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Category: Exceptional Case

Alleged ‘Patent Troll’ Wants SCOTUS to Hear Fee Award Dispute

November 30, 2023

A recent Law 360 story by Kelly Lienhard, “Traxcell Asks High Court To Review Atty Fee Fight”, reports that Traxcell Technologies LLC has asked the U.S. Supreme Court to take up an appeal concerning attorney fees owed to Sprint and Verizon after the telecommunication companies beat its infringement suit, arguing that the alleged "exceptional" litigation conduct occurred before a final ruling.

A  petition for a writ of certiorari from Traxcell, which filed for bankruptcy earlier this year, claimed that the Federal Circuit erred when it affirmed attorney fee awards to units of Sprint Corp. and Verizon Communications Inc. based on so-called "baseless" litigation conduct from Traxcell's attorney, William Ramey III of the Houston firm Ramey LLP, as the conduct in question occurred before the court adopted a magistrate judge's ruling.

"It is black letter law that a Magistrate's ruling is not final until approved by a district court.  It was [an] error for the Panel to base its fee award entirely upon rulings that were not final and could not have been final until December 11, 2019," Traxcell said.  "None of the conduct that was found to be "exceptional" under [federal law] occurred after the Magistrate Judge's recommendation was made final on December 11, 2019."

Texas-based Traxcell, which has been accused of being a "patent troll" by groups like the Electronic Frontier Foundation, is on the hook for about $784,000 in fees owed to Sprint and $132,000 in fees owed to Verizon, after the companies won rulings that Traxcell's patent lawsuits were legally frivolous.  AT&T Inc., which had also been named in those lawsuits, did not request any fees, as it ended its litigation with Traxcell back in 2019.  A panel of Federal Circuit judges ruled in July without comment that the lower court was right to order Traxcell to pay legal fees incurred by lawyers for the major telecom firms.

Traxcell is now appealing that decision based on arguments that the Federal Circuit departed from typical proceedings and court precedent by issuing fee awards based on conduct that occurred before U.S. Magistrate Judge Roy Payne's ruling in a separate, but related, case was finalized.

Traxcell is asking the high court to either vacate or reverse the attorney fees granted to both Sprint and Verizon and find that the case was not exceptional.  Verizon and Sprint, the latter now owned by T-Mobile, moved to dismiss the bankruptcy attempt, telling the court that it was filed in bad faith.

Prevailing Party Wins $3.1M in Fees in “Exceptional” IP Case

October 16, 2023

A recent Law 360 story by Rose Krebs, “Emerson Radio Gets $3.1M Atty Fees, Enhanced TM Damages”, reports that Emerson Radio Corp. has been awarded about $3.1 million in attorney fees following its $6.5 million default win in a trademark infringement suit, with a Delaware federal judge saying fees were awarded due to "unreasonable" litigation conduct by the companies it sued.  In a memorandum opinion and accompanying order, U.S. District Judge Gregory B. Williams also awarded $700,000 in enhanced damages to Emerson Radio in litigation against Emerson Quiet Kool Co. Ltd. and Home Easy Ltd.

"The Lanham Act provides that the court may award reasonable attorneys' fees in exceptional cases," and this was an instance where awarding fees to the plaintiff was merited, given the circumstances of the case, Judge Williams ruled.  "A case is exceptional if "(a) there is an unusual discrepancy in the merits of the positions taken by the parties or (b) the losing party has litigated the case in an 'unreasonable manner,'" Judge Williams noted, citing the Third Circuit's 2014 ruling in Fair Wind Sailing Inc. v. Dempster.

As the prevailing party, Emerson Radio asserted "that it is entitled to reasonable attorneys' fees because this case is exceptional based on both (1) the merits of the case, and (2) the unreasonable manner in which defendants litigated it," the opinion said.  "The court agrees that the case is exceptional," Judge Williams wrote.

Among the litigation conduct that was flagged were actions mentioned in a prior court decision that granted a motion to withdraw by the defendants' former counsel, including that the defendants' repeatedly refused to follow counsel's advice, were unwilling to engage in trial preparations, and had a "sudden and unexplained change of tack" during proceedings.

Another prior court order also took issue with Emerson Quiet Kool and Home Easy for being unable to obtain substitute counsel for a time, calling it "part of a pattern of delay and lack of representation that has plagued this litigation."

"Given these previous findings, the court need not further expand on defendants' litigation conduct," Judge Williams wrote. "In light of the totality of the circumstances, the court finds the present case is exceptional based both on the merits and on the unreasonable manner in which defendants litigated the case."

