Few issues are of more interest to patent practitioners in the Eastern District these days than rulings on motions for attorneys fees under section 285. Of course both prevailing plaintiffs and defendants can seek an award of fees under Section 285 if the statute's standards are met, as recently clarified by the Supreme Court in Octane Fitness. And in cases where either side's positions are so weak as to make a fee award likely if the case runs its course, both might be well-advised to consider the old Cherokee proverb to the effect that when the horse dies, it's time to get off.
But as with most other areas of civil law, since approximately 94% of all cases filed are either settled or dismissed (voluntarily or involuntarily) only the small percentage of cases which result in a resolution on the merits either at trial or on summary judgment, or which resulted in a settlement which did not preclude the filing of a section 285 motion, can potentially generate a Rule 285 motion and decision. Thus the size of the Eastern District's patent docket means that it is one of the few venues in the nation that has a sufficient number of cases to generate a relatively steady stream of rulings under Section 285. This is helpful because when the same judge is ruling a motions under the same law, at least the variables are reduced to the facts of the operative cases, and not the judge's experience with patent litigation or subjective beliefs as to when a particular set of facts does or doesn't rise to the level of "exceptional case" - a decision the Supreme Court has recently held is subject to review only for abuse of discretion. So it's very interesting to see when the same judge that has rejected a request for fees in one case finds that they are appropriate in another.
One of these situations was recently presented in Georgetown Rail Equipment Company v. Holland, L.P. in a case dealing with railroad track inspection technology. This was a competitor case, and a rare instance of a patent case generating injunctive relief during the pendency of the case, as in early 2014, Judge Davis found that all the relevant factors supported entry of a preliminary injunction. The case proceeded to trial in April 2015, and the Tyler jury found infringement, willful infringement, and assessed damages of $1,541,333, which was the exact amount the plaintiff sought. Last month while I was on vacation Judge Schroeder ruled on the postverdict motions, including not just the usual JMOLs, but also motions for a permanent injunction and for fees under Section 285.
JMOL & Permanent Injunction
In a 54 page opinion, Judge Schroeder denied the defendant's request for JMOL on infringement, willful infringement and the plaintiff's lost profits damages model, finding that a reasonable jury could have found as it did on all three issues. He also entered a permanent injunction against the defendant. There was no JMOL on invalidity, as the Court noted that defendant dropped its invalidity case two days before trial
The Court also found the infringement to be willful, noting in its analysis of the objective prong of the test that the defendant's noninfringement defenses through trial were unreasonable, and that despite seeking an obtaining early claim construction and moving for summary judgment of noninfringement, none of its claim constructions were adopted (the order found them "self-contradictory"), and its motion was denied. It further noted that the defendant's fallback position of divided infringement following claim construction was wrong as a matter of law, noting that it had denied summary judgment on that ground as well as a request to file a third motion on similar grounds. The defendant then proceeded to argue divided infringement to the jury anyway as if this was a method claim, despite the charge to the jury submitting the case as a system claim.
The defendant argued that the fact that the plaintiff did not move for summary judgment precluded a finding of willful infringement but the Court disagreed, noting that the plaintiff did not receive the source code until after the deadline to file letter briefs for summary judgment. In light of this, the Court concluded that the plaintiff had produced clear and convincing evidence of willfulness. The Court agreed that "simply because a defense to infringement proves to be unsuccessful does not make that defense unreasonable. However, as has been demonstrated above, Holland continued to rely on arguments through trial that were substantially weak and rejected time and again."
Analyzing the Read factors, the Court found that that some- the existence of "strong evidence of copying", no good faith belief of noninfringement, and an attempt to needlessly multiply proceedings and prolong the litigation (although no litigation misconduct) supported enhancement, and various other factors either slightly supported enhancement or were neutral. With three factors supporting, three slightly supporting, and three neutral, the Court declined to enhance the $1.5 million award to $4.6 million, but did enhance it by $1 million for a total of $2,544,333.
Exceptional Case & Attorneys Fees Under 285
Judge Schroeder noted that a willfulness finding supports a finding of exceptional case, and also addressed specific "glaring examples" of litigation strategies by the defendant that multiplied the proceedings and needlessly increased costs. As these are something readers may want to write down in ink, I have noted them below, with a facepalm reference because I just couldn't help myself.
- "Significant disparities" between a declaration and the witness' testimony at the preliminary injunction hearing.
- Producing source code it claimed made clear that the claim of infringement was sanctionable, then later challenging its authenticity.
- Continuing to asserted divided infringement of a method claim at trial after the Court ruled it was a system claim.
- Moving to strike plaintiff's expert's reliance on articles, website pages & other "irrelevant hearsay" despite FRE 703, then following up with a limine motion and threats of sanctions on the same grounds after the motion to strike was denied.
"It should be noted that none of Holland’s actions, in isolation, was so egregious as to make this case exceptional," Judge Schroeder wrote. "Though unfortunate, there is nothing “exceptional” about a party resisting its discovery obligations, maintaining already rejected objections to exhibits or testimony into trial, filing weak Daubert requests, or even making repeated Rule 11 sanction threats. However, when a party does all of these things, and continues to raise rejected arguments that are found to be objectively unreasonable, the Court can only conclude the party needlessly multiplied the proceedings at the expense of the opposing side and the Court. This Order should not be read to condone a “kitchen sink” approach to a motion for fees—but in the rare case where the court and jury have found willful infringement and the accused infringer engaged in conduct that needlessly drew out resolution of the issues to the extent that is present here, the totality of the circumstances warrants the award of fees."
The plaintiff sought and the Court awarded $1,566,540.35 in fees, which the Court noted was below both the Texas average of $2 million and the national average of $2.1 million. The defendant did not contest the reasonableness of the fees (although the Court noted that it did object to cost amounts as small as $1.76 which the plaintiff "easily substantiated").
The Court concluded with a brief observation after reviewing the defendant's reference to its Rule 68 offer of judgment where it offered to abide by a permanent injunction of its own terms and the plaintiff's explanation of why that offer was rejected.
Having agreed with the jury that Holland willfully infringed, the Court cannot from its current vantage look back over the litigation and determine precisely when Holland should have conceded to Georgetown’s demands or what the exact form of those demands should have been. Hindsight bias clouds a fair and accurate assessment. However, given the history between these two companies, the weakness of Holland’s litigation position, and the fact that the jury found willful infringement, the Court can say with confidence that Georgetown has not compromised its position by viewing the Offer of Judgment as too little, too late.