Kramer et al v. Creative Compounds LLC

Filing 126

ORDER denying 98 Plaintiffs' Amended Motion for Award of Attorneys' Fees and Non-Taxable Expenses. FURTHER ORDERED denying 113 Plaintiffs' Supplementary Motion for Award of Attorneys' Fees and Non-Taxable Expenses Incurred During [Defendant]'s Appeal. (See attached Order). Signed by Senior Judge James A Teilborg on 3/19/2015.(TLB)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Ron Kramer, et al.,

No. CV-11-01965-PHX-JAT
Plaintiffs,

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v.

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ORDER

Creative Compounds LLC,

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Defendant.

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Pending before the Court are Plaintiffs’ “Amended Motion for Award of

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Attorneys’ Fees and Non-Taxable Expenses” (Doc. 98) and Plaintiffs’ “Supplementary

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Motion for Award of Attorneys’ Fees and Non-Taxable Expenses Incurred during

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[Defendant]’s Appeal.” (Doc. 113). The Court now rules on the motions.

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Plaintiffs seek an award of $81,508.00 in its motion for attorneys’ fees (Doc. 98 at

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2) as well as an additional award of $28,563.00 incurred in defending against

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Defendant’s appeal.

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“exceptional” under 35 U.S.C. § 285 (“§ 285”), whether Plaintiffs are the prevailing party

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under § 285, whether Plaintiffs’ motion is defective because it does not comply with the

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Local Rules, whether the attorneys’ fees claimed are reasonable, and whether Plaintiffs

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are entitled to attorneys’ fees and expenses on appeal. (Doc. 98 at 8, 9, 13; Doc. 113).

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I.

(Doc. 113 at 2).

The parties dispute whether the case is

Background

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Assuming familiarity with the factual and procedural history of this action, the

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Court will recount only those aspects of this litigation that are relevant to the pending

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issue of attorneys’ fees and costs. See Kramer v. Creative Compounds LLC, 2013 WL

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6048804, at *1–8 (D. Ariz. 2013).

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At issue in this case is Plaintiffs’ U.S. Patent No. 7,919,533 (“‘533 Patent”).

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Defendant initially filed a complaint seeking a declaratory judgment that Defendant did

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not infringe the ‘533 Patent and that the ‘533 Patent is invalid. Id. at *1. In response to

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Defendant’s claim, Plaintiffs filed claims of direct, contributory, and induced

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infringement of the ‘533 Patent, and that Defendant falsely advertised its product. Id. On

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Defendant’s claim, the Court found that the patent was not invalid. Id. at *6–7. The

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Court dismissed Plaintiffs’ claims of direct and contributory patent infringement without

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prejudice for lack of ripeness, id. at *2–4, and the Court dismissed Plaintiffs’ claim of

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induced patent infringement with prejudice due to lack of evidence of another direct

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infringer. Id. at *5. The Court also dismissed Plaintiffs’ final claim, that Defendant

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falsely advertised its product in violation of 15 U.S.C. § 1125(a)(1)(B), without prejudice

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with both sides to bear their own attorneys’ fees and costs pursuant to Federal Rule of

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Civil Procedure (“Rule”) 41(a)(1)(A)(ii). (Doc. 79).

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Plaintiffs now move for an award of attorneys’ fees and non-taxable expenses.

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(Doc. 98). Plaintiffs further move for an award of attorneys’ fees and non-taxable

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expenses incurred during Defendant’s appeal (Doc. 113) after the Federal Circuit Court

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of Appeals affirmed this Court’s judgment dismissing Defendant’s claim that the ‘533

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Patent is invalid. (Doc. 112 at 3; Doc. 81).

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II.

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Plaintiffs’ Motion for Award of Attorneys’ Fees and Non-Taxable Expenses
Plaintiffs request a total award of $110,071.00 in attorneys’ fees and non-taxable

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expenses.

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“exceptional” under § 285, that Plaintiffs are not the prevailing party under § 285, that

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Plaintiffs’ motion is defective because it does not comply with the Local Rules, and that

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the fees requested are unreasonable. (Doc. 109 at 10, 15, 17).

(Doc. 98 at 2; Doc. 113 at 2).

Defendant argues that the case is not

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Both parties filed their claims within the Patent Act. Within the Act, § 285

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provides in relevant part that “[t]he court in exceptional cases may award reasonable

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attorney fees to the prevailing party.” 35 U.S.C. § 285 (emphasis added). Thus, whether

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a party is a prevailing party is a threshold issue. See Manildra Milling Corp. v. Ogilvie

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Mills, Inc., 76 F.3d 1178, 1182 (Fed. Cir. 1996). “A plaintiff ‘prevails’ when actual relief

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on the merits of his claim materially alters the legal relationship between the parties by

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modifying the defendant’s behavior in a way that directly benefits the plaintiff.” Farrar

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v. Hobby, 506 U.S. 103, 111–12 (1992) (defining who the prevailing party was in the

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context of a civil rights case); see also Manildra Milling Corp., 76 F.3d at 1182–83

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(taking the Supreme Court’s definition of prevailing party in Farrar and applying it to

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patent cases). A party does not have to prevail on all its claims to be considered a

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prevailing party, Shum v. Intel Corp., 629 F.3d 1360, 1367–68 (Fed. Cir. 2010), and there

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does not have to be a prevailing party, Silicon Graphics, Inc. v. ATI Techs., Inc., 569 F.

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Supp. 2d 819, 833 (W.D. Wis. 2008) (finding neither party to be the prevailing party on

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the merits).