Emerson Radio submitted declarations breaking down the $3,159,000 in attorneys' fees incurred by Stevens & Lee, Cooley LLP, and an Orrick Herrington & Sutcliffe LLP attorney who worked the case before he moved over to Cooley, according to the opinion.  "Upon review, the court finds that the number of hours spent litigating this action in representation of plaintiff is reasonable," the opinion said. "Similarly, the court finds that the hourly rates are reasonable."

Apple Seeks $5M in Fees After Beating IP Action

August 29, 2023

A recent Law 360 story by Hailey Konnath, “Apple Wants $5M in Fees After Beating Vibration Tech IP Suit”, reports that Apple Inc. has asked a California federal judge to award it roughly $5 million in attorney fees and expert costs following its recent defeat of a patent infringement suit brought by headphone maker Taction Technology Inc., arguing that Taction's "unreasonable" litigation tactics caused Apple to incur significant costs.  Apple said in a motion filed that Taction dragged out the litigation when it should've admitted that it couldn't maintain its patent infringement claims following a September 2022 claim construction order.  Apple asked the court to award it $4.5 million in fees and $444,000 in expert expenses.

"Rather than concede non-infringement and then seek immediate appeal, which would have avoided another year of costly litigation in this court, Taction violated this district's patent local rules to pursue new theories of infringement in the expert phase and attempted to defend those theories with new arguments and evidence at the summary judgment hearing," Apple said.  On top of that, Taction made a late attempt to add marketing allegations to its complaint that it hadn't properly disclosed during discovery, according to the motion.  "Each of these objectively unreasonable tactics caused Apple and the cort to expend significant resources and caused Apple to incur significant costs," it said.

Earlier this month, U.S. District Judge Todd Robinson ruled in Apple's favor after discarding "improper" testimony from Taction's expert witness, Iowa State University mechanical engineering professor James Oliver. Oliver's opinions "constitute a ... new theory of infringement" that Taction hadn't previously presented, Judge Robinson held. And without that testimony, Taction's case fails, the judge said.  In any event, Apple's iPhone and Apple Watch operate differently from the invention covered by Taction's patents, Judge Robinson added.

Apple said that Taction's "untenable and shifting infringement positions" make the case "exceptional."  Apple's accused technologies are "fundamentally different" from Taction's patents, and this was evident from Taction's own evidence and infringement contentions, according to the motion.  "Taction's entire case was based on its objectively meritless infringement positions, as evidenced by the court's conclusion that no reasonable jury could find infringement of either asserted patent," Apple said.

Judge Recommends Gutting Attorney Fees in IP Case

April 11, 2023

A recent Law 360 story by Rachel Riley, “Ohio Judge Guts Counsel Fees in Archery Row IP,” reports that an Ohio federal magistrate judge has recommended slashing attorneys' request for fees and expenses by more than half when awarding an archery company for a default win in a bow patent and trademark dispute, saying the out-of-town lawyers were pricier than the district where they argued the suit.  U.S. Magistrate Judge Chelsey M. Vascura suggested that the court award Wisconsin-based MCP IP LLC about $109,000 in attorneys fees and some $1,500 in legal costs – a fraction of the nearly $240,000 total the company requested last month.

MCP alleged in a 2021 suit that Ohio outdoor retailer .30-06 Outdoors LLC and archery equipment brand Daibow Inc. ripped off more than a dozen of its bow patents for various designs and utilities and infringed its associated trademarks.  Last August, the federal district court ruled that the two accused archery companies had admitted to those allegations, by default, by failing to respond to the claims over the course of 18 months.  Judge Vascura agreed with MCP that the case met the "exceptional" threshold for awarding attorneys' fees in patent cases; however, the magistrate judge recommended cutting the proposed $168,631.95 attorney fee award by about $60,000 for two reasons.

First, Judge Vascura suggested a downward adjustment to the lodestar because the lead attorneys on the case, Kadie M. Jelenchick and Michelle A. Moran of Foley & Lardner LLP, are based in Milwaukee and thus charge more than average billing rates for intellectual property attorneys in the Southern District of Ohio.  Altogether, the legal team charged the plaintiffs for 314 hours of work on the case, with hourly rates between $330 and $700.

Second, Judge Vascura recommended reducing the lodestar because the lawsuit was only partially successful. MCP was awarded about $80,500 in damages – less than half of the $168,500 it sought — and the court denied the company's request for a preliminary injunction barring the defendants from further patent infringement, the judge said.

