ReedHycalog UK, Ltd. et al v. Diamond Innovations Inc., 6:08cv00325 (E.D. Tex. August 12, 2010)
Judge: Leonard Davis
Holding: Defendants' JMOL motions DENIED; Plaintiff's Request for Exceptional Case Finding, Enhanced Damages & Permanent Injunction GRANTED
A few days back I posted on how much I enjoy JMOL orders. Late last week Judge Davis entered another, which, in contrast to Soverain v. Newegg granted an injunction and found the case to be "exceptional" so as to warrant an award of fees, principally due to the defendant's litigation misconduct.
Procedurally, Defendant Diamond Innovations’ Motion for Judgment as a Matter of Law Notwithstanding the Jury’s Verdict on Invalidity and Non-Infringement and Alternative Motion for a New Trial was denied, while the Plaintiff's Motion for Prejudgment and Postjudgment Interest, its Motion for an Order Finding Exceptional Case and Awarding Enhanced Damages and Attorneys’ and Expert’s Fees and its Motion for Entry of a Permanent Injunction were all granted.
Judge Davis noted that Plaintiff ReedHycalog’s patents have gone through extensive litigation over the past five years - in fact this case was the fourth lawsuit that involved these patents. "All of the defendants in these prior suits settled before trial for significant sums and ongoing license agreements. During the trial of the instant case, both parties without objection acknowledged before the jury that ReedHycalog had license agreements with over 95% of the drill bit industry generating over $100 million dollars per year in ongoing royalty payments to ReedHycalog. Both sides argued to the jury that their verdict in the instant case would have an effect on the industry and ReedHycalog’s $100 million annual royalty stream." Both parties also acknowledged before the jury, Judge Davis went on to note, that ReedHycalog had offered and continued to offer Diamond Innovations the same no royalty supply agreement it had given to other cutter manufacturers whereby Diamond Innovations would pay no royalties provided it would only sell cutters to licensed bit manufacturers, who represent over 95% of the bit market. Diamond Innovations rejected ReedHycalog’s no royalty supply agreement and continued to press its declaratory judgment action of invalidity even though its partially leached cutters accounted for only 2.2% of its total annual revenue. Damages were not submitted to the jury because the parties stipulated past damages in the amount of $1.5 million. After a six day trial, the jury found that the patents were not invalid and were infringed and infringed willfully.
On Diamond's JMOL, Judge Davis found that there was evidence to support the jury's verdict as to infringement and no anticipation. As for its new trial motion, Judge Davis rejected its claim that the plaintiff's closing argument was improper, and in any event, noted that it waived any objection on this point by failing to object to the closing argument. He also reaffirmed his JMOL as to the defense of obviousness, noting that Diamond presented no expert testimony that the asserted patents were invalid for obviousness (sound familiar, readers?) and that it failed to seek an instruction on the issue, or file a motion regarding testimony about obviousness at trial. Judge Davis also rejected the challenges as to the jury instructions, noting that there was not an objection to the proposed charge on several of the issues.On Reedhycalog's motion for exceptional case and awarding enhanced damages and attorney and expert fees, Judge Davis notes that ReedHycalog presented multiple instances where Diamond Innovations acted in bad faith and committed litigation misconduct sufficient to make this an exceptional case. You know things are not looking up when you see the language "The Court discusses the more egregious actions here" right? In any event, they were:
- Improper concealment and withholding of communications with an attorney who wrote a memo regarding the validity of the patents after producing opinion of counsel documents from another attorney. "The Fay communications revealed that Mr. Fay was specifically retained to provide a patent opinion. Further, the communications also revealed that Mr. Fay wrote a memo regarding ReedHycalog’s patents, which was not produced. . . . Diamond Innovations only produced the Fay memo after the Court ordered it to do so. Order (Docket No. 271). The Fay memo is clearly an opinion of counsel, not merely general business legal advice as Diamond Innovations had characterized it. Diamond Innovations blatantly failed to comply with the Court’s Docket Control Order and the Eastern District’s Local Rules when it withheld its communication with Mr. Fay that squarely fell within its waiver." (Internal cites omitted).
- Diamond Innovations "repeatedly burdened the Court with unnecessary motion practice throughout this case." (The orders detailed some of the motions, characterizing some as "completely meritless." The Court specifically noted that "Diamond Innovations’ attempt to constantly circumvent the Local Rules generated a needless amount of motion practice related to inequitable conduct, which unfairly burdened ReedHycalog and wasted the Court’s resources." It then notes that Diamond abandoned the inequitable conduct allegation at trial.
- Repeatedly interrupting testimony during depositions to make improper objections.
- Conferring with a testifying expert during a break in a deposition, after which the expert changed his answer, and then refusing to let the expert answer questions about the colloqy with counsel during the break.
- Failure to mediate in good faith (didn't show up for court-ordered mediation).
"Diamond Innovations’ conduct throughout this case falls far below the Court’s standards for professionalism and collegiality," Judge Davis concluded. "Based on Diamond Innovations’ litigation misconduct and willfulness, the Court deems this case exceptional. Accordingly, the Court awards ReedHycalog reasonable attorneys’ fees and expenses."
How much? Reedhycalog presented detailed billing records totaling $5,266,884.00, which Judge Davis found were reasonable (noting that Diamond's were $5,069,442.50). Added to this were $3,043,267 in expert fees for plaintiff's expert who was required to do extensive testing which the Court found was "very expensive and probably unnecessary" to prove infringement, but was required as a result of the motion for summary judgment filed by Diamond.
As for enhanced damages, Judge Davis noted that "this was not a close case" and trebled the stipulated $1.5 million in damages for a total award of $4.5 million.Judge Davis also granted the motion for entry of injunction, which he entered as a separate order.
