WILLIAM T. HART, District Judge.
This case is before the court after trial to determine whether defendants HTC Corporation and HTC America, Inc. ("HTC") are entitled to recover attorney fees and costs from plaintiff's attorneys Raymond Niro, Paul Vickrey, Paul Gibbons, and David Mahalek (hereinafter "Niro"), as well as from plaintiff Intellect Wireless, Inc. ("IW"). IW has withdrawn its initial opposition and conceded that this case is exceptional within the meaning of the Patent Act's fee-shifting provision which authorizes the award of attorney fees and costs to prevailing parties in exceptional cases. 35 U.S.C. § 285. IW does continue to dispute the amount of fees that should be awarded. HTC contends that a finding should also be made that the attorneys for IW are jointly and personally required to satisfy HTC's attorney fees and costs because IW's attorneys unreasonably and vexatiously multiplied the proceedings within the meaning of 28 U.S.C. § 1927; because their litigation conduct was in violation of Fed. R. Civ. P. 11; and/or based on the court's inherent power to punish litigation misconduct.
The Niro attorneys have filed declarations stating that they were never informed of false declarations the inventor made to the United States Patent and Trademark Office ("PTO") in February 2007, and they have stated that they are not guilty of any misrepresentations in this litigation. HTC and the Niro attorneys agree that the issue of the attorneys' liability can be decided on the papers that have been presented.
The key issue that must be determined is what and when did IW's attorneys in the infringement litigation know about the inventor's multiple false statements to the PTO and any false statements in litigation in this court concerning the patents.
Subsequent to the affirmance of the judgment finding the patents-in-suit unenforceable, HTC sought discovery from the attorney who represented the inventor before the PTO. This discovery establishes that, in February 2007, the inventor clearly knew his statements to the PTO were false. HTC argues that Niro also knew the statements were false.
A post-trial discovery request produced an email message from Daniel Henderson, the inventor, to Robert Tendler, the attorney then representing him before the PTO, dated February 10, 2007, and stating in part:
(Emphasis in the original.)
The patents-in-suit were issued in September and December of 2007. Thereafter, during 2008 and 2009, IW filed a series of infringement actions in this court.
The specific infringement action in this case was filed on May 14, 2009. The Amended Complaint, filed on August 6, 2009, alleges in part:
On November 6, 2009 Henderson sent an email message to Niro attorneys, stating in part:
On November 11, 2010, HTC filed a counterclaim specifically alleging that false declarations were filed by the inventor stating, among other things, that the claimed invention had been reduced to practice and falsely claiming diligence.
Thereafter, during discovery, specific questions were asked about the claimed invention. In February 2011, Niro attorneys informed Henderson: "We're not taking the position that it wasn't an actual reduction to practice. We're trying to be more circumspect than that and convey the impression that we're unsure." In IW's Third Supplemental Response to HTC Corporation's First Set of Interrogatories signed by Niro attorneys, but not Henderson, it is stated at page 7: "Mr. Henderson did build a prototype with functional electronics that he believed was an actual reduction to practice of United States Patent No. 6,278,862."
Additional testimony by Henderson at trial obfuscating the nature of what he claimed to have reduced to practice is quoted in the court's opinion. See
Niro attorneys and Cliff Kraft have each presented declarations stating that Tendler did not consult them about the February 10, 2007 message from Henderson to Tendler. They state that they did not see the actual February 10 email until it was produced in recent discovery. Tendler has also filed a declaration stating that he did not consult with Niro or Kraft about the message. Tendler has also stated that he did not turn over his entire file to Niro, which is contrary to testimony he gave in a pretrial deposition. Crediting these declarations, however, does not excuse the presentation of Henderson's false testimony at trial and the extension of this litigation on appeal.
HTC also argues that, in addition to the evidence relating to knowledge of Henderson's false statements, a basis exists to draw a negative inference with respect to Niro's knowledge, because Niro has not revealed all of its documents with respect to preparation for trial. After it clearly appeared that Henderson knew of his false statements, it was ruled that no attorney-client privilege prevented discovery of all facts and documents relating to the trial of inequitable conduct. See
The court may award attorney fees under 28 U.S.C. § 1927 "when an attorney has acted in an `objectively unreasonable manner' by engaging in `serious and studied disregard for the orderly process of justice,'
Daniel Henderson clearly knew that he had not invented (or reduced to practice) a wireless picture phone or wireless identification device in 1993, notwithstanding contrary statements to the PTO (and coincidentally false representations to the Smithsonian Institution apparently to strengthen his litigation position). He revealed this to his patent attorney in 2007 and specifically to Niro in 2009 if not before. Relying on the adverse inference to be drawn from Niro's failure to disclose documents, it is found that Niro was aware of the false statements prior to the filing of the present lawsuit. Therefore, Niro is liable for all reasonable attorney fees and expenses incurred by HTC, not just those incurred after the November 6, 2009 email from Henderson to Niro.
