Free Order on Motion for Attorney Fees - District Court of Arizona - Arizona

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

LEMELSON MEDICAL, EDUCATION & RESEARCH FOUNDATION, L.P.,

) ) ) Plaintiff, ) ) vs. ) ) COMPUSA, INC., et al., ) ) Defendants. ) ___________________________________) O R D E R

No. 2:00cv0663-HRH

Motions for Attorney Fees and Costs Defendants Liz Claiborne, Inc; Nash Finch Company; and Ingram Industries, Inc. move for awards of attorney fees and costs.1 These motions are opposed.2 and is not deemed necessary. Background This case was filed by plaintiff Lemelson Medical, Oral argument has not been requested

Education & Research Foundation Limited Partnership on April 14, 2000. Plaintiff asserted one claim in its complaint, alleging that defendants had infringed patents issued to Jerome Lemelson by utilizing bar code scanners or similar systems. Although the

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patents-in-suit had issued in the early 1990s, Mr. Lemelson claimed the benefit of filing dates of two patent applications that had been submitted in 1954 and 1956. Defendants were the end-users of bar

code scanners and/or similar systems, not the manufacturers of such systems. On April 3, 2001, this case was stayed,3 pending a final decision in Symbol Tech., Inc. v. Lemelson Medical, Education & Research Foundation, which was pending in the District of Nevada. The Symbol case was a declaratory judgment action brought by Symbol and Cognex Corporation, both of which are manufacturers of bar code scanners and/or similar systems. At the time the case was stayed,

Liz Claiborne and Ingram Industries had both filed an answer and counterclaim,4 and Nash-Finch had filed an answer.5 On January 23, 2004, the district court in Nevada entered an order in the Symbol case, in which the court found the patentsin-suit unenforceable due to prosecution laches. Symbol Tech., Inc. v. Lemelson Medical, Education & Research Foundation, 301 F. Supp. 2d 1147 (D. Nev. 2004) (Symbol I). On September 9, 2005, the

Federal Circuit affirmed the district court's decision that the patents-in-suit were unenforceable because of prosecution laches. Symbol Tech., Inc. v. Lemelson Medical, Education & Research Foundation, 422 F.3d 1378 (Fed. Cir. 2005) (Symbol II). On November

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16, 2005, the Federal Circuit granted a petition for rehearing for the limited purpose of amending the September 9, 2005 opinion to apply the laches holding to all of the asserted claims. Symbol

Tech., Inc. v. Lemelson Medical, Education & Research Foundation, 429 F.3d 1051 (Fed. Cir. 2005) (Symbol III). The Symbol decision being final, plaintiff, on December 22, 2005, filed a motion to voluntarily dismiss this case.6 On

February 6, 2006, the court dismissed the case its entirety with prejudice.7 Final judgment was also entered on February 6, 2006.8

The three instant motions for attorney fees and costs timely followed. Discussion Fees Attorney fees in patent cases are governed by 35 U.S.C. § 285, which provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." "The award of attorney fees is within the informed discretion of the trial court." Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d An award of attorney fees in a patent

1555, 1582 (Fed. Cir. 1992).

case is not the norm, and "[i]n the context of fee awards to prevailing accused infringers, ... § 285 is limited to circumstances in which it is necessary to prevent 'a gross injustice' to the

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accused infringer[.]" Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1329 (Fed. Cir. 2003) (quoting Mach. Corp. of Amer. v. Gullfiber A.B., 774 F.2d 467, 472 (Fed. Cir. 1985)). "An award of attorney fees under 35 U.S.C. § 285 involves a two-part determination." Perricone v. Medicis Pharmaceutical "First, a district

Corp., 432 F.3d 1368, 1380 (Fed Cir. 2005).

court must determine whether the prevailing party has proven an exceptional case by clear and convincing evidence." Id. "Second,

if the district court finds the case exceptional, it must then determine whether an award of attorney fees is appropriate." Prevailing Party Defendants contend that they are prevailing parties, and plaintiff does not dispute this contention. finds otherwise. "[T]o be a prevailing party, one must receive at least some relief on the merits, which alters ... the legal relationship of the parties." Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, "When the However, the court Id.

