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Category: Practice Area: IP Litigation

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.

Ninth Circuit: Attorney Fees Cannot Exceed Value to Class

June 14, 2023

A recent Law.com story by Avalon Zoppo, “Attorney Fees Cannot Exceed Value to Class, 9th Circuit Makes Clear in Copyright Case,” reports that the U.S. Court of Appeals for the Ninth Circuit made clear its view that class action plaintiffs lawyers generally should not be awarded fees that exceed the amount their clients get from a settlement as the court struck down a $1.7 million fee award in which the class received less than $53,000 in a royalties dispute settlement.

The three-judge panel, in a presidential decision last week, said the lower court wrongly calculated fees for plaintiffs’ counsel in a copyright case based on a settlement that provided for a fund of up to $20 million for class payouts.  The district court should have instead looked at the amount actually obtained by those who made claims, here $52,841.05, the Ninth Circuit said.

Judge Kenneth Lee, writing for the panel, said the $1.7 million award is one that will “likely make the average person shake her head in disbelief.”  “Except in extraordinary cases, a fee award should not exceed the value that the litigation provided to the class,” Lee wrote.  ”No rational person would spend, say, $1 million in legal fees— and endure the hassles and headaches of litigation — to recover only relief that is a small fraction of that amount.”

‘A Significant Decision’

Alexander Smith, a class action defense partner at Jenner & Block, said the opinion is the circuit’s clearest statement so far that the main principle for determining the reasonableness of attorney fees under Federal Rule of Civil Procedure 23 is the benefit to the class.  “It’s certainly a significant decision, and sort of crystallizes a point that the Ninth Circuit indirectly made over the years, which is that we are not going to tolerate class settlements that pay a disproportionate benefit to attorneys as opposed to the class members that they purport to represent,” said Smith, noting that the court has made similar rulings over the past few years.

Michelman & Robinson represented a class of musical composition holders in the lawsuit against streaming service Rhapsody International, now branded as Napster, accusing the company of infringing their copyrights by sharing songs without a license.  The district court approved $1.7 million in fees based on Rhapsody’s promise to set aside up to $20 million for class members who submit claims.  But the Ninth Circuit said the lower court should have focused its analysis on how much the class ended up taking home, adding that there was no meaningful injunctive or non-monetary relief justifying the fee award.

In a statement to Law.com, Mona Hanna, Michelman & Robinson’s Orange County office managing partner, said the court did not give enough weight to non-monetary benefits for plaintiffs that resulted from the lawsuit and that the firm is “considering our options moving forward.”

“There is no dispute that after years of failing to pay artists their legally mandated royalties, Rhapsody ceased that practice, entered into a settlement with the National Music Publishers’ Association, and created an internal artist board to watch over Rhapsody’s conduct and confirm compliance with the new procedures.   This lawsuit contributed to these significant changes and resulted in a settlement providing up to $20 million to eligible class members and other non-monetary benefits,” Hanna said.  “We believe the Ninth Circuit opinion does not appropriately acknowledge the benefits to the class and does not comport with prior authority.”

In reversing the award, the panel pointed to its 2021 holding in Kim v. Allison that courts must compare the amount anticipated to be paid and not the maximum payable amount.  In the civil rights class action against Tinder where a $1.2 million award was vacated, the company agreed to a theoretical settlement cap of up to $6 million but only $45,000 was paid out.

But leading plaintiffs class action lawyer Jay Edelson said lower courts, and the magistrate judge here in particular, did not view the circuit’s past rulings in this area as establishing a bright-line rule on the question.  The circuit now has cleared up that confusion, he said.  The panel, composed of Lee and Judges Milan Smith and Daniel Collins, said explicitly that “what matters most is the result for the class members.”

Edelson said the decision will have an outsized effect beyond the Ninth Circuit, where plaintiffs lawyers will be forced to grapple with the court’s logic.  “It’s very hard now for [class action plaintiffs lawyers] to make arguments in other courts, even outside the Ninth Circuit, and say, ‘No, it’s OK that we’re keeping 95% of the money,’” said Edelson, founder of Edelson PC.  “They’re going to have to try to explain why the Ninth Circuit’s logic was wrong.  And I don’t think that’s possible to do.”  Meanwhile, Smith predicted that the decision may push class action plaintiffs attorneys to negotiate common fund settlements over claims-made settlements.

Beyond Copyright?

Kian Hudson of Barnes & Thornburg said the court’s decision also touches beyond copyright cases.  But Hudson also said the court gestured toward a possible narrow exception for civil rights class actions.  The panel noted that fees awarded in civil rights cases “need not be strictly proportional to monetary damages” because they can benefit society through non-monetary relief such as ending civil rights abuses.

“Although this case arose in the copyright context, it’s important to note that the Ninth Circuit was applying Rule 23(h), which imposes a ‘reasonableness’ requirement to attorney fee awards in class-action cases regardless of the nature of the lawsuit,” Hudson said in an email.  “It thus seems clear that the court intends its approach to be applied across many substantive areas of law.”

Edelson said the Ninth Circuit made a similar holding in the context of a consumer class action against ConAgra over alleged false labeling on its Wesson vegetable oil as “100% all natural.”  Lee also authored that 2021 opinion, in which the court reversed $7 million in attorney fees for plaintiffs counsel based on a claims-made settlement where the food company put up a maximum of $70 million for claims but a little less than $1 million was paid out.