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Although the facts in the present case are somewhat different than the facts in

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Manildra, the Court finds Manildra clarifying for the present case. In Manildra, the

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Federal Circuit Court of Appeals found that a party who successfully challenged several

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patents and won a declaration of invalidity was the prevailing party. Manildra Milling

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Corp., 76 F.3d at 1183; see also Shum, 629 F.3d at 1370 (“[A] party that obtains an

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injunction, declaration of patent invalidity, or judgment of infringement gains ‘significant

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latitude’ and frequently a ‘competitive edge’ vis-à-vis the opposing party.”). This is

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because a patent gives the right to exclude others from “making, using, or selling the

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patented invention.” Manildra Milling Corp., 76 F.3d at 1183. By invalidating the

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patents, the prevailing party was free to “practice an invention without fear of suit by the

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patentee,” which “is a valuable commercial benefit.” Id. “By removing the potential

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threat of the patentee instituting an infringement action, the competitor necessarily alters

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the patentee’s subsequent behavior to his benefit.” Id.

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Here, neither party obtained an injunction, declaration of patent invalidity, or

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judgment of infringement.

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Defendant, but this defense did not alter the relationship between the parties. While

Plaintiffs successfully defended their patent against

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Plaintiffs’ patent has now been tested by the Court, both parties are in the same position

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they were before the claims were brought. Plaintiffs still have a valid patent that can be

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used to exclude others, and Defendant may still be prosecuted for later infringement of

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the ‘533 Patent.

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infringement of the ‘533 Patent further fortifies the point that neither party’s behavior has

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been modified in any way that benefits the opposing party; the parties have returned to

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the status quo.

Defendant’s successful defense of Plaintiffs’ claim for induced

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Furthermore, one side does not have to be a prevailing party. In Silicon Graphics,

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Inc. v. ATI Technologies, Inc., the court held that neither side prevailed and neither side

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lost. Silicon Graphics, Inc., 569 F. Supp. 2d at, 833. The plaintiff in Silicon lost its claim

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for infringement, but found the patent valid. Id. Although the defendant in Silicon

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learned that its product did not infringe the patent, the defendant was not able to prove

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the invalidity of the patent. Id. The present case is similar to Silicon in that Plaintiffs’

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patent is valid, and Defendant did not induce infringement of the patent. Therefore, like

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Silicon, neither side is the prevailing party under § 285.

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Plaintiffs contend that the present case is similar to Kellogg v. Nike, Inc., 74 Fed.

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R. Serv. 3d 1028 (D. Neb. 2009). (Doc. 98 at 9). The Court disagrees. In Kellogg, the

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court found that Nike continuously pursued frivolous claims; Nike’s claims were without

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merit; and “Nike engaged in litigation misconduct during the trial.” Kellogg, 74 Fed. R.

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Serv. 3d at *12. The court in Kellogg further found that “[i]n light of Nike’s unjustified

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prosecution of the invalidity claim, its litigation misconduct and borderline abusive

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advocacy, costs cannot justly be assessed against Kellogg.

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prevailing party with respect to infringement, Kellogg is the equivalent of a prevailing

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party with respect to the invalidity claim.” Id. at *13. However, here, none of Kellogg’s

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facts are similar to the present case. The Court finds for only the purpose of determining

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a prevailing party that there has been no litigation misconduct nor abusive advocacy,

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Plaintiffs did not succeed with respect to their infringement claim, and Defendant did not

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succeed with respect to his invalidity claim. The Court does not find the facts of Kellogg

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Although Nike is the

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to be similar to the present case. Thus, the Court finds that Plaintiffs are not a prevailing

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party under § 285.

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As stated above, whether Plaintiffs are the prevailing party is a threshold issue.

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See Manildra Milling Corp., 76 F.3d at 1182. Therefore, because Plaintiffs are not a

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prevailing party, Court does not need to address whether Plaintiffs’ claimed attorneys’

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fees are reasonable, whether this is an exceptional case, and whether Plaintiffs’ motion is

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defective.

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III.

Supplementary Motion for Attorneys’ Fees During Defendant’s Appeal

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Plaintiffs also filed a “Supplementary Motion for Award of Attorneys’ Fees and

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Non-taxable Expenses Incurred During [Defendant’s] Appeal.” (Doc. 113). This motion

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adds $28,563.00 to the fees and expenses already compiled. (Doc. 113 at 2).

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As Plaintiffs state in their supplementary motion, “a case should be viewed more

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as an ‘inclusive whole’ rather than a piecemeal process when analyzing fee shifting under

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§ 285.” Therasense, Inc. v. Becton, Dickinson & Co., 745 F.3d 513, 516 (Fed. Cir. 2014)

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(internal citation omitted). “Indeed, § 285 does not bar the trial court from awarding fees

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for the entire case, including any subsequent appeals.” Id. at 516–17.

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Taking the case as a whole, the denial of Defendant’s appeal by the Federal

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Circuit Court of Appeals does not affect who prevails.

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supplementary motion is also denied on the same grounds as Plaintiffs’ initial motion for

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attorneys’ fees and expenses.

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IV.

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Conclusion
Based on the foregoing,

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Therefore, Plaintiffs’

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IT IS ORDERED that Plaintiffs’ “Amended Motion for Award of Attorneys’
Fees and Non-Taxable Expenses” (Doc. 98) is denied.

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IT IS FURTHER ORDERED that Plaintiffs’ “Supplementary Motion for Award

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of Attorneys’ Fees and Non-Taxable Expenses Incurred during [Defendant]’s Appeal”

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(Doc. 113) is denied.

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Dated this 19th day of March, 2015.

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