1320 (Fed. Cir. 2004) (internal quotations omitted).

plaintiff voluntarily dismisses the lawsuit prior to final judgment, it has been held that the defendant is not necessarily a prevailing party." Id. at 1321 (citing Dean v. Riser, 240 F.3d 505, 509 (5th Cir. 2001)). Plaintiff moved to voluntarily dismiss this case, and the judgment that was entered as a result did not find in favor of defendants. Rather, it simply dismissed the case with prejudice.

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plainly defendants benefitted from the Symbol litigation.

To the

extent that defendants' legal relationship to plaintiff was altered, it came not because of this litigation but because of the Symbol litigation. Because defendants have received no relief on the

merits of this case, defendants cannot be considered prevailing parties for purposes of Section 285. fees are denied. Exceptional Case But even if defendants were prevailing parties, the court would not find that this is an exceptional case. exceptional is a factual determination. Whether a case is Their motions for attorney

Phonometrics, Inc. v. "'The

Westin Hotel Co., 350 F.3d 1242, 1245 (Fed. Cir. 2003).

prevailing party may prove the existence of an exceptional case by showing: inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement.'" Id. at 1246 (quoting

Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002)) (emphasis added). "Evidence of such conduct must be supported by clear and convincing evidence." McNeil-PPC, Inc. In cases

v. L. Perrigo Co., 337 F.3d 1362, 1371 (Fed. Cir. 2003).

such as these, where the prevailing party is the alleged infringer, "'"exceptional cases" are normally those of bad faith litigation or those involving fraud or inequitable conduct by the patentee in procuring the patent.'" Id. at 1371-72 (quoting Cambridge Prods.

Ltd. v. Penn Nutrients Inc., 962 F.2d 1048, 1050-51 (Fed. Cir. 1992)). "When 'the patentee is manifestly unreasonable in assessing - 5 -

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infringement, while continuing to assert infringement in court, an inference is proper of bad faith, whether grounded in or denominated wrongful intent, recklessness, or gross negligence.'" Phonometrics, 350 F.3d at 1246 (quoting Eltech Sys. Corp. v. PPG Indus., Inc., 903 F.2d 805, 811 (Fed. Cir. 1990)). Looking first at this case only (and not considering what occurred in the Symbol litigation), defendants argue that this is an exceptional case because plaintiff that engaged because in the bad faith of

litigation.

Defendants

contend

issue

prosecution laches had already been raised in the Symbol litigation when this case was filed, plaintiff knew or should have known that the patents-in-suit were unenforceable. Defendants also contend

that plaintiff acted in bad faith because this lawsuit, as well as the others filed by plaintiff involving the same patents-in-suit, was filed as a means of forcing the defendants to take quick licenses to the Lemelson patent portfolio. Bad faith litigation is "where a patentee initiates litigation on a patent he knows is invalid or is not infringed[.]" McNeil, 337 F.3d at 1372. At the time plaintiff filed the instant

case, plaintiff did not know, nor should plaintiff have known, that the patents-in-suit were unenforceable because of prosecution

laches. At the time plaintiff filed this lawsuit, no court had held that the patents-in-suit were unenforceable due to prosecution laches. In fact, one court had denied a motion for summary judgment based on prosecution laches in a case involving many of the same patents here in suit. See Ford Motor Co. v. Lemelson, 42 U.S.P.Q.2d - 6 -

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1706, 1711 (D. Nev. 1997).

Other authority also suggested that

prosecution laches was not an available defense in cases involving continuation applications. See Progressive Games, Inc. v.

Amusements Extra, Inc., 83 F. Supp. 2d 1180, 1184 (D. Colo. 1999) (court unwilling to apply laches when the Federal Circuit has yet to recognize the laches defense to continuation or continuation-inpart applications); Advanced Cardiovascular Sys., Inc. v. Medtronic, Inc., 41 U.S.P.Q.2d 1770, 1774-75 (N.D. Cal. 1996) (striking prosecution laches defense in case involving continuation

applications). At the time plaintiff filed this case, the patentsin-suit were at least facially valid. Plaintiff did not initiate

litigation on patents it knew, or should have known, were invalid. Nothing about plaintiff's licensing attempts gives rise to an inference of bad faith either. As stated above, the patents-

in-suit were facially valid. The court perceives no impropriety in offering licensing agreements for facially valid patents as an alternative to pursuing uncertain and costly patent infringement litigation. In sum, the evidence of bad faith falls far short of the clear and convincing proof that is required in order to deem a case exceptional; nor is there any other evidence, when looking at this case only, to support a conclusion that this case is exceptional. The case was stayed shortly after it was filed, remained stayed for over five years, and then was voluntarily dismissed by plaintiff. Such a case can hardly be considered exceptional.

