MARY PAT THYNGE, Magistrate Judge.
Defendant EarthLink, Inc. ("EarthLink") submitted a bill of costs against plaintiff United Access Technologies, LLC ("UA") seeking recovery of expenses incurred during litigation of a patent infringement case. EarthLink contends it was the prevailing party, and therefore, entitled to recover costs for depositions, witness fees, mileage and subsistence, exemplifications, discovery production, and printing and Clerk and Marshal fees.
UA maintains it did not assume responsibility for such costs when it purchased the patents-at-issue from the original plaintiffs, and in any event, EarthLink's bill of costs seeks reimbursement for unauthorized expenses.
The patent infringement lawsuit was originally brought in April 2002 by Inline Connection Corporation ("Inline"), Broadband Technology Innovations, LLC ("Broadband") and Pie Squared, LLC ("Pie"), collectively (the "Original Plaintiffs"), against EarthLink.
In its answer, EarthLink denied the allegations of infringement and raised counterclaims seeking declaratory judgment of non-infringement, invalidity and unenforceability of the Patents.
In April 2007, Original Plaintiffs filed a renewed motion for judgment as a matter of law ("JMOL"), or alternatively, motion for new trial, arguing no reasonable jury could have found the Patents invalid or not infringed.
While on appeal, UA purchased an assignment of all rights, title, and interest in the Patents.
On October 12, 2011, the Federal Circuit affirmed this court's judgment without a written opinion.
Fed. R. Civ. P. 54(d) provides, "[u]nless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney's fees-should be allowed to the prevailing party." There is a "strong presumption" that costs are to be awarded to the prevailing party.
In its analysis, this court will first address whether EarthLink is the prevailing party, and then whether it is entitled to any taxable costs.
EarthLink contends it is the prevailing party because it obtained a judgment of no liability, later affirmed on appeal,
UA asserts EarthLink's bill of costs is flawed. UA maintains it never assumed any responsibility for the costs and expenses associated with the litigation, including trial.
EarthLink maintains UA is responsible for the expenses sought because it voluntarily substituted itself, and EarthLink's right to costs vested at the time of substitution, as confirmed by a post trial teleconference with this court.
Additionally, EarthLink argues the requested costs are recoverable, because deposition transcripts were used extensively in the resolution of material issues, and travel expenses were incurred for three witnesses who traveled from Atlanta, GA with the remaining witnesses coming from Morristown, NJ. In light of the distance, travel to-and-from Atlanta or Morristown each trial day would have been impossible, and more expensive than subsistence expenses.
Finally, EarthLink contends expenses for production of documents are also recoverable under L.R. 54 and § 1920.
Rule 54(d)(1) governs the award of costs.
Federal Circuit law defines "prevailing party" for the purposes of patent litigation.
To be a prevailing party, a party must have received at least some relief on the merits. That relief must materially alter the legal relationship between the parties by modifying one party's behavior in a way that "directly benefits" the opposing party.
EarthLink contends it achieved its ultimate objective in the litigation: the right and ability to continue operating its DSL business free from damages, royalty payments, and the threat of an injunction or further litigation involving the Patents.
UA contends both Original Plaintiffs and EarthLink achieved some benefit from the litigation since Original Plaintiffs successfully defended against EarthLink's claims of invalidity and unenforceability. Applying the analysis in Lifescan Inc. v. Home Diagnostics, Inc.,
At trial, Original Plaintiffs asserted infringement of claim 61 of the `596 patent; claims 1, 2, 3, 4, and 5 of the `446 patent; and claims 1, 2, 4, 8, and 9 of the `585 patent. EarthLink denied infringement and alleged the asserted claims were anticipated and obvious, and the Patents failed to comply with the written description and enablement requirements of 35 U.S.C. § 112. Subsequently, the jury returned a verdict of noninfringement, and found each asserted claim invalid as anticipated and obvious, and the Patents failed to comply with the written description and enablement requirements of § 112. In upholding the jury's verdict of noninfringement, this court reviewed the jury's decision to determine if it was reasonably supported by the evidence.