In a March 23 motion for attorneys' fees, MCP argued that the defendants' failure to appear in court and other bad-faith legal tactics made for exceptional circumstances.  Since the lawsuit was filed, the plaintiff alleged, .30-06 Outdoors' published a defamatory statement claiming the suit was racially motivated.  According to Judge Vascura's recent report, though, that statement was later deleted at the request of MCP's counsel.

Judge Vascura recommended that the court largely deny MCP's request for another $70,118.77 in litigation expenses, which MCP had only described as "consisting largely of professional services provided by local counsel and MCP IP's damages expert."  "Indeed, beyond a monthly total of fees paid to its damages expert and local counsel (along with modest expenses associated with mailing, parking, travel, and meals), Plaintiff provides no explanation of how these fees were calculated or the services for which these fees were incurred," Judge Vascura said.

If MCP sought reimbursement for fees paid to its local counsel, the company should have included those billing records with its attorneys fee request so the court could determine if they were reasonable, Judge Vascura said.  And though the law authorizes award of attorneys fees to winners of exceptional patent cases, it does not make the same allowance for expert witness fees, the judge said.  The attorneys fees already awarded should be enough to cover any additional costs created by the defendants' uncooperative behavior, Judge Vascura said.  She recommended standard expert witness fees of $40 a day for each day the damage expert spent attending a hearing plus any travel days, totaling $120.

Federal Circuit Urged to Toss IP Fee Award in ‘Exceptional Case’

October 20, 2022

A recent Law 360 story by Kelly Leinhard, “Reverse Dish, Sirius XM Fee Award in IP Row, Fed. Circ. Urged” reports that patent-holding company Dragon Intellectual Property LLC urged a federal appeals court to overturn a ruling that found a decade-long infringement fight exceptional, allowing counsel for Dish Network and Sirius XM to collect more than $3 million in attorney fees.  Dragon alleged that the Delaware district court abused its discretion when finding the case exceptional, which led to higher attorney fees, by misreading claim language and not fully considering Dragon's expert testimony.

"When it accepted the unreviewed determination as resolving the issues presented by the exceptional case motions, the district court disregarded Dragon's presentation, ignored the requirements of Supreme Court authority, and abused its discretion," Dragon said.  "The exceptional case finding should be reversed."

The district court had found that the case was exceptional and that the defense team was entitled to higher fees because the infringement allegations had no merit when faced with "one of the clearest cases of prosecution history disclaimer the court had ever seen."  Disclaimers are made by applicants during patent application reviews and can limit the scope of protection provided by a patent.

Even without the disclaimer, Dragon continued to pursue the "meritless" case for nearly a decade.  However, even though Dish's counsel, Baker Botts, and Sirius' counsel, Kramer Levin Naftalis & Frankel, netted a combined $3.3 million, the attorneys still were not awarded their full fee request and petitioned the court in August for the rest of the money.  Dragon said in a response brief that the case should never have been found to be exceptional because it was based on a flawed disclaimer ruling resulting from the district court's misreading of the claim language.

According to Dragon, the district court erred by misreading the claim language as a verb — "to begin a recording" — instead of a noun — "a recording."  By conflating the noun form of the claim language with the verb form, the court caused a series of events leading to a claim construction order finding that Sirius and Dish had included clear disclaimers of continuous recording devices in their products.

The patent-holding company hinted that Sirius and Dish pushed the court toward this thinking, saying the two companies wanted to pass off the idea of beginning a recording by initiating the storage of specific broadcast program information, which Dragon said is agnostic as to whether the overall recording process was underway.  "In this exchange, the district court equated the noun form of the claim language with a verb form requiring that the entire recording process, rather than the storage of specific broadcast program information of the invention, begin upon actuation of the key," Dragon said.

The court's disclaimer ruling based on this conflation resulted in "stipulated judgments of noninfringement," Dragon said, because the court found that Dish and Sirius had clearly included a disclaimer that their product contained continuous recording devices.  The disclaimer finding has remained the foundation for "many years of subsequent litigation" without review, despite the absence of evidence proving that Dish and Sirius included a clear disclaimer on their products, Dragon said.

According to Dragon, the U.S. Supreme Court found in 1990's Lewis v. Continental Bank Corp. that an interest in attorney fees is insufficient to claim an extraordinary case, and in Dragon's case, no other justiciable case or controversy has come forward since the cases became moot.  Dragon filed the suits against the companies nearly 10 years ago in December 2013, claiming both Dish and Sirius XM were infringing a patent on a keyboard equipped with audiovisual recording and playback technology.