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Category: Practice Area: IP Litigation

Client Drops Attorney Fee Dispute Against Law Firm

May 16, 2022

A recent Law 360 story by Caroline Simson, “Taiwanese Co. Says It Won’t Arbitrate Fisch Sigler Fee Dispute” reports that a Taiwanese manufacturer of smartphone camera lenses is pressing a DC federal court to quash arbitration initiated by intellectual property boutique Fisch Sigler LLP seeking millions in additional fees for its work on a "meandering, inconclusive" and expensive patent lawsuit that settled last year.  Largan Precision Co. Ltd. told the court in the lawsuit filed May 10 that it never gave its informed consent to arbitrate the dispute with Fisch Sigler, which is set to be heard by the DC Bar Attorney/Client Arbitration Board, or the ACAB.

The company noted that while the DC Court of Appeals requires any attorney who is a DC Bar member to submit to arbitration before the ACAB if a client chooses that venue to pursue a fee dispute in matters with some connection to DC, there has never been any such rule for clients.  Largan argued that since it intends to challenge the validity of an arbitration agreement that was "quietly added" to its engagement agreement with the firm near the end of their negotiations, that question should be left to the court.

"[G]overning precedent makes plain that only a court, and not an arbitration panel, can decide the threshold issue of whether a valid agreement to arbitrate exists, unless there is clear and unmistakable evidence that the parties agreed to have that question decided by the arbitrators," the company wrote.  "There is nothing here to suggest that the parties ever discussed, let alone agreed to, the ACAB deciding the specific issue of arbitrability."

Largan alleges in the litigation that the firm has already gotten $4.5 million in "fixed fee" payments.  It's now seeking an additional $5.6 million in success fees — despite the fact that Largan agreed to settle the litigation in Texas due to the outcome of parallel litigation in Taiwan that Fisch Sigler had not worked on, according to the brief.  The underlying dispute for which Largan engaged Fisch Sigler involved another Taiwanese company called Ability Opto-Electronics Technology Co. Ltd., which Largan accused of misappropriating its trade secrets in 2013.

While litigation was ongoing in Taiwan, Largan hired Fisch Sigler to file a patent infringement lawsuit in the U.S. against Ability Opto-Electronics Technology and two other entities in Texas.  Largan alleges that while the lawsuit was ongoing, Fisch Sigler charged a fixed fee despite not doing all the work that was supposed to be included under that fee.  That included depositions and a hearing in mid-2020 that Largan says never took place.

Largan won some $50 million in the Taiwanese litigation in early 2021, and it subsequently approached Fisch Sigler about settling the Texas litigation.  The company claims that the litigation had gone poorly, and that there was no reason to continue with it at that point.  It was then that the firm attempted to collect the success fee "based on the resolution of a litigation in Taiwan in which it had no role — and despite achieving nothing resembling success from the meandering, inconclusive, yet very expensive litigation it had pursued for Largan against [Ability Opto-Electronics Technology] and others in Texas and, later, California," according to the suit.

Quinn Emanuel Client Hit With Attorney Fees in IP Action

May 5, 2022

A recent Law 360 story by Andrew Karpan, “Quinn Emanuel Client Hit With $160K In Fees In IP Fight” reports that a China-based client of Quinn Emanuel Urquhart & Sullivan LLP was ordered to cough up over $160,000 in legal fees after its defense in a copyright case ran afoul of California's anti-SLAPP statute.  The amount that Northern District of California Judge Edward Chen ultimately arrived at was about $12,000 less than the final fee request from lawyers at the small San Francisco firm Tyz Law Group PC after they beat a dismissal bid in a copyright suit they leveled on behalf of Moonbug Entertainment. Moonbug is the company behind the children's educational brand CoComelon, which runs popular shows on YouTube and Netflix.

The suit accuses a Fuzhou City-based company called BabyBus (Fujian) Network Technology Co. Ltd. of building "its Super JoJo YouTube business by blatantly copying CoComelon."  BabyBus' lawyers at Quinn Emanuel responded last September with allegations that Moonbug's lawyers had been "using baseless [Digital Millennium Copyright Act] notices to effectively shut down BabyBus' lawful, competitive business."  DMCA notices are sent to companies like YouTube to ask them to take down content that infringes someone's copyright.

The legal fight is ongoing.  But Judge Chen had rejected outright BabyBus' contention that the way Moonbug pursued its case against BabyBus violated certain state laws, such as Section 17200 of the California Business & Professions Code.  This defense was legally hopeless, Judge Chen wrote last year: "No amendment can cure the fact that the state law counterclaims are preempted by the Copyright Act."

"Moonbug estimated it spent 'roughly' 324 hours in total, accounting for both compensable and non-compensable time spent on the joint motions to dismiss and strike," Judge Chen wrote.  According to the decision, the Moonbug lawyers had initially offered to settle the dispute over their legal bills for the whole effort for $96,152. BabyBus offered to pay just $15,580 instead.

