed with her colleagues that Schwartz is entitled to “reasonable costs and expenses (including lost wages)” directly related to his class representation, but otherwise dissented.  The majority said: “The district court reasonably considered the contingent nature of the work, the procedural posture of the case (which was just past the pleading stage after an appeal), and the lack of discovery and other fact-intensive work in calculating the award.  “Moreover, the district court attempted to rely on a lodestar calculation as a cross-check but was hampered by counsel’s failure to provide reliable evidence.  To the extent the district court did not have enough information about rates and hours, counsel failed to meet their burden to provide reliable evidence.”

The memorandum opinion rejects the contention that Bencivengo abused her discretion in denying a motion for reconsideration, remarking: “The motion for reconsideration provided expert declarations and records to support counsel’s requested hours and rates, information absent from counsel’s initial motion for attorney’s fees.  That information was available to counsel when they filed the initial motion for fees; they simply chose not to meet their burden of providing adequate documentation with the initial request….A motion for reconsideration should not be a better argument for the same position counsel previously put forth, just with better evidence it could have offered before.”  The opinion declares the order for the incentive fee vacated, explaining that “the Private Securities Litigation Reform Act…does not allow for incentive awards for class representatives.”

Rawlinson faulted Bencivengo for failing to explain how she concluded that 15 percent of the class’s recovery was reasonable while 25 percent is the norm.  She wrote: The district court acknowledged the excellent results achieved, the difficulty of the case, counsel’s experience, and the positive class response, all of which weighed in favor of granting the fee request….Yet, the district court inexplicably awarded only one-half of the requested percentage, citing the paucity of activity reflected on the district court’s docket.  The court failed to cite any authority in support of this determination.  More importantly, its ruling essentially penalized counsel for resolving the case effectively and efficiently….Moreover, the district court did not fully take into consideration the fact that counsel successfully obtained reversal in the Ninth Circuit of the district court’s dismissal of the second amended complaint.  Although those successful efforts would not be reflected on the district court docket, we have considered successful appellate litigation as an important factor in determining the appropriate percentage rate.”

NALFA Announces The Nation’s Top Attorney Fee Experts of 2019

August 20, 2019

NALFA, a non-profit group, has a network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2019:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA
 
"Outstanding Skills Assessing Reasonable Attorney Fees in Class Actions"
Stephen J. Herman
Herman Herman & Katz LLC
New Orleans, LA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Fox Rothschild LLP
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Strong on Fee and Billing Issues in Mass Torts"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA