Caron et al v. Lifestyle Crafts LLC

Filing 76

ORDER that Lifestyle Crafts' Motion for Exceptional Case Finding and Award of Attorney Fees and Expenses (Doc. 65 ) is granted in the amount of $62,067.85. IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Lifestyle Crafts, LLC, in the amount of $62,067.85, plus interest thereon at the rate of 0.17% per annum from the date of judgment until paid. Signed by Judge Neil V Wake on 3/4/2013.(KMG)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 James Jeffrey Caron, Spellbinders Paper Arts Company, LLC, 10 Plaintiffs, 11 ORDER vs. 12 No. CV-12-00124-PHX-NVW Lifestyle Crafts, LLC, 13 Defendant. 14 15 16 Before the Court is Lifestyle Crafts’ Motion for Exceptional Case Finding and 17 Award of Attorney Fees and Expenses (Doc. 65). Lifestyle Crafts seeks an award of 18 attorney fees and non-taxable costs in the amount of $62,239.85. 19 I. BACKGROUND 20 On December 3, 2012, this action was dismissed because U.S. Patent No. 21 7,469,634 (“the ’634 Patent”) was held to be unenforceable due to the inequitable 22 conduct of Plaintiffs James Jeffrey Caron and Spellbinders Paper Arts Company, LLC, 23 before the United States Patent & Trademark Office (“PTO”) and this action was barred 24 by collateral estoppel. (Doc. 59.) The Court declined to dismiss this action as a sanction 25 for discovery misconduct. (Id.) On the same day, judgment was entered in favor of 26 Defendant Lifestyle Crafts, LLC, and against Plaintiffs, on Plaintiffs’ complaint and 27 Lifestyle Crafts’ counterclaim. (Doc. 60.) 28 1 The determination that Plaintiffs had engaged in inequitable conduct before the 2 PTO to obtain the ’634 Patent was made in Caron et al. v. QuicKutz Inc., No. CV-09- 3 02600-PHX-NVW, based on finding clear and convincing evidence that: 1. 4 Plaintiffs misrepresented to the PTO Michael Dywan’s status as a joint 5 inventor, inventorship is material, and Plaintiffs intended to deceive the 6 PTO by submitting inventorship information that suited their current 7 interests without regard for its truthfulness. 2. 8 Plaintiffs submitted to the PTO declarations without disclosing three of the 9 declarants had financial relationships with Spellbinders, misled the PTO 10 regarding the qualifications of two other declarants, the qualifications and 11 financial relationships were material, the PTO relied on the declarations, 12 and Plaintiffs intended to deceive the PTO. 3. 13 Caron misrepresented his knowledge of chemical etching either to the PTO 14 or during deposition and misrepresented to the PTO his knowledge of the 15 teachings of an earlier patent, Caron’s 2011 declaration is an affirmative act 16 of egregious misconduct, and Plaintiffs intended to deceive the PTO by 17 submitting the declaration. 18 (Id.) 19 Lifestyle Crafts seeks an award of attorney fees under 35 U.S.C. § 285 and, 20 alternatively, under the Court’s inherent powers. Because the Court will award fees 21 under 35 U.S.C. § 285, it is not necessary to consider awarding fees under the Court’s 22 inherent powers. 23 II. ANALYSIS 24 In patent infringement actions, “[t]he court in exceptional cases may award 25 reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. Deciding whether to 26 award attorney fees under § 285 requires a two-step inquiry: (1) whether the prevailing 27 party has proved by clear and convincing evidence that the case is exceptional, and, if so, 28 (2) whether an award of attorney fees is justified. MarcTec, LLC v. Johnson & Johnson, -2  1 664 F.3d 907, 915-16 (Fed. Cir. 2012). It is undisputed that Lifestyle Crafts is the 2 prevailing party in this action. 3 A. This Is an Exceptional Case. 4 Whether a case is exceptional under § 285 is decided under Federal Circuit law. 5 Power Mosfet Techs., LLC v. Siemens AG, 378 F.3d 1396, 1407 (Fed. Cir. 2004). “A 6 case may be deemed exceptional when there has been some material inappropriate 7 conduct related to the matter in litigation, such as . . . fraud or inequitable conduct in 8 procuring the patent, misconduct during litigation . . . .” Brooks Furniture Mfg., Inc. v. 9 Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). “Although a finding of 10 inequitable conduct or ‘fraud in the Patent and Trademark Office’ is often a basis for a 11 district court to find that a case is ‘exceptional,’ it is not a prerequisite to an award of 12 attorney fees under § 285.” Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 13 455 (Fed. Cir. 1985). “[T]here is no per se rule of exceptionality in cases involving 14 inequitable conduct,” but the lack of such a rule “does not mean that inequitable conduct 15 is insufficient for a finding of an exceptional case.” Nilssen v. Osram Sylvania, Inc., 528 16 F.3d 1352, 1358 (Fed. Cir. 2008). 17 The Court has found by clear and convincing evidence that Plaintiffs made 18 multiple, material misrepresentations with the intent to deceive the PTO and declared the 19 ’634 Patent unenforceable under the inequitable conduct doctrine. 20 findings, the Court finds this case to be “exceptional” under § 285. Based on these 21 B. An Award of Attorney Fees Is Justified. 22 Federal Circuit case law “provides wide discretion to district courts; courts may 23 award attorney fees in inequitable conduct cases, but are not required to do so.” Nilssen, 24 528 F.3d at 1358. “In determining whether to award attorney fees, courts must weigh 25 factors such as degree of culpability, closeness of the questions, and litigation behavior.” 26 Id. at 1359 (district court was within its discretion to award attorney fees where it 27 weighed the evidence before it and determined that litigation misconduct and inequitable 28 conduct were sufficient grounds to award fees to prevent a gross injustice). In an -3  1 inequitable conduct case, the district court may award all of the fees reasonably incurred 2 defending against an infringement lawsuit because the accused infringer would not have 3 incurred any of the fees if the patentee had not committed inequitable conduct in pursuit 4 of its patent and had not filed a claim for infringement of the improperly obtained patent. 5 Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1386 (Fed. Cir. 2001). 6 Here, the Court held Plaintiffs’ patent unenforceable upon finding by clear and 7 convincing evidence that they made multiple, material misrepresentations with the intent 8 to deceive the PTO. The ruling was not a close question. But for Plaintiffs’ inequitable 9 conduct before the PTO and filing of this lawsuit, Lifestyle Crafts would not have 10 incurred defense fees. Thus, the Court finds an award of attorney fees under § 285 is 11 necessary to prevent a gross injustice and is justified. 12 C. The Amount of the Attorney Fees Award Is Reasonable. 13 Federal procedural rules govern applications for attorney fees (including non- 14 taxable costs) and taxable costs in this Court. LRCiv 54.2 requires a party seeking 15 attorney fees and related non-taxable expenses to show eligibility, entitlement, and the 16 reasonableness of the requested award. LRCiv 54.2(c)(3) provides a non-exclusive list of 17 factors bearing on the reasonableness of the requested fee award, which the Court has 18 considered. 19 familiarity with fees charged in cases similar to this, the Court finds that the hourly rates 20 charged in this case are at or below reasonable and market rates, and the fees awarded are 21 reasonable in light of all the circumstances of the litigation. Based on the Court’s lengthy commercial litigation experience and 22 As found above, Lifestyle Crafts has shown eligibility and entitlement under 23 § 285. “The methodology of assessing a reasonable award under 35 U.S.C. § 285 is 24 within the discretion of the district court.” Automated Business Co. v. NEC America, 25 Inc., 202 F.3d 1353, 1355 (Fed. Cir. 2000). The purpose of § 285 is to compensate the 26 prevailing party for its expenses in the prosecution or defense of the suit, and it serves as 27 a deterrent to improperly bringing clearly unwarranted patent infringement lawsuits. Id. 28 -4  1 2 Plaintiffs object to the majority of the items for which Lifestyle Crafts seeks reimbursement. They have identified twelve types of objections. 3 Under Objection No. 1, Plaintiffs object to fees requested for preparation of 4 Lifestyle Craft’s fee motion and memorandum because Lifestyle Crafts has not cited 5 legal authority showing its entitlement to reimbursement for fees incurred preparing a fee 6 application. Preparation of the fee application is part of legal services rendered in 7 defense of Plaintiff’s patent infringement litigation. 