Company Held in Contempt For Failing to Pay Attorney Fees

May 11, 2023

A recent Law 360 by Emily Sawicki, “Co. Held in Contempt For Failing To Pay $1M Atty Fee,” reports that a New Jersey federal judge has issued a contempt order against an India-based supplement company for failing to pay discovery misconduct fees and blocked its legal counsel from withdrawing, a year after the company was ordered to pay more than $1 million to opposing counsel following patent infringement claims dating back to 2015.  U.S. District Judge Robert B. Kugler found Prakruti Products Pvt. Ltd. in civil contempt, citing the $994,803.29 in discovery misconduct fees Prakruti still owed to Sabinsa Corp.

Judge Kugler issued an order on April 12 giving Prakruti until April 18 to issue payment.  As of oral argument on May 1, Prakruti had paid just $8,671 of what had been more than $1 million in outstanding fees toward Sabinsa, in order for the plaintiff to pay back $878,548.56 in ArentFox Schiff LLP law firm fees, $15,120 in "Indian-law counsel fees," $96,750.50 in Saiber LLC law firm fees and $13,035.23 in costs.

Judge Kugler ordered the clerk of the District of New Jersey's Camden Vicinage to enter default against Prakruti on Sabinsa's claim that Prakruti violated a 2015 settlement agreement between the two entities, and converted a summary judgment briefing, set to take place in May, into a briefing on Prakruti's default judgment.

In his order, Judge Kugler specified that, although Prakruti's attorneys, Gregory A. Krauss and James T. Wilson of Davidson Berquist Jackson & Gowdey LLP and Jason B. Lattimore of the Law Office of Jason B. Lattimore, would not be permitted to withdraw, "Prakruti's attorneys are not held jointly or severally liable with Prakruti for the remainder of the discovery misconduct fees."

The three had filed a motion to withdraw from their representation on April 14 and Lattimore provided reasoning in a letter dated April 25, saying, "a conflict of interest has arisen between Prakruti, on the one hand, and its current counsel, on the other," citing a pro se, ex parte letter entered into the docket by a Prakruti company director.  "It appears that Prakruti intends to shift blame for its current predicament from itself to its counsel for their supposed failure to provide 'proper representation,'" Lattimore wrote of the company's letter.

The fee amount itself was a point of contention, after then-U.S. Magistrate Judge Karen M. Williams calculated an initial award of about $879,724 to the ArentFox Schiff lawyers in November 2021, recalculated to $878,548 by U.S. Magistrate Judge Sharon A. King, in April 2022.  The award stems from an underlying patent infringement case brought by New Jersey-based Sabinsa, which claimed Prakruti was violating its patent by selling a turmeric supplement.

During a "contentious" discovery process, Judge Williams found that "Prakruti had withheld certain information from Sabinsa and also spoliated pertinent evidence," according to court documents.  The judge sanctioned Prakruti with an adverse inference, finding that Sabinsa's legal efforts to prove Prakruti's misconduct warranted an award of attorney fees against Prakruti.

Shook Hardy Doubles Down on Fee Request in $189M Verdict

April 21, 2023

A recent Law 360 story by Hayley Fowler, “Shook Hardy Fee Bid Defense Pans ‘Massive’ Vivint Trial Team,reports that Shook Hardy & Bacon LLP attorneys have doubled down on their $3 million fee bid after nabbing a $189 million jury verdict against Vivint Smart Home Inc., quipping its staff of three and corresponding rates were far more reasonable than the smart home security company's use of five law firms and a "massive trial team."

Shook Hardy, representing CPI Security Systems Inc. in a trademark infringement suit in which Vivint was found to have tricked customers into switching home security providers, fired back at Vivint's attempts to whittle down the attorney fee award in a reply brief.  The law firm said the fees it's seeking are both reasonable given its staffing model and relevant to the claims on which CPI succeeded under the Lanham Act and North Carolina's Unfair and Deceptive Trade Practices Act.

In attacking the fee bid, Vivint had accused Shook Hardy of charging excessive hourly rates and overusing partners for work that could have been done by associates.  But Shook Hardy said that CPI was represented for the duration of the suit by just three partners, whose hourly billing rates were at or below the average for western North Carolina.  "These allegations are startlingly ironic in light of Vivint's four-partner-per-deposition staffing model, Vivint's massive trial team, and the rates Vivint's own lawyers charge in commercial litigation matters," the reply brief states.

CPI first filed its request for $3 million in attorney fees earlier this month, noting that Vivint was found to have willfully engaged in a deceptive trade practice and didn't try to settle the case until the trial was well underway.  In its response, Vivint asked the court to delay ruling on the motion until after its own motion for a new trial is addressed.  If the award is granted, the fees should be significantly reduced, the smart home security company has argued, saying CPI failed to distinguish on which claims it's seeking to recover fees.

Vivint also slammed how CPI classified its billing rates and corresponding time entries, as well as its request to recover fees associated with a delay in the trial date.  But Shook Hardy countered that all of the work it performed leading up to and during the trial related to CPI's trademark and unfair business practices claims, under which the prevailing party can recover attorney fees. It also argued the billing entries were "adequately detailed."

The firm similarly rebuffed Vivint's criticism of its staffing model as "vague," saying in its reply brief that its smaller legal team was far more efficient than the five law firms working for Vivint, "one of which is one of the top five largest law firms in the country."  Finally, Shook Hardy said the work it did preparing for the original trial date last year was used for the actual trial in February, noting it was "careful to preserve work product to ensure that it would not need to be recreated."

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.