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Judge Rejects Fee Request for Untimeliness

April 18, 2016 | Posted in : Expenses / Costs, Fee Entitlement / Recoverability, Fee Reduction, Fee Request, Prevailing Party Issues

A recent Law 360 story, “Marvel Loses Atty Fee Fight After Key Spider-Man IP Win” reports that an Arizona federal judge shot down Marvel Entertainment LLC’s request for attorneys' fees after it prevailed against an inventor’s high court appeal in a breach of contract suit seeking royalty payments for an expired Spider-Man toy patent, saying Marvel couldn’t relitigate the issue.

The denial of $257,168 in attorneys' fees for The Walt Disney Company-owned subsidiary hinged on Marvel’s failure to timely request attorneys' fees after two favorable rulings stemming from a 2008 action filed by inventor Stephen Kimble claiming the company breached a 2001 settlement agreement by failing to pay him royalties for a patent he licensed to the company used in the Spider-Man Web Blaster toy.

Last June, the U.S. Supreme Court held 6-3 that a rule established by the court’s 1964 decision in Brulotte v. Thys Co. rendered licenses requiring royalty payments for expired patents per se unlawful.  Kimble’s toy patent had expired in May 2010.

Marvel followed up on that victory by filing in September a separate suit against Kimble and his former attorney Robert Grabb, for the $257,168 in costs it spent defending the high court appeal, citing the terms of the 2001 settlement, which provided that prevailing parties were entitled to fees “in any action brought to enforce this agreement.”

But U.S. District Judge Rosemary Marquez said that even if Marvel filed a counterclaim for fees in the 2008 suit under the terms of the earlier settlement, it nonetheless failed to follow up on its request “at the appropriate time following [Kimble and Grabb’s] unsuccessful appeal to the U.S. Supreme Court.”

“The doctrine of res judicata bars Marvel from raising the claim in a separate, subsequent lawsuit,” Judge Marquez wrote in her eight-page ruling, dismissing Marvel’s suit with prejudice.

The judge reasoned that allowing Marvel to prevail in its fees action would allow the company to relitigate the claim in a follow-up action when it could have been raised in the prior one, in violation of the res judicata doctrine that seeks to avert “piecemeal prosecution at the expense of judicial economy.”

The dispute between Kimble and Marvel dates back nearly two decades, when the inventor first filed a patent infringement and contract suit against the company. Kimble alleged that in 1990, he created a Spider-Man wristband toy that could shoot foam string, and Marvel agreed to pay him if it ever used the idea.  After it released the Web Blaster toy, Kimble claimed he wasn’t compensated and filed suit in 1997.

That suit settled in 2001 when Marvel agreed to buy the patent for $500,000 and pay Kimble a 3 percent royalty on product sales.  After Marvel licensed the right to produce the toy to Hasbro Inc. in 2006, however, further disputes over royalties arose and Kimble filed another breach of contract suit in 2008.

Kimble lost at the federal court level when the district judge held in March 2010 that he could no longer collect royalties when his patent expired later that year.  The parties agreed to dismiss the case, without attorneys' fees to either side, but retained the right to appeal.

Kimble appealed the ruling to the Ninth Circuit, which in 2013 said the Supreme Court’s Brulotte decision barred the inventor from seeking royalties after his patent had expired in 2010.  Kimble then appealed to the top court, and lost.  Judge Marquez noted that neither after the Ninth Circuit’s 2013 decision nor last year’s Supreme Court ruling had Marvel filed a request for attorneys' fees.