8 reimbursement for those services under § 285 for the reasons stated above. Lifestyle Crafts is entitled to 9 Under Objection No. 5, Plaintiffs object to more than 70 time entries on the 10 ground the entry “[u]nreasonably splits time for tasks that are undifferentiated between 11 the instant action and the Lifestyle Crafts [sic] action, which tasks also are not properly 12 itemized.” On June 25, 2010, substantially all of the assets of QuicKutz were sold to 13 Lifestyle Crafts. In December 2011, Lifestyle Crafts began paying QuicKutz’s legal 14 expenses associated with Caron et al. v. QuicKutz Inc., No. CV-09-2600-PHX-NVW, 15 and those payments by Lifestyle Crafts were offset against the payments QuicKutz was 16 entitled to receive for its assets. One firm that represented both Lifestyle Crafts and 17 QuicKutz invoiced Lifestyle Crafts for services it provided on behalf of Lifestyle Crafts 18 in this case and for services provided on behalf of QuicKutz in Caron et al. v. QuicKutz 19 Inc. in a combined invoice. Counsel for the firm has submitted a declaration stating that 20 he reviewed each time entry and allocated each entry as appropriate between QuicKutz 21 and Lifestyle Crafts; he also provided a spreadsheet showing how each time entry has 22 been allocated. There is no reason to believe the allocation was not made in good faith. 23 Further, because Plaintiffs have had opportunity to review QuicKutz’s fee application 24 concurrently with Lifestyle Crafts’ fee application, there is little risk that both QuicKutz 25 and Lifestyle Crafts will be reimbursed for the same expense. The task descriptions are 26 sufficient for the Court to conclude that these time entries are reasonably allocated. 27 Moreover, as a practical matter, whether a portion of an item is included in the fee award 28 against Plaintiffs in favor of QuicKutz or in the fee award against Plaintiffs in favor of -5  1 Lifestyle Crafts should make little difference to Plaintiffs. QuicKutz’s fee request will 2 not be reduced on the basis of Objection No. 5. 3 Under Objection No. 8, Plaintiffs object to the vast majority of time entries, 4 contending that the entry does not comply with LRCiv 54.2(e)(1) and (2) because it fails 5 to show the time devoted to each individual unrelated task per day and does not 6 adequately describe the services rendered. Many of the entries to which Plaintiffs object 7 adequately describe a service rendered that is combined with a conference, email, or 8 telephone call described as “re same.” Other entries objected to describe a series of 9 plainly related tasks. 10 QuicKutz’s fee request will not be reduced on the basis of Objection No. 8. 11 The Court has considered Plaintiffs’ other objections and finds them to be 12 unpersuasive. Therefore, objections numbered 2, 3, 4, 6, 7, 9, 10, 11, and 12 are rejected. 13 LRCiv 54.1(e) identifies taxable items1 that may be recovered by filing a bill of 14 costs within fourteen days after the entry of final judgment, which Lifestyle Crafts did 15 not do. But Lifestyle Crafts has not requested reimbursement of taxable items in its fee 16 application. Except for pro hac vice applications ($100.00) and certificates of good 17 standing ($72.00), which are not reimbursable costs and will be excluded from the fee 18 award, the expenses included in the fee application are non-taxable items. 19 IT IS THEREFORE ORDERED that Lifestyle Crafts’ Motion for Exceptional 20 Case Finding and Award of Attorney Fees and Expenses (Doc. 65) is granted in the 21 amount of $62,067.85. 22 // 23 24 25 26 27 1 Taxable items include Clerk’s fees and service fees, the cost of original transcripts for trial, deposition costs, witness fees and expenses, the cost of certain paper copies and photographs, interpreter fees, docket fees, and fees paid to the state court clerk in removed cases. 28 -6  1 IT IS FURTHER ORDERED that the Clerk enter judgment in favor of Lifestyle 2 Crafts, LLC, in the amount of $62,067.85, plus interest thereon at the rate of 0.17% per 3 annum from the date of judgment until paid. 4 Dated this 4th day of March, 2013. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7 

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