United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
LAURA TAYLOR SWAIN, District Judge.
Plaintiff Worldwide Home Products, Inc. ("Plaintiff") sought, in this litigation, to enforce its 300 patent. The Court has granted summary judgment in favor of Defendants Bed, Bath & Beyond, Inc., and Cohesion Products, Inc. ("Defendants"), invalidating the 300 Patent for inequitable conduct, finding non-infringement and dismissing Plaintiff's claims. Defendants now bring this motion seeking, pursuant to 35 U.S.C. section 285 and the Court's inherent power, to recover from Plaintiff $875, 415.15 in attorneys' fees and related expenses that Defendants incurred while defending this lawsuit. Defendants also assert that Plaintiff's former attorney, Jeffrey Sonnabend, Esq., should held jointly and severally liable for the award pursuant to 28 U.S.C. section 1927. Plaintiff and Mr. Sonnabend each have opposed the motion.
The Court has thoroughly reviewed all of the submissions in connection with this motion. This Memorandum Opinion and Order constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rules of Civil Procedure 52(a) and 54(d)(2)(C). For the following reasons, the Court grants, in part, Defendants' motion for attorneys' fees and related expenses. The Court finds that this is an exceptional case pursuant to 35 U.S.C. section WORLDWIDE ATTORNEY FEES.WPD VERSION 4/9/15 1 285 and that the fees and costs incurred are reasonable, but that expert witness fees are not available under section 285, and that an award of expert witness fees in the nature of sanctions is not warranted as against Plaintiff. The Court further holds Mr. Sonnabend liable jointly and severally, pursuant to 28 U.S.C. section 1927, for the reasonable attorneys' fees and related expenses awarded to Defendants.
The 300 Patent is directed to a clothing hanger having an abutment feature with a "supporting means in the form of a cascade hook for supporting additional hangers therefrom." (300 Patent at 1:52-54). In an order entered on September 30, 2014 (the "September Order"), the Court granted summary judgment in Defendants' favor, finding that the uncontroverted factual record established that Plaintiff had engaged in inequitable conduct to procure the 300 Patent in that, during the prosecution of the patent, Plaintiff's counsel, Jeffrey Sonnabend, Esq., knowingly provided false information to the United States Patent and Trademark Office ("PTO") examiner concerning hangers that constituted prior art. The Court reaffirmed this finding of misconduct in an amended order, docket entry number 256 (the "Amended Order"), wherein the Court granted Plaintiff's request for reconsideration of the September Order, and reaffirmed the summary judgment and the declaration that Plaintiff's patent is unenforceable as a product of inequitable conduct. The Court found, inter alia, that the undisputed evidence of record required the conclusion that Plaintiff specifically intended to deceive the PTO in the patent prosecution process and that Defendants proved the "but-for materiality of the [key] reference and of Mr. Sonnabend's misrepresentations and withholding of crucial information concerning [another manufacturer's] attachable hanger products." (Amended Order at 22.)
35 U.S.C. section 285 authorizes the court to award attorneys' fees to the prevailing party in "exceptional" patent cases. The decision to award attorneys' fees involves a two-step analysis. First, the district court must determine whether the case is exceptional. Cambridge Prods., Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050 (Fed. Cir. 1992). "[A]n exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances." Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1756 (2014). In its Octane Fitness decision, the Supreme Court rejected a "rigid" standard of exceptionalness under which courts had required a showing of "litigation-related misconduct of an independently sanctionable magnitude or... that the litigation was both brought in subjective bad faith' and objectively baseless.'" Id., at 1756. Instead, a district court should consider nonexclusive factors including "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Fogerty v. Fantasy, Inc., 510 U.S. 517, 535 (1994); see Octane Fitness, 134 S.Ct. at 1756.
"[P]revailing on a claim of inequitable conduct often makes a case exceptional, ' leading potentially to an award of attorney fees under 35 U.S.C. § 285." Therasense, Inc., v. Becton, Dickinson & Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011) (citing Brasseler, U.S.A.I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2010)). In Brasseler, the Federal Circuit affirmed the grant of summary judgment for inequitable conduct against a patentee whose attorney purposefully had withheld information known to be material from the Patent and Trademark Office. 267 F.3d at 1385. The Circuit further affirmed the district court's finding that the case was exceptional under section 285, and that the patentee was liable for the defendant's reasonable fees. Id.
Here, as in Brasseler, the Court has found on summary judgment that there was no genuine dispute of material fact as to inequitable conduct. Mr. Sonnabend engaged in a pattern of inequitable conduct by willfully misrepresenting and selectively withholding information from the PTO examiner that he understood to be material. Mr. Sonnabend then prosecuted the instant case on behalf of Plaintiff, alleging infringement of the wrongfullyprocured patent. Consequently, this is an exceptional case for purposes of a fee award under 35 U.S.C. section 285.
Notwithstanding Plaintiff's argument that it was acting solely on the advice of Mr. Sonnabend and therefore should not be held liable for Defendants' fees and expenses, parties are responsible for the actions of their attorneys in a litigation and Plaintiff is properly held liable under section 285 in this exceptional case. See, e.g., Brasseler, 267 F.3d at 1385 (holding plaintiff liable under section 285 for attorneys' litigation conduct). Having considered the relevant factors, the Court finds that this case involves precisely the type of litigation conduct - frivolous claims motivated by unbridled desire to gain an improper patent monopoly windfall - that should be deterred by courts through the shifting of fees.
