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Attorney Fees Becoming More Common in Patent Cases

By Cynthia Ford, Litigation News Contributing Editor – January 26, 2016

 

Attorney fees awards are becoming more common in patent cases. A federal district judge awarded more than $4.1 million in such fees in a patent infringement case under 35 U.S.C. § 285, which allows attorney fees “in exceptional cases.” Universal Elecs., Inc. v. Universal Remote Control, Inc. This award illustrates the trend to liberalize standards for finding a patent case to be “exceptional,” due at least in part to the abuse-of-discretion review standard announced in the U.S. Supreme Court’s twin 2014 decisions Highmark Inc. v. Allcare Health Management System, Inc. and Octane Fitness, LLC v. ICON Health & Fitness, Inc.


An “Exceptional” Case
Universal Electronics, Inc. sued Universal Remote Control, Inc. for alleged infringement of various remote control patents. Three years later, after a jury trial, the U.S. District Court for the Central District of California entered judgment for the defendant. The defendant then moved for attorney fees and costs, claiming $4.6 million in fees and more than $860,000 in costs.


The court analyzed the reasonableness of the requested amounts, ultimately reducing the fee claim by 15 percent, to approximately $4.1 million, and the expense claim by 45 percent, to approximately $478,000. Still, the court awarded what it admitted was “a relatively large number.” Among other things, the court based its finding that the case was “exceptional” on the facts that “this litigation was at least in part motivated by Plaintiff’s desire for ‘payback’ for Defendant’s successful competition in the marketplace, that Plaintiff failed to adequately review its own material concerning marking before filing suit, that it engaged in discovery gamesmanship to obscure such failing, and that Plaintiff engaged in ‘troubling’ conduct concerning a petition for correction of inventorship.”


Rather than taking the approach of “green-eyeshade accountants” and scrutinizing each entry, the court followed a more holistic approach. “There is a growing trend that District Court judges should award fees based on an overall global understanding and review of a case, rather than on a tedious review of voluminous time entries and hourly rates,” the court explained.


Although the court found defense counsel’s average hourly rate of $768.06 reasonable, the court reduced the hourly rate billed by the defendant’s patent agent from an average of $693 to a $323 hourly rate. The judge also refused to award any fees for 19 lawyers who spent less than 100 hours each on the case, “[b]ecause such transient involvement is inefficient.” Finally, the judge observed that the number of defense firms (four) and individual lawyers (56) was also excessive and inefficient. “Too often, the proper goal of a litigator to bring order out of chaos was lost, with more chaos resulting,” the court noted.


Appellate Deference
The parties filed cross-appeals, which are still pending, in the U.S. Court of Appeals for the Federal Circuit. Notably, in Highmark and Octane, decided the same day, the U.S. Supreme Court held that an appellate court should apply an abuse-of-discretion standard to all aspects of a district court’s attorneys’ fees determination under 35 U.S.C. § 285. “The combination of these cases means the district court has a ton of flexibility when operating under section 285,” explains Alton L. Absher III, Winston-Salem, NC, cochair of the Patents Subcommittee of the ABA Section of Litigation’s Intellectual Property Litigation Committee.


The fee award in this case illustrates the impact of the recent Supreme Court holdings. “Before Octane, it was pretty rare that you would get fees in a patent case,” comments Michael P. Padden, Chicago, IL, cochair of the Patents Subcommittee of the Section of Litigation’s Intellectual Property Litigation Committee. “It is much easier now. Octane is having an impact. If you lose, you can lose badly. If you win, you can win big.”
According to a Federal Circuit Bar Association study, district courts granted only 13 percent of attorney fees motions before the Highmark and Octane decisions, says Angela Foster, North Brunswick, NJ, cochair of the Section’s Intellectual Property Litigation Committee. Since those decisions, “district courts have granted between 40 percent and 50 percent of attorney fee motions,” she states.


Heed the Warning
Patent lawyers should be careful not to overstaff their cases. “The judge gave a pretty good practice tip when he docked the fees from all the lawyers who spent less than a hundred hours on the case,” Absher notes. “The lesson is helpful outside the fee award context, too.  Clients don’t like you adding lawyers. It is much more efficient to have a smaller core of lawyers living the case, who really know it.” Careful timekeeping helps, too. “Be reasonably accurate in keeping your time,” Absher advises. “In this case, the court allocated fees per patent, so it is helpful to note which patent you are working on when making time entries.” 


“If you want to avoid getting rung up like this, just do what you already know you should: Only assert reasonable claims and defenses; don’t hide evidence; don’t mislead the court or your opponents,” notes Absher.  “Octane and this case won’t change the practices of the vast majority of patent lawyers, who do and will continue to practice the right way. But if there are a few more big awards like this one, where the plaintiff has to pay its own fees and then another $4.1 million to the defendant, especially if they are affirmed by the Federal Circuit, the bad guys will have to reconsider their approach,” Absher predicts.


Keywords: attorney fees, exceptional, patent litigation


 
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