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Category: Exceptional Case

Federal Circuit Asked in Toss Fee Award to Apple, Cisco

October 15, 2020

A recent Law 360 story by Britain Eakin, “Fed. Circ. Asked To Nix Alsup’s Fee Award to Apple, Cisco,” reports that saying its infringement suit against Apple and Cisco was reasonable, a tech company told the Federal Circuit that U.S. District Judge William Alsup wrongly determined the case was exceptional and abused his discretion by awarding them $4.2 million in fees.  In a brief, Straight Path IP Group LLC said the district court departed from an agreed-upon claim construction in granting summary judgment of non-infringement to Apple and Cisco.  It argued that as a result, Federal Circuit precedent requires it to reverse Judge Alsup's finding of exceptionality, which is required for a prevailing party in a patent dispute to get fees.

"Where a plaintiff asserts infringement under a claim construction and the district court subsequently clarifies or modifies that construction in granting summary judgment of non-infringement, this court holds that the case is not exceptional, and that a district court abuses its discretion by granting a motion for attorney's fees," Straight Path said.  In determining whether a case is exceptional, a district court considers things like whether a suit was frivolous or if a party's case was unreasonable.

Straight Path contended that it provided plenty of evidence that its case was reasonable, including a declaration from former U.S. Chief Circuit Judge Paul Michel.  The former judge testified at the district court that Straight Path had "asserted an objectively reasonable view of infringement" under the agreed-upon claim construction, which he said was supported by evidence.  While Judge Alsup called Straight Path's litigation position "a slick maneuver," the company argued in its brief that "Chief Judge Michel's view far more accurately characterized this case."

"Whether ultimately correct or not, Straight Path respectfully submits that if Chief Judge Michel concluded that the litigating position was reasonable, that is strong evidence that the litigating position was reasonable," the brief said.  Straight Path said the appeals court need not probe why Judge Alsup deemed the case an exceptional one "in such brash tones."  "It is enough to recognize that the district court's determination of exceptionality runs afoul of the limits this court has placed on the district court's discretion, and must therefore be reversed," Straight Path said.

The fee dispute between the parties has been a lively one, sparking fireworks in the courtroom during a May 7 hearing when Judge Alsup scolded Apple and Cisco for initially requesting $10 million in fees after beating the suit nearly three years ago.  The judge said the tech giants "played games," used "abusive" tactics and were motivated by "greed, G-R-E-E-D."

He required them to resubmit their fee bids and appointed a special master to determine a reasonable amount of fees and costs. On May 19, the court awarded Cisco $1.9 million — half of its initial request — while Apple netted $2.3 million of its initial $3.9 million ask.  In its brief, Straight Path — now known as SPIP Litigation Group LLC — noted that the claim construction the parties had agreed to was signed off on by the Federal Circuit when Straight Path successfully appealed Patent Trial and Appeal Board decisions invalidating various claims in the patents, which Cisco and others challenged after Straight Path initially sued in 2014.

Federal Circuit Not Sure Court Botched Patent Fee Award

September 1, 2020

A recent Law 360 story by Nadia Dreid, “Fed. Circ. Not Sure Court Muddled Fee Award in Patent Fight,” reports that the Federal Circuit seemed wary of overturning a decision awarding attorney fees to HP Inc. and SAP America after they emerged victorious from a patent dust-up with software maker Big Baboon Inc. that a lower court declared was unfairly waged.  While Big Baboon worked to convince a three-judge panel that the California federal court that handled the patent dispute "basically awarded fees based on some arbitrary line in the sand," U.S. Circuit Judge Kathleen O'Malley wasn't sure about that — particularly the company's contention that it couldn't be forced to shell out attorney fees without evidence of misconduct.

"I don't understand your statement that litigation misconduct is required before fees can be awarded," she said.  "What the court found was that the pursuit of litigation was objectively unreasonable, right?"  The parties were before the court to argue two different appeals: whether the lower court flubbed when it threw out the software maker's case and whether it was within its rights to order Big Baboon to pay $188,000 in attorney fees.