Once the court determines that a party is entitled to an award of attorneys' fees, it then must decide whether the requested attorneys' fee award is reasonable by calculating the "lodestar, " which is "the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Lumen View Tech, LLC v. Findthebest.com, Inc., No. 13CV3599, 2014 WL 5389215, at *2 (S.D.N.Y. October 23, 2014) (citing Healy v. Leavitt, 485 F.3d 63, 71 (2d Cir. 2007)). "The Federal Circuit has emphasized that a reasonable attorney fee is a determination that lies primarily within the discretion of the district court, ' which may consider all the relevant circumstances in a particular case.'" Takeda Chem. Indus. v. Mylan Labs., Inc., No. 03CV8253, 2007 WL 840368, at *3 (S.D.N.Y. Mar. 21, 2007), aff'd, 549 F.3d 1381 (Fed. Cir. 2008) (quoting Junker v. Eddings, 396 F.3d 1359, 1365-66 (Fed. Cir. 2005)). In patent infringement cases, the district court may also consider the American Intellectual Property Law Association ("AIPLA") surveys of typical litigation costs. See, e.g., Takeda Chem. Indust., 2007 WL 840368, at *3 (citing Mathis v. Spears, 857 F.2d 749, 755 (Fed. Cir. 1988)).
Defendants request an award in the amount of $875, 472.15, comprised of $739, 743.09 in attorneys' fees and $135, 729.06 in costs. (See O'Connor Decl. at ¶ 3.) The AIPLA 2011 survey concluded that the average fees and costs for patent litigation through discovery, but not including pre-trial or trial, is $1.6 million, where the amount in controversy was between $1 million and $25 million. The amount in controversy in this patent infringement matter is in excess of one million dollars. Accordingly, the AIPLA data indicate that Defendants' total requested award, $875, 472.15 - roughly half the average $1.6 million typically incurred through discovery in comparable cases - is objectively reasonable.
Having reviewed Defendants' attorneys' time records and billing rates, the Court finds that the lodestar computation properly includes all of the time billed and results in a reasonable and appropriate fee award. The billing rates for Defendants' attorneys are modest in comparison to those often charged in litigation in this District by attorneys with comparable experience. The highest hourly rate billed was $550 for Edward F. O'Connor, Esq., lead counsel with over forty years of experience. The remainder of the attorneys utilized by defense counsel billed between $300 to $400 per hour for counsel with over ten years' experience each, and $165 per hour for an associate with five years' experience. The Court finds that these rates are reasonable in light of the attorneys' respective levels of experience. See TigerCandy Arts, Inc. v. Blairson Corp., No. 09CV6215, 2012 WL 760168, at *9 (S.D.N.Y. Feb. 23, 2012) (finding that $500 was a reasonable hourly rate for partner who "has been practicing law for twenty-eight years, specializes in intellectual property law, and has been recognized as a skilled intellectual property attorney by several organizations."); OZ Mgmt. LP v. Ozdeal Inv. Consultants, Inc., No. 09CV8665 2010 WL 5538552, at *3 (S.D.N.Y. Dec. 6, 2010) (finding that $657 per hour "is well within the range of rates for law firm partners in the New York City area with significant intellectual property law experience" and approving associate hourly rates of $395 to $435). Defendants' primary counsel in this action were based outside of New York City, and appear to have billed at their local rates rather than New York City rates.
The time expended and costs incurred by defense counsel here are also reasonable in light of the circumstances. The majority of the hours for which defense counsel billed are for the services of Uleses C. Henderson Jr., Esq. Mr. Henderson is a senior counsel and has over ten years of intellectual property law experience. His hourly rate is $315, and is modest compared with those of attorneys in the New York City area with comparable experience. See OZ Mgmt. LP, 2010 WL 5538552, at *3 (approving $395 to $435 associate rates in the New York City area). Defendants also seek recovery for Mr. O'Connor's time in a supervisory attorney role for reviewing pleadings and attending conferences, and the Court finds that these supervisory time expenditures were reasonable. The Court has reviewed all of the objections to particular tasks and time entries billed, and finds that the requested fees are in each case reasonable.
Moreover, Defendants proffer that they "have in fact paid for all [requested attorneys' fees] through August 30, 2013." (Docket entry no. 238, at 18.) The fact that Defendants, which are sophisticated business entities, have paid the fees in full pursuant to the fee arraignment with counsel is indicative of the reasonableness of the fees. See Crescent Publ'g Grp., Inc. v. Playboy Enterprises, Inc., 246 F.3d 142, 151 (2d Cir. 2001) ("[T]he actual billing arrangement is a significant, though not necessarily controlling, factor in determining what fee is reasonable.'").
Plaintiff and Mr. Sonnabend each object to Defendants' request for reimbursement of $21, 500 related to flat fee arrangements for opposing Plaintiff's motion pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend the judgment and for prosecuting Defendants' instant motion to recover from Plaintiff attorneys' fees and related expenses. The Court has observed the extensive work expended by Defendants' counsel while litigating these motions, and finds that the time corresponding to these flat rate amounts is reasonable in relation to the work reflected in the submissions to the Court. See, e.g., Watson v. E.S. Sutton, Inc., No. 02CV02739, 2006 WL 6570643, at *12 (S.D.N.Y. Aug. 11, 2006), report and recommendation adopted as modified, No. 02 CV 2739, 2007 WL 2245432 (S.D.N.Y. Aug. 3, 2007) ("[A]lthough flat fees are usually disfavored, courts in this district have awarded attorneys fees in fee-shifting contexts where billing was done on a flat-fee basis, as long as the supporting documentation allowed the court to assess who performed the task, the nature of the task performed, and when the task was completed."). The Court further notes that Defendants' counsel proffers that the arrangement was designed to reduce the ...