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Defendants, however, insist that the court can look to what occurred in the Symbol case to determine whether the instant case is exceptional because the Symbol case involved the same patents-in-suit. Jerome Lemelson's conduct in prosecuting the

patents-in-suit was criticized in Symbol and was found to constitute prosecution laches. While plaintiff certainly stands in the shoes

of Mr. Lemelson regarding the patent prosecution that came under criticism in Symbol, the court rejects the proposition that it is appropriate for purposes of an attorney fee motion to look to what happened in another case--a case in which the moving defendants were not parties. Defendants have cited no authority for the proposition that the court should look to the results of other litigation to determine whether the instant case is exceptional nor has the court identified any such authority. In the absence of supporting

authority, the court declines to make this kind of extension to the exceptional case concept. Assuming for the sake of discussion that it were

appropriate to take notice of the conclusions reached in Symbol that that case was exceptional, see Symbol I, 301 F. Supp. 2d at 1167 and Symbol III, 429 F.3d at 1052, that fact does not make this an exceptional case. That which made Symbol exceptional was simply

not litigated in this case.

Even considering the outcome of the

Symbol litigation, the court could not conclude that this is an exceptional case. bad faith in the There was no finding of inequitable conduct or Symbol case, and although a case "may be

exceptional for some other reason," Orthopedic Equip. Co. v. All - 8 -

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Orthopedic Appliances, Inc., 707 F.2d 1376, 1384 (Fed. Cir. 1983), this is not such a case. laches could be the While it is possible that prosecution for finding a case exceptional,

basis

defendants' evidence is neither clear nor convincing enough to support such a conclusion here. Without "proof of actual wrongful intent . . . or of gross negligence,"9 Mach. Corp., 774 F.2d at

473, the court would not be inclined to find this an exceptional case. Appropriateness Even if the court had determined that defendants were prevailing parties and that this was an exceptional case,

defendants' motions for attorney fees would still be denied as an award of attorney fees would not be appropriate here. In

determining whether a fee award is appropriate, the court "'weigh[s] intangible as well as tangible factors: the degree of culpability of the infringer, the closeness of the question, litigation

behavior, and any other factors whereby fee shifting may serve as an instrument of justice.'" Superior Fireplace Co. v. Majestic

Products Co., 270 F.3d 1358, 1378 (Fed. Cir. 2001) (quoting Nat'l Presto Indus., Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed. Cir. 1996)). There has been no "'gross injustice' to the accused

The court is aware that the Supreme Court has observed that, in the punitive damages context, "culpable neglect" may encompass conduct that is grossly negligent. See Smith v. Wade, 461 U.S. 30, 45 n.12 (1983) (citing Welch v. Durand, 36 Conn. 182 (1869)). The court is not convinced that this observation has much relevancy to the question of whether a patent case is exceptional for purposes of Section 285. - 9 -

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infringer[s]" in this case. Forest Labs., 339 F.3d at 1329 (quoting Mach. Corp., 774 F.2d at 472). Defendants do not advance any argument as to why fees would be appropriate here. As set out more than once previously,

this case commenced at a time when the patents-in-suit were facially valid; the case was quickly and easily brought to issue; the case was stayed without significant dispute pending a final decision in Symbol; and the case was voluntarily dismissed by plaintiff once the Symbol decision became final. Under these circumstances, an award

of attorney fees would be inappropriate Costs The Federal Circuit has interpreted section 285 to include the recovery of non-taxable costs for the prevailing party. See

Central Soya Co. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983). Because defendants are not prevailing parties, they are not entitled to non-taxable costs. taxable costs are denied. Conclusion Defendants' motions10 for attorney fees and costs are denied. DATED at Anchorage, Alaska, this 6th day of July, 2006. Defendants' motions for non-

/s/ H. Russel Holland United States District Judge

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