On one side, patent holder Big Baboon, which has been battling with HP and SAP America for a while over claims that a product they sold in 1996 infringed one of its e-commerce patents, argues that the lower court ignored contradictory testimony from the tech companies when it threw out its case and that it unfairly ordered it to pony up attorney fees without evidence of misconduct.

On the other side, HP and SAP America say they're owed the $188,000 in attorney bills that they ran up preparing for the discovery that Big Baboon was refusing to delay — even though the suing software maker had evidence that showed that the allegedly infringing product existed before the e-commerce design at issue.

"This case is exceptional because Big Baboon doesn't know when to stop, no matter how weak its position," counsel for HP and SAP America told the court.  The tech companies accused the software company of "abusively [filing] serial suits," pointing toward a suit against HP's predecessor in 2009 over the same patent, albeit with different claims.

Sixth Circuit Sets out Guidelines for Lodestar Fee Awarded in Class Actions

August 22, 2020

Attorney fee awards are a major driver of class action litigation – both in the employment and other contexts.  How they are awarded, and what is “reasonable” has been an ongoing source of contention in many cases.  A recent opinion from the Sixth Circuit provides some guidance and also places limits on methodology used by some courts to support generous, even lavish, fee awards.

The decision in Linneman v. Vita-Mix Corp., Case Nos. 19-3993/4249 (6th Cir., Aug. 12, 2020), related to the settlement of a class action involving the high-end Vita-Mix blenders used commercially and by consumers.  The plaintiffs, who owned the mixers, claimed that a seal used in the blenders was defective and would wear away with use.  The parties settled the case under a two-part structure: Consumers could get either a $70 gift card or a replacement assembly with a revised seal; commercial users would get only the assembly.  As the parties were unable to agree to a fee amount, the settlement provided that class counsel would receive a fee to be determined by the district court.  As explained below, after two years of litigation, and using a lodestar calculation, the district court awarded $3.9 million in fees ($2.2 million plus a 75% premium), and the defendant appealed.

Much of the Court of Appeals’ decision related to the application of the Class Action Fairness Act (CAFA), as it was largely undisputed that the terms of the agreement made the deal a coupon settlement.  The importance to this blog is that the court found that it was appropriate for the trial court to use a lodestar calculation rather than a percentage of the settlement.

With respect to the lodestar calculation, the court made a number of important pronouncements, ruling for the plaintiffs in some instances and for the defendant in others. Among them:

  • In a lodestar calculation, the result (reasonable hours times a reasonable rate) is presumed to be the correct reasonable rate. The court can apply a multiplier (no surprise there), but only in “rare and exceptional” circumstances.
  • A fee award can include the time spent pursuing fees (again, no surprise), but in this case, the defendant had made a reasonable Rule 68 offer of judgment on the amount ($3.1 million), calling into serious question why the fee issue needed to be litigated for another two years.
  • The rates used must be appropriate in the local community, not nationwide.  Thus, the plaintiffs were limited to the relatively lower rates charged in southern Ohio, where the case was pending, and not higher rates charged in other or “national” markets.

The court ultimately remanded the case for numerous reasons and for further determination of the issues noted above, as well as to determine whether the settlement had actually accomplished much for the class members given the steps the defendant had taken prior to the litigation to correct the alleged defect.

The Linneman case is a good example of what can happen when a court actually looks at the amount of work done, the results obtained for the class and whether a fee enhancement is actually in order.  The bottom line: Courts that look closely at what goes into lodestar fee awards in class actions may award less than the plaintiffs expect.

Article: New Case Law on Awarding Attorney Fees in Patent Litigation

July 18, 2020

A recent Law 360 article by Lionel Lavenue, Amanda Stephenson, R. Benjamin Cassady. and Brooke Wilner of Finnegan LLP, “Evolving Case Law Elucidates Atty Fees For Patent Litigants” reports on recent case law development in awarding attorney fees in patent litigation.  This article was posted with permission.  The article reads:

Title 35 of the U.S. Code, Section 285, in its entirety, states that "[t]he court in exceptional [patent] cases may award reasonable attorney fees to the prevailing party."  This means that if a party prevails in an "exceptional" case, the court may award it upwards of millions of dollars in attorney fees.  Unsurprisingly, the high value of these fees in often complex and high-stakes patent litigation has encouraged much debate over who can recover, and how they can recover, fees under the deceptively brief Section 285.