HTC seeks fees and related expenses totaling $4,801,476.44. IW and the Niro attorneys contend HTC is entitled to no more than $2,357,682.36.
The first issue to address is what is before the court. Local Rule 54.3 requires that parties exchange information and attempt to resolve disputes regarding the amount of fees prior to the filing of a motion seeking those fees. If a full resolution cannot be reached, the parties are to file a joint statement setting forth their remaining disputes. N.D. Ill. L.R. 54.3(e). "Unless otherwise allowed by the court, the motion and any supporting or opposing memoranda shall limit their argument and supporting evidentiary matter to disputed issues" in the joint statement. Id. 54.3(f). As expressly stated in the Rule itself, this is not an absolute rule, but one that can be varied as "otherwise allowed by the court." The Opposition complains that HTC's present motion includes amounts that were not included in the joint statement. The additional amounts, however, were not yet finalized at the time of the joint statement or concern work performed thereafter, that is, the briefing of the fee motions. HTC cannot be expected to have included in the joint statement amounts that were concurrent with and subsequent to the joint statement. The additional amounts that are presently claimed by HTC will be considered. The final amount awarded to HTC should include reasonable fees incurred in order to obtain the fee award. When the issue is finally resolved, HTC must estimate the fees for its final work. On the other side, HTC complains that the Opposition's present contentions vary from objections raised in the joint statement, including seeking further reductions and lower billing rates. The issues presently raised still fall within the same general contentions previously raised. An extensive collection of billing documents had to be analyzed and the Opposition contends some were not timely provided before the joint statement was due. The arguments and objections presently raised by the Opposition will all be considered.
As to the § 285 fee award against IW, Federal Circuit law applies including as regards the calculation of the amount of fees.
The parties disagree as to the appropriate hourly rates for the attorneys and legal staff. Relying on Seventh Circuit case law, defendants contend the rates actually charged and already paid by them are presumed to be reasonable. The Opposition contends that Federal Circuit law does not support use of such a presumption and provides that the appropriate rates to use are those for the Chicago market (where this case is pending), not the rates charged in the non-Chicago markets (San Diego and San Francisco) where HTC attorneys and staff representing most of the billed time are based.
The Seventh Circuit holds that the rate actually charged by an attorney is presumed to be reasonable unless the opponent meets its burden of showing that the rate is not reasonable. As regards an out-of-town attorney, the rate charged is still generally used, but the district judge may, but is not required to, exercise discretion to lower the billing rate if the opponent shows that local counsel could have provided comparably effective legal services and the rate of the out-of-town practitioner was higher than the local market rate.
The Opposition cites to Chicago-area rates disclosed in the American Intellectual Property Law Association's ("AIPLA") 2013 economic survey. AIPLA's surveys have been considered in other cases. See, e.g.,
HTC also requests prejudgment interest. The Opposition agrees prejudgment interest would be appropriate under Federal Circuit law, but disputes that it should be compounded. There also may be a disagreement as when prejudgment interest ends and postjudgment interest begins. The Opposition contends prejudgment interest ends when judgment was entered dismissing the case, not when a judgment for attorney fees is actually entered. However, actual billed rates are not being awarded. Instead, all the hours appropriately billed are being awarded at current rates,
The opposition contends that certain time entries have been "block billed" and therefore a reduction of 81.5 hours should be made. The items listed at pages 105 to 110 of the Contention Letter have been examined. Considering the amount of hours claimed in the fee petition, this is not a substantial number of entries. These entries did not preclude the Opposition from being able to adequately raise issues as to the reasonableness or propriety of claimed hours. No reduction will be made based on blocked billing.
The Opposition contends that 140.25 hours billed by George Kanabe, an experienced partner, as part of preparation for the inequitable conduct bench trial was excessive, redundant, or otherwise unnecessary. Kanabe made no presentation to the court as part of the bench trial. Four attorneys presented the case in court, with assistance from at least three attorneys other than Kanabe. In response, HTC does not establish why the work of Kanabe was necessary, only contending that IW was also billed for the work at the bench trial by a number of its attorneys. HTC has not met its burden of establishing that the time billed by Kanabe was reasonable and necessary. HTC should not be reimbursed for the 140.25 hours billed by Kanabe.
HTC billed 999.25 hours for work on a summary judgment motion seeking summary judgment based on inequitable conduct. The motion was denied. See
The Opposition contends that 2,463.9 hours should be cut in half as duplicative and excessive. However, other than two instances, the Opposition does not identify these hours. Other than the two instances, this objection will not be considered. See
On pages 69 to 105 of the Opposition Letter, the Opposition identifies 946.45 hours of billed attorney time that is largely clerical in nature and therefore should have been included in overhead. See
The Opposition contends that 626.35 hours should not be awarded because vague or unsupported. The Opposition, however, specifically identifies only 14 time entries. See Answer to Fee Motion [Docket Entry 341], Exh. 11. Only these 14 time entries will be considered. Almost all of these are entries that were entirely or largely redacted by HTC. While Local Rule 54.3 allows some redaction, the time claim still must be sufficiently identified. Moreover, this court has consistently and repeatedly denied leave to file any of the fee motions and related pleadings under seal. See Docket Entries 238, 246, 250, 280, 294, 313, 327, 332, 339. Despite the denial of the motions to seal, the parties have generally failed to file in the public record unredacted versions of their pleadings.