The Moonbug lawyers then asked the court for $155,620 in fees but, in a later filing in the matter last year,  they beefed the number up to $173,553.  The new figure included an additional $17,933 in what the company's lawyers called "reasonable fees-on-fees" that were "not accounted for in its original fees-on-fees request," referring to legal work done in connection with the fee motion.  Judge Chen told BayBus to pay out $161,683.

"Moonbug's request for fees on fees is not unreasonable," Judge Chen decided.  He also rejected an argument from the BabyBus team that Tyz Law had deliberately overstaffed its legal response in order to collect more in fees.  "Moonbug's use of five attorneys of various levels of experience on its anti-SLAPP motions is nothing out of the ordinary," the ruling read.  The ruling did, however, trim out a little over 10 hours of work that Tyz Law had attached to the motion "for unnecessary work on a reply brief."

Former Client Fights Law Firm’s $1.9M Attorney Fee Lien

May 3, 2022

A recent Law 360 story by Matthew Santoni, “Ex-Client Fights Buchanan Ingersoll’s $1.9M Fee Lien” reports that a former client of Buchanan Ingersoll & Rooney PC has said the firm isn't entitled to $1.9 million from a settlement in a patent dispute, but it offered to put a smaller amount aside while the parties litigate whether the firm overcharged for its work.  Best Medical International Inc. opposed Buchanan Ingersoll's motion for an attorney's lien on its settlement with Varian Medical Systems Inc., arguing in a brief to a Pennsylvania federal court that its former firm wasn't as instrumental as it claimed in securing the settlement and couldn't seek fees for the work while the reasonableness of those fees was at the heart of the current lawsuit.

"BIR has produced no evidence whatsoever that any settlement discussions began because of the quality of or the quantity of BIR's work," Best's reply brief said.  "Settlement discussions which resulted in an actual settlement did not result until after a substantial amount of additional work was done by other law firms once BIR withdrew from, or were substituted as to, representation of BMI in the Varian case."  Best urged the federal court to deny Buchanan Ingersoll's motion to enforce the $1.9 million lien and offered to put $700,000 in escrow with the court "as a good faith gesture, and without admitting liability in any amount."

Best had sued Buchanan Ingersoll in July 2020, alleging the Pittsburgh-based firm had overcharged for representing the medical device maker in a pair of patent disputes, including the fight with Varian.  Best broke off its relationship with Buchanan Ingersoll in March 2020.  Best and Varian announced a settlement in Delaware federal court April 18, and Buchanan Ingersoll filed a motion with the Pennsylvania court to enforce a lien on the settlement proceeds April 26, expressing concern that its former client would spend or otherwise dispose of the funds before the firm could claim its share.

Although the law firm claimed its engagement contract with Best included a clause saying it would be governed by Virginia law, Best argued that the Federal Rules of Civil Procedure regarding liens superseded the choice of law provision and that the law of the state where the lien was brought should apply.  And under Pennsylvania law, Best claimed that Buchanan Ingersoll had failed to make the necessary showing that its work contributed substantially to the settlement it sought the lien against.

Buchanan Ingersoll said it did most of the work on the Varian case in Delaware and on six "inter partes review" challenges that Varian had filed with the U.S. Patent and Trademark Office.  But Best countered that more was done by the successor law firms, including a "substantial amount of discovery, the taking and defending of depositions, significant briefing and oral argument before the USPTO … and appeals of the IPR final decisions to and currently pending in the U.S. Court of Appeals for the Federal Circuit."

"It is this substantial work by others, not BIR, that ultimately led to the Varian case settlement more than two years after BIR's representation was terminated," Best's reply said.  Even if the court agreed with Buchanan Ingersoll that Virginia law applied, the firm had not given all parties to the settlement — including Varian — that state's required notice that a lien might be applied to the settlement proceeds, Best said.

Moreover, Best said that Virginia law required Buchanan Ingersoll to show that the fees it sought to recover were reasonable, and the current lawsuit contended that they were not.  Best cited the Virginia Supreme Court's 1997 ruling in Seyfarth Shaw Fairweather & Geraldson v. Lake Fairfax Seven Limited Partnership to support its argument.

"Similar to issues in the instant case, the issues in Seyfarth involved the law firm expending an unreasonable amount of time in the performance of legal services and, therefore, the total amount of legal fees charged was unreasonable," Best's reply said.  "Any fees recoverable must be reasonable and … the party claiming legal fees has the burden of proving prima facie that the fees are reasonable and necessary.  Clearly, BIR has not met its burden of proof, nor has there been any adjudication, that the fees in dispute allegedly owed BIR were reasonable and necessary."