A presumption of validity attaches to an issued patent; invalidity requires proof by clear and convincing evidence.
For EarthLink to overcome this presumption of validity in challenging the Patents, it must prove facts supporting invalidity by clear and convincing evidence.
A patent gives the right to the patentee to exclude all others from making, using, offering to sell or selling the patented invention, and by this right prevents others from competing with the patent owner.
As a result, although EarthLink was not ultimately successful on its invalidity positions, because of the finding of noninfringement and Original Plaintiffs' loss of the right to exclude, EarthLink is the prevailing party.
Rule 25(c) does not ordinarily alter the substantive rights of parties, but is a procedural device designed to facilitate the conduct of a case.
UA contends it did not pursue any of the infringement claims against EarthLink that resulted in the expenses detailed in the bill of costs.
EarthLink argues UA's substitution was voluntarily, and therefore, it is responsible for the costs. Furthermore, EarthLink asserts it is not a party to the Purchase Agreement between UA and Original Plaintiffs. In fact, EarthLink never saw the Purchase Agreement until certain portions were produced under seal pursuant to a court order because the terms were confidential.
UA's argument that it was not involved in the infringement action against EarthLink is without merit. UA took the place of Original Plaintiffs while this matter was on appeal. Original Plaintiff's claim is now UA's claim. In fact, in its almost mirrored motions to substitute before the Federal Circuit and this court, UA represented the Original Plaintiffs "sold and assigned" to it all right, title and interest in the Patents, including the right to sue for past infringement and the instant matter, "including the exclusive right to pursue the pending appeal . . . ."
UA's contention that Earthlink's acquiescence to its motion to substitute operates as a form of waiver is also unfounded. UA provides no support that there is a substantive difference between joining and substituting a party pursuant to Rule 25(c), and a survey of relevant law yielded no evidence to the contrary. UA's substitution was procedurally necessary due to the transfer of interest in the Patents, and served as a mechanism to automatically continue the litigation without delay.
The parties dispute whether substitution of UA in place of the Original Plaintiffs bars or in someway prevents EarthLink's ability to recover costs against UA. Neither party disputes UA's status as a successor in interest to and its substitution for the Original Plaintiffs As noted previously, Rule 25(c) enables an action to continue with the assignee in place of the original party, as if both parties are one in the same. Any judgment resulting from an action binds the successor, even if the successor is not named in the lawsuit.
Substitution under Rule 25 yielding contrary results would allow UA to elude its responsibility as the losing party, while reaping the benefits if successful,
As the prevailing party, EarthLink seeks costs under D. DEL. LR 54.1(b) and 28 U.S.C. § 1920, for depositions, witnesses fees including mileage and subsistence, exemplifications and copies and Clerk and Marshal fees totaling $109,922.19.
UA contends EarthLink seeks expenses not authorized under 28 U.S.C. § 1920, and therefore, its bill of costs should be denied.
LR 54.1(b)(3) provides, in pertinent part:
LR 54.1(b)(3) focuses on the actual use of a substantial portion of the deposition to resolve a material issue in the case; it does not focus on the party's attorney's use or subjective view of the deposition as important or unimportant.
EarthLink requests $39,772.44 for deposition costs, arguing the jury resolved the question of infringement, and not the court's subsequent JMOL decision.
UA maintains the JMOL decision resolved the issues of infringement and validity, and not the jury's verdict.
The primary issue is whether a substantial portion of the depositions was used to resolve material issues in the case, that is infringement and validity. Post verdict, the court reversed the jury's determination of invalidity, and upheld its finding of non-infringement. In applying the JMOL standard, this court found a reasonable jury could have determined UA's/Original Plaintiffs' witnesses were not credible by use of their depositions on cross examination for impeachment. Additionally, the JMOL decision notes the jury could have found a non-infringement verdict based on the testimony of Messrs. Anderson and Collins.
Each deposition will be addressed to determine whether a substantial portion was used to resolve a material issue.
Goodman's deposition was used during his cross examination for impeachment purposes. His deposition testimony was referenced on a total of thirteen pages of trial transcript regarding infringement and validity.