Though some decisions from the U.S. Court of Appeals for the Federal Circuit have clarified some answers to those questions, refining the definition of a "prevailing party" and explaining some circumstances when a court has jurisdiction to award attorney fees under Section 285, ambiguity remains.  For instance, uncertainties remain over what is required for a party to be deemed prevailing and when courts have jurisdiction to award fees.  Special circumstances, such as when an intervenor, or other entity whose involvement was limited and tangential to the main action, seeks attorney fees, further cloud the issues.  Is such an entity a prevailing party in a patent case under Section 285, such that the court has authority to award attorney fees?

Recent decisions in the Federal Circuit and other courts have provided some guidance for these questions.  For example, in My Health Inc. v. ALR Technologies Inc., the U.S. District Court for the Eastern District of Texas recently found, agreeing with a long line of cases, that a nonparty can be held liable for exceptional fees under Section 285.  And for its part, the Federal Circuit clarified this year, in Mossberg & Sons Inc. v. Timney Triggers LLC, what makes a defendant a prevailing party.  These recent decisions, when combined with the growing body of law on Section 285, give crucial and valuable insight to parties seeking attorney fees under Section 285 and defending against such requests.

When does a court have jurisdiction to award attorney fees under Section 285?

Determining whether and when a court has jurisdiction to award fees under Section 285 depends on what, exactly, the nature of an award under Section 285 is — a claim, cause of action, a sanction, a defense or something else.  Courts have made clear that it is not a standalone cause of action; i.e., not a claim or controversy.  In other words, a request for an award of attorney fees under Section 285 cannot be pled independently and cannot support jurisdiction on its own.  It must be collateral to an independent controversy over which the court has (or had) subject matter jurisdiction.

But this creates a curious procedural posture, as fees under Section 285 cannot be awarded until there is a prevailing party, i.e., when no controversy remains and jurisdiction for the original proceeding has terminated.  However, the U.S. Supreme Court, in Cooter & Gell v. Hartmarx Corp., confirmed that "district courts may award costs after an action is dismissed for want of jurisdiction" and that motions for attorney fees are "independent proceedings supplemental to the original proceeding and not a request for a modification of the original decree."

Thus, Cooter clarified that the imposition of attorney fees is not a judgment on the merits, but rather a determination of a collateral issue.  And, consistently with Cooter, the Federal Circuit has held that a court retains jurisdiction to decide requests for attorney fees under Section 285 after the court otherwise loses subject matter jurisdiction.  Thus, Section 285 is an ancillary issue over which a court will retain jurisdiction so long as it had jurisdiction over the underlying controversy and can properly be thought of as a sanction or remedy.  Indeed, in some cases, the Federal Circuit has described the grant of attorney fees under Section 285 as a sanction.

At its core, though, Section 285 provides one of several remedies available to prevailing parties in patent cases.[10] Indeed, "[t]he purpose of Section 285 is to reimburse a party injured when forced to undergo an 'exceptional' case."  Consistently with this purpose, courts have found that a litigant cannot avoid a prevailing party determination, and thus exposure to an attorney fee award, simply by dismissing their claims when it becomes clear that they have lost.

Indeed, such "mid-case mootness" does not necessarily remove a court's jurisdiction to determine which party is prevailing under Section 285, because "[w]here [parties] unilaterally dismiss cases after adverse findings, or move to dismiss them after granting a covenant not to sue, the [other party] is the prevailing party."  In patent cases, the issue of the nature of the dismissal itself may be considered a live controversy conferring jurisdiction, even where a judgment has cancelled all relevant patent claims.

What is required for a party to be deemed prevailing?

