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Fifth Circuit Says Fee Entitlement Needs Reconsideration

July 13, 2020 | Posted in : Fee Entitlement, Fee Issues on Appeal, Fee Request, Prevailing Party Issues

A recent Law 360 story by Michelle Casady, “5th Circ. Says $1M Atty Fee Request Needs Reconsideration” reports that the Fifth Circuit has determined that drilling data company Petrolink Services Inc. will get another chance to prove it's entitled to about $1 million in attorney fees for a lawsuit in which it beat back copyright infringement claims but was found by a jury to have unjustly enriched itself.

In an opinion, a three-judge panel agreed with Petrolink that a trial court had wrongly denied its request for fees without consideration in the lawsuit brought by competitor Digital Drilling Data Systems LLC, or Digidrill. Digidrill accused Petrolink of hacking into its software at various oil rig sites in order to "scrape" valuable drilling data in real time.

Both companies appealed the trial court's judgment in early 2019. After granting summary judgment dismissal on Digidrill's claims that Petrolink violated the Copyright Act and the Digital Millennium Copyright Act, the trial court denied Petrolink's request for about $1 million in attorney fees. On appeal, Petrolink argued it was entitled to the award as the prevailing party on those claims.

Quoting the district court, the Fifth Circuit wrote that the lower court declined to award costs or fees to either side, because "both prevailed on different issues."

"It is difficult to make sense of this language in light of the fact that Petrolink only sought fees related to Digidrill's copyright and DMCA claims, on which Petrolink clearly and solely prevailed," the panel wrote. "It matters not whether Digidrill ultimately prevailed on its state law unjust enrichment claim."

The Fifth Circuit sent the case back to the trial court for it to "properly analyze the motion" for attorney fees.

According to the opinion, Petrolink had a competing drilling data product, but unlike Digidrill's, it couldn't provide the information in real time. When Petrolink learned that one of its biggest customers, EOG Resources, was considering switching to Digidrill, Petrolink "took action," according to the opinion.

Petrolink discovered a way to gain access to the Digidrill database and used that copied information to develop a competing program that could be installed on company computers already running Digidrill's "DataLogger" program. Petrolink then installed the competing program on computers at more than 300 well sites without permission, according to the opinion.

The trial court granted Petrolink an early win on the claims for copyright infringement and DMCA violations, holding that while Petrolink copied "aspects" of Digidrill's database, Digidrill failed to show there was a substantial similarity between the original work and the copied work. The court held the DMCA claims failed because while Digidrill did implement a USB security dongle to restrict access to the database, it didn't "effectively control" access.

On the only claim it was asked to decide, the jury awarded Digidrill $414,940 on its unjust enrichment claim, which was the exact amount of EOG revenue Petrolink said it attributed to its competing computer program. That award was undisturbed by the Fifth Circuit's ruling.