Attorneys Seek $4.3M in Long Running Trade Secrets Litigation

April 27, 2022

A recent Law 360 story by Andrew Karpan, “Atty Seek $4.3M In Fees For 13-Year Trade Secrets Suit” reports that lawyers for an Austrian-owned electronics company have asked a Texas federal judge to allow them to collect over $4.3 million in fees from losing party Renesas Electronics at what could be the end of a decade-long trade secrets saga, if the now-$48 million case doesn't head to a jury for a third time.  The fee bid came from the Dallas law firm that has continuously represented Texas Advanced Optoelectronic Solutions Inc. since its initial 2008 lawsuit against a California rival chipmaker named Intersil.  In the time since, Texas Advanced was sold to austriamicrosystems AG and renamed AMS Sensors USA Inc., Intersil was absorbed by Japanese conglomerate Renesas, and law firm Munck Carter PC became Munck Wilson Mandala LLP.

"Plaintiff seeks its reasonable attorneys' fees after 13.5 years of contentious litigation," Munck Wilson's motion reads.  Legal filings in the case had spanned "886 docket entries," and the case went to a jury twice.  In 2015, a jury agreed with AMS Sensors' argument that Renesas used failed merger talks to steal legally protectable trade secrets related to light sensors that Renesas sells companies including Apple to use in products like iPhones and iPods. Renesas was ordered to pay AMS $88.7 million in damages, although a Texas federal judge trimmed the amount to $77 million.

But the Federal Circuit later ruled that AMS' lawyers made a legally incorrect argument to jurors in that case: the exact amount of damages that Renesas owed should have formally come from the judge instead.  The Texas federal judge overseeing the case then declared senior status and, noting that he now had "limited time to devote to this matter," immediately handed the case to U.S. District Judge Amos L. Mazzant III, who sent the case to a jury again last year.  That time, the jury delivered only an "advisory" award of nearly $85.9 million. Last month, Judge Mazzant set the damages award at $48 million.

According to AMS, the original agreement the companies inked in 2004 to cover the merger negotiations "specifically provides that the parties 'will indemnify and hold harmless the other against any and all damages, loss, or liability (including reasonable attorney's fees).'"  Citing the clause, the company and its attorneys put forward a request for $4,332,265 in fees.  The lawyers say this accounts for "merely one-third of the total hours worked before the proceedings on remand, and just one-half of the total hours worked thereafter."

To defend their rates, the Munck Wilson attorneys cited what they could find about how much Renesas' lawyers at Foley & Lardner LLP are known to bill their clients.  For example, they found a deposition delivered by Foley's William Robinson after he won a 2014 trademark case that attested his "average rate" is "$769/hour."  Munck Wilson asked to list the actual rates it was asking for under seal.

Federal Circuit Says Party Time-Barred From Challenging Fee Award

April 20, 2022

A recent Law 360 story by Jasmin Jackson, “Fed. Circuit Says Appeal of Domino’s $2.7M Fee Win Too Late” reports that the Federal Circuit has held a patentee waited too long to challenge an order forcing it to pay Domino's $2.7 million worth of attorney fees in a patent suit over online menus, yet it won't decide whether to ax the appeal until a lower court rules on a filing extension request.  The three-judge panel said they would postpone ruling on a motion to dismiss filed by Domino's Pizza LLC in an appeal launched by patent-holding company Ameranth Inc. over the seven-figure fee award, which was issued after the pizza chain beat claims that its online menu infringed a patent held by Ameranth.

The panel said they would wait for a California federal judge to decide whether the missed 30-day filing deadline for the appeal could be extended.  "Granting an extension of time to appeal could result in the notice of appeal being deemed timely, and because the district court did not act on that request, the court deems it proper here to remand for the district court to now act on that request," the panel said.

Ameranth filed its suit against Domino's in March 2012 and claimed the chain's online ordering system infringed a patent that covered menu generation, which was issued by the U.S. Patent and Trademark Office that same month.  But U.S. District Judge Dana M. Sabraw invalidated the patent in September 2018 and found the ordering technology was unpatentable under the U.S. Supreme Court's 2014 ruling in Alice v. CLS Bank — a decision that prevented abstract computer-based ideas from being patented without an added inventive element.  According to the ruling, Ameranth's patent was based on an abstract idea of configuring and transmitting menu information.

The pizza chain then requested nearly $3 million in attorney fees in February 2020.  A year later, Judge Sabraw agreed that Domino's was entitled to the award due to Ameranth's "especially weak" suit and said further briefing was needed to determine the exact amount.  Ameranth asked that the ruling be reconsidered the following month and asserted it was wrongfully being labeled as a "patent troll."  But the pizza chain was ultimately awarded $2.7 million in June 2021.

Judge Sabraw amended the judgment the following November but maintained the fee amount, prompting the patent-holding company to initiate an appeal at the Federal Circuit the same month.  But the panel said in their order that Ameranth had to initiate the appeal within about a month of the lower court's initial June order, ruling the filing clock didn't restart after the amended judgment.  "The June 21, 2021, order here fully adjudicated the fee matter and evidenced a clear intent to be the court's final act on that matter," the panel held.