Jackson's deposition was also used for impeachment during his cross examination regarding infringement.
Despite EarthLink's conclusory argument that use of Beckman's deposition was substantial, it only referenced a total of five pages in the trial transcript where his deposition was used for impeachment on validity issues.
Collins' deposition relating to infringement was presented in lieu of his live testimony at trial. Assuming Collins deposition resolved a material issue, Earthlink only concludes his deposition was used extensively, relying on the declaration of Matthew C. Gaudet, Esq., who merely confirms the deposition was used, but fails to identify a substantial portion of his deposition was used under the Honeywell analysis.
EarthLink has failed to demonstrate a substantial portion of the depositions were used to resolve the material issues, and thus is not entitled to deposition costs. Moreover, no justification exists under the circumstances of this matter to allow EarthLink to recover deposition expenses related to the issue of validity.
EarthLink seeks $5,195.75 in witness fees.
UA maintains the requested costs for witnesses should be denied because EarthLink failed to prove such expenses were warranted
EarthLink notes its bill of costs explicitly indicates the city and state of residence of each witness. Messrs. Gallagher, Whited, and Anderson reside in Atlanta, GA, while Mr. Waring lives in Morristown, NJ.
Regarding Waring, EarthLink argues although his daily travel expenses would have been less than the allowable per diem accommodation rate, expenses related to his lodging should be awarded because daily travel during trial was unrealistic and not feasible. Alternatively, EarthLink requests $323.01 (222 miles round trip × $.485 per mile)
Although EarthLink lists the days and total cost for each witness's lodging at the DuPont Hotel, it did not submit a copy of the actual hotel invoice for any witness. All it provided was a 2003 invoice for the DuPont Hotel EarthLink evidencing in that year, lodging costs were significantly higher than the maximum subsistence rate allowed in 2007.
The Cost Detail document, along with the Gaudet declarations and copy of the example 2003 hotel invoice satisfy the requirements of 28 U.S.C. § 1821. As recognized in In re Ricoh Co. Ltd. Patent Litigation, the Federal Circuit noted some "circuits have held that a list of costs and expenses must be adequately detailed, identifying the purpose of each expenditure, and not filled with generic references".
Therefore, EarthLink is entitled to subsistence and for travel expenses in the amount of $5,195.75.
Costs for exemplifications of exhibits will be granted only if a party shows the requested expenses were 1) necessarily sustained in connection with exhibits admitted into evidence or were explicitly and specifically requested by the court; 2) for exhibits or documents prepared primarily in order to aid the finder of fact's understanding of the issues in the case, and were not essentially explanatory or argumentative, serving merely as an aid to the argument of counsel and the explanation of expert witnesses; and 3) for the actual presentation of the exhibits and documents, and not for the intellectual effort involved in their production.
UA argues all costs requested for exemplification, copies and printing should be precluded because EarthLink failed to establish such items were necessarily obtained for use at trial, rather than solely for use in discovery.
EarthLink notes since UA does not address or dispute its application for costs of file wrappers or exhibits requested by the court, those expenses should be awarded.
EarthLink submitted several documents in support of its bill for costs, including an eighty-four page Cost Detail document which identifies and itemizes the dates, times, names of persons making copies, and number of and cost for copying.
EarthLink argues because the court required the parties to provide exhibits, represented to be used and for admission at trial, to address objections, it is entitled to recover those costs of $1,800. That the court required the parties to make available potential exhibits for it to review before trial and prepare for objections, on the possibility a party may move a particular exhibit's admission at trial, does not fall within the Honeywell analysis. Nothing EarthLink has provided identifies which of the massive amount of exhibits it reserved for admission were actually admitted at trial. Because EarthLink chose to make such an extensive designation of possible trial exhibits, requiring the court to review and prepare for potential objections, does not make all exhibits reserved by EarthLink as explicitly or specifically requested by the court. Further, since it is unclear which exhibits were actually admitted at trial, they also do not qualify under the second and third prongs of Honeywell as being prepared to aid the finder of fact's understanding of the issues in the case, or for the exhibit's actual presentation.