Whether jurisdiction to award fees exists is not the only issue — courts may only grant attorney fees under Section 285 to prevailing parties.  Of course, a party winning on every theory it proposed would certainly be a prevailing party.  But other victories may nonetheless allow a party to be characterized as prevailing under Section 285.  The Supreme Court has held that the touchstone of the prevailing party inquiry is "the material alteration of the legal relationship of the parties."  Thus, a favorable judgment on the merits is not explicitly required.  Instead, courts consider whether the court's decision, action or order — a "judicially sanctioned change in the legal relationship of the parties" — either "effects or rebuffs a plaintiff's attempt to effect" the alteration in the parties' relationship.

Accordingly, a dismissal with prejudice is enough to confer "prevailing" status.  In Raniere v. Microsoft Corp., for example, the Federal Circuit found that the court's dismissal with prejudice of plaintiff's claims was enough to make the defendant a prevailing party.  In fact, the Raniere court did not even adjudicate any patent claim—the plaintiff's claims were dismissed for lack of standing.  Dismissals with prejudice, even if they do not resolve patent claims, may thus be sufficient to confer "prevailing" status.

Not all dismissals will do, however.  Recently, in O.F. Mossberg & Sons Inc. v. Timney Triggers LLC, the Federal Circuit found that a voluntary dismissal without prejudice following successful post-grant proceedings was not sufficient to make the defendant a prevailing party.  Although the defendant had prevailed in trial proceedings at the Patent Trial and Appeal Board, a voluntary dismissal takes effect immediately upon giving notice, and thus the court's order to dismiss did not have the necessary judicial force — i.e., there was no judicially sanctioned change to the parties' legal relationship.

These cases highlight that winning on the merits may not always equate to prevailing under Section 285.  Timney Triggers won its case, after all, achieving a dismissal without prejudice after successful post-grant proceedings.  And Microsoft achieved a victory on constitutional grounds, not on the merits of its patent defense.

Thus, prevailing on the merits is not required; prevailing in the correct way is.  A party seeking to be deemed prevailing must prove (1) that the court decision which it believes makes it prevailing is indeed a final court decision with the necessary judicial imprimatur; and (2) that the relationship between it and the opposing party was materially altered in its favor.

When is a party, such as an intervenor or other entity whose involvement was limited and tangential to the case, entitled to attorney fees?

Where the Section 285 inquiry gets particularly thorny is where a party other than plaintiff or defendant seeks a remedy of attorney fees under Section 285.  After all, Section 285 allows that remedy for any prevailing party — it does not distinguish between plaintiffs, defendants and third parties.[19]

Third parties have many times been made to pay attorney fees under Section 285.  Even if a party was not an original party to the suit, but rather joined in its sole capacity as a third party defendant, for example, the case law is unanimous: Courts have the authority to award fees against a nonparty.

One special class of third parties stands out in the limited case law on this issue — shareholders.  Recently, in My Health v. ALR Technologies, the court clarified the state of the law on this issue, finding that corporations' shareholders can be held liable for deceptive conduct that leads to an exceptional case finding and the award of Section 285 attorney fees.

Just as third parties may be ordered to pay fees under Section 285, so too are they likely able to seek them.  Although there have been relatively few cases where such parties have sought attorney fees under Section 285, there is no case indicating that such parties may not do so.

In Sony Electronics, Inc. v. Soundview Technologies, for example, a third-party defendant sought Section 285 attorney fees as part of its prayer for relief related to an inequitable conduct issue.  The court found that the third-party defendant's actions in seeking Section 285 attorney fees as a remedy was "wholly appropriate" but denied the request because the inequitable conduct issue was moot.  Other courts have assumed that third parties or nonparties can recover fees under Section 285 but then found that those cases were not exceptional.  These cases were predominantly decided before the formation of the Federal Circuit.

The enticing remedy of attorney fees under Section 285 has provided incentive for parties to litigate over the brief statute's meaning for decades.  Recent decisions have clarified when a court has jurisdiction to grant attorney fees, when a party is prevailing, such that it could receive fees under Section 285, and how the section applies to third parties.  But with so much money potentially on the line, parties can expect more litigation in the years to come.

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide 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 also 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 in court or arbitration.  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 2020:

"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

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
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
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins 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
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