Time spent attending the claim construction hearing in another IW case filed in this District will not be compensated. To the extent rulings in that case were relevant to the present case, HTC could have relied on written pleadings and rulings and, if necessary, transcripts. To the extent the present fee petition contains time for work before the USPTO, such time should not be included in the fee award. The Opposition has not specifically identified such time in its brief. To the extent it can specifically identify such time to HTC, such time should not be reimbursed.
Last, the Opposition raises objections to certain expenses. Only some of the objected-to expenses are identified in the Opposition's Exhibit 15. HTC has already agreed that it is not seeking reimbursement for some of these expenses. It also contends that it has not duplicated any items already included in its bill of costs. As to remaining disputed expenses, HTC is limited to expenses (as well as billable time) for no more than two attorneys attending a deposition. Absent a showing that cheaper alternatives were not available, HTC is not entitled to reimbursement for first-class airplane tickets.
Also to be considered is the bill of costs. As to deposition costs, the Opposition objects to costs related to certain depositions as not being reasonably necessary. The Opposition contends that costs related to witnesses whose testimony concerned infringement or damages should not be allowed because the case was resolved based on inequitable conduct. A party, however, cannot be certain as to what the outcome of the case will be. To the extent the depositions were reasonably related to an issue in the case at the time the transcript was obtained, the reasonable costs of obtaining the transcript are properly included in the bill of costs; it is not required that testimony from the transcript be used at trial or otherwise or that the transcript be "absolutely indispensable."
As the parties agree, per page costs of the transcripts are to be limited to $4.85. In accordance with Local Rule 54.1, attendance fees for the court reporters are limited to $110 for a half day and $220 for a full day. The Livenote, rough draft, and deposition exhibit copying costs have not been shown to be necessary and therefore should not be included in the bill of costs.
The Opposition contends interpreter costs for Taiwanese deponents should not be allowed. As previously held, the depositions were necessary so these costs will not be disallowed based on that general objection. The Opposition also contends that the deponents spoke adequate English and did not need an interpreter. HTC does not respond to this contention. Since the burden is on HTC to show the need for an interpreter, the interpreter costs will not be allowed.
HTC has sufficiently established its need for all the hearing transcripts that were produced. These amounts will be allowed.
HTC does not establish a need for rush service of process other than to contend that the total was still less than the Marshal would have charged. Nevertheless, the rush fee is only reimbursable if necessary and that has not been shown. The $617.50 in rush fees will not be allowed. HTC does not dispute that $265.50 in unsuccessful service should not be allowed. That amount should also be removed from the bill of costs.
HTC has sufficiently established that $14,058.60 for in-house copying is a reasonable amount.
There is no objection to $298.52 in copying costs at the Smithsonian Museum.
The parties had an agreement to provide documents in a readable electronic format. The costs of such conversion is awardable under § 1920.
HTC has sufficiently established that it is entitled to $7,389.00 for copying patent files and $17,047.49 for trial exhibits. HTC also sufficiently establishes $2,135.52 for demonstrative exhibits and establishing an internet connection for use at trial.
The Opposition objects to travel costs for HTC's expert and two Smithsonian Museum employees who brought for trial the prototype that is presently in the Smithsonian's collection. The amounts for hotel and food are limited to actual costs or the applicable per diem rate, whichever is less. 28 U.S.C. § 1821(d);
Within one week, the parties shall meet to determine whether they can agree to the amounts that would result from the application of today's ruling to the fee petition and bill of costs. At the next status hearing, the parties shall report the appropriate amounts and a final judgment to that effect will thereafter be entered. If no such agreement can be reached, the parties shall report as to the issues on which they disagree and a briefing schedule will be set to establish a final amount. Alternatively, if the parties can reach a settlement finally resolving the amounts due, there will be no need to enter a further judgment.
IT IS THEREFORE ORDERED that defendants HTC Corporation's and HTC America's motions for an adverse inference [307, 312] are granted. Defendants' motion to hold plaintiff Intellect Wireless, Inc. and Attorneys Raymond Niro, Paul Vickrey, Paul Gibbons and David Mahalek jointly and severally liable for attorney fees and costs [300] is granted. Defendants' motions for fees and expenses [329, 330] are granted in part and denied in part. Defendants' bill of costs [222] is granted in part and denied in part. A status hearing is set for January 22, 2015 at 2:00 p.m.