As to EarthLink's request for the cost of the file wrappers, LR 54.1(b)(5) provides: "[t]he cost of patent file wrappers and prior art patents are taxable . . . ." The rate charged by the USPTO is $600. EarthLink submitted invoices for this expense, which UA does not dispute: therefore, EarthLink's request for patent file wrapper costs in the amount of $600.00 is granted.
Regarding EarthLink's request for reimbursement of printing costs for materials copied for use in this matter, including production to UA/Original Plaintiffs, EarthLink represents it paid $.20 per page, constituting a total cost of $62,099, as evidenced on its Cost Detail document. These expenses are confirmed by the Gaudet declaration which notes "EarthLink physically copied and produced at least 310,495 pages of documents to [UA/Original Plaintiffs]," for which the contemporaneous records prepared by Duane Morris LLP, show EarthLink was billed at the rate of $.20 per page.
Section 1920 (which defines the term "costs" in Rule 54(d)),
Under this court's local rules, discovery or e-discovery expenses are not specifically itemized in D. DEL. LR 54.1(b). LR 54.1(b)(11) provides: "Other Costs: Claims for costs other than those specifically mentioned in the preceding paragraphs of subpart (b) of this Rule ordinarily will not be allowed, unless the party claiming such costs substantiates the claim by reference to a statute or binding decision." Determining if copying and printing expenses are recoverable, is analyzed under the framework of § 1920(4), where the "[c]ourt looks to whether the expenses are reasonable, necessary to the prosecution of the litigation, and adequately documented."
Although Steiner cited herein was decided before the promulgation of LR 54.1(b), this court continues to rely on and has frequently cited this case since the implementation of the Delaware Local Rules in 1995.
As evidenced by the Cost Detail document and the supporting Gaudet declarations, EarthLink provided the necessary information regarding its internal copying charges, including the date, person ordering the copies, invoice number, quantity, per page charge, total amount and description of the service provided, such as printing and duplication. Although the Cost Detail document did not describe the purpose for the copying, the Gaudet declarations confirm the charges were related to responding to discovery.
Regarding the reasonableness of the copying charges, UA maintains the per page charge of $.20 is excessive, and EarthLink has failed to show that rate is reasonable.
As noted by EarthLink, it is requesting reimbursement for the actual per page charge. However, it has not provided a basis as to why a $.20 per page charge is reasonable. In a Third Circuit opinion, relied upon by UA, Interfaith Comty. Org. v. Honeywell Int'l, Inc.,
One unexplained mystery is on the first sixty-four pages of the Cost Detail record, the per page charge is consistently $.20. Beginning in September 2006 and continuing through November 2010 (the date of the last copying charge), certain copies were made at the reduced rate of $.12 per page.
UA maintains the Original Plaintiffs are required to indemnify it under the Purchase Agreement, and requests leave to bring a third party action against them for indemnification.
Section 9.2 (c) of the Purchase Agreement provides specific procedures for invoking indemnification, including notification to the Original Plaintiffs of any claim, and a request to assume UA's defense. UA represents notification and a request to indemnify was made to the Original Plaintiffs for EarthLink's bill of costs. UA's request for leave to bring a third-party action against the Original Plaintiffs is granted.
Therefore, consistent with the reasons contained herein, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:
1. EarthLink's bill of costs (D.I. 716) is GRANTED in part and DENIED in part:
a. EarthLink's request for deposition costs in the amount of $39,772.44 is DENIED.
b. EarthLink's request for witness subsistence fees, mileage and transportation in the amount of $5,195.75 is GRANTED.
c. EarthLink's request for exemplification and exhibit costs is DENIED. Its request for copying and printing expenses is GRANTED at the reduced amount of $37,259.40.
e. EarthLink's request for patent file wrapper expenses in the amount of $600 is GRANTED.
f. EarthLink's request for Clerk and Marshal fees in the amount of $455.00 is GRANTED.
2. UA's request for leave to pursue a third party action against the Original Plaintiffs is GRANTED.