Bayer CropScience AG et al v. Dow Agrosciences LLC
Filing
374
REPORT AND RECOMMENDATIONS: IT IS RECOMMENDED that Dow's Motion 317 for Fees and Costs as Prevailing Party be GRANTED in part and DENIED in part. Recommended that Dow's Motion be granted to the extent it asks the Court to find that this is an "exceptional case" within the meaning of 35 U.S.C. 285. It is also recommended that Dow be awarded a substantial sum in attorney's fees. It is only recommended that Dow's motion be denied to the extent the motion asks for the reimbursement of the fees Dow incurred before June 29, 2012, and to the extend Dow seeks reimbursement of costs. The Court recommends that Dow be permitted to update its clamed fees if this Report and Recommendation is adopted. Objections to R&R due by 1/8/2015. Signed by Judge Joel Schneider on 12/22/2014. (gvw)
[D.I. 317]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
BAYER CROPSCIENCE AG, et al.,
Plaintiffs,
Civil No. 12-256 (RMB/JS)
v.
DOW AGROSCIENCES LLC,
Defendant.
REPORT AND RECOMMENDATION REGARDING DEFENDANT’S
MOTION FOR FEES AND COSTS AS PREVAILING PARTY
This matter is before the Court on defendant’s “Motion for
Fees and Costs as Prevailing Party.” (D.I. 317). Defendant’s
motion
was
referred
to
this
Court
for
a
Report
and
Recommendation issued pursuant to 28 U.S.C. § 636(b)(1)(B). The
Court received the parties’ extensive briefs and recently held
oral argument.
Plaintiff filed this patent infringement lawsuit on March
2,
2012.
The
Honorable
Renée
Marie
Bumb
granted
defendant’s
summary judgment motion on October 7, 2013. The Federal Circuit
summarily affirmed the decision on October 17, 2014. The issue
now before the Court is whether this is an “exceptional case”
entitling defendant to recover its attorneys’ fees pursuant to
35 U.S.C. § 285. If the answer is yes the next step is to
determine the amount of fees to award.
1
For the reasons to be discussed, the Court respectfully
recommends that defendant’s motion be GRANTED in part and DENIED
in part. Having managed the case for years and being familiar
with
everything
that
has
occurred,
and
after
exhaustively
reviewing the proceedings and record before the District Court
and
the
Federal
Circuit,
the
Court
is
left
conviction that this is an “exceptional case.”
with
the
firm
Thus, the Court
recommends that defendant’s motion be granted to the extent it
asks for a finding that this is an exceptional case pursuant to
35 U.S.C. § 285. The Court also recommends that defendant’s
motion be granted to the extent defendant asks for an award of
substantial
attorneys’
fees.
The
Court
recommends
that
defendant’s motion be denied but only to the extent defendant
asks for an award of fees for work done on the Bayer I lawsuit
prior to June 29, 2012, the date the Bayer II complaint was
served, and to the extent defendant asks for an award of costs.
Because Dow has incurred additional fees, the Court recommends
that Dow be permitted to update its claimed fees if this Report
and Recommendation is adopted. The net amount of attorneys’ fees
the Court recommends be awarded is $5,462,889.10.
Background
The background of this matter is set forth in detail in
Judge Bumb’s comprehensive decision granting defendant’s motion
for summary judgment. Bayer CropScience AG v. Dow AgroSciences,
2
LLC, C.A. No. 12-256 (RMB/JS), 2013 WL 5539410 (D. Del. Oct. 7,
2013).
Court
Rather than repeating what the parties already know, the
incorporates
by
reference
Judge
Bumb’s
summary.
The
salient points will be highlighted along with a discussion of
other matters not pertinent to Judge Bumb’s decision but which
the parties, but not necessarily this Court, deem relevant to
the present motion.
Plaintiff filed its complaint in the District of Delaware
on March 2, 2012 and alleged defendant violated seven patents.
Complaint ¶ 8, (D.I. 1). The patents-in-suit claim a soybean
technology
known
as
a
“Triple
Gene
Event,”
comprising
three
soybean genes genetically engineered for herbicide resistance.
The litigation involves Dow’s Enlist E3 (“E3”) product. Bayer
alleged that Dow planned to commercialize the soybean technology
in violation of Bayer’s patent rights. Although the case was
originally
referred
to
the
Honorable
Richard
G.
Andrews,
on
April 10, 2013, Judge Bumb was designated to hear the case.
(D.I. 100).
The case was referred to this Court the same date
to handle case management, discovery, and other non-dispositive
matters.
Dow
presented
a
twofold
defense
to
Bayer’s
complaint.
First, Dow argued it did not violate Bayer’s patents.
Second,
and more importantly as it pertains to the present motion, Dow
argued it had a valid sublicense that authorized the conduct
3
Bayer
challenged.
Dow
filed
a
motion
to
dismiss
on
its
sublicense defense which Judge Andrews denied on December 6,
2012. (D.I. 26).1 Dow filed its answer on December 20, 2012 (D.I.
29) and, as noted, shortly thereafter the case was referred to
Judge Bumb and then to this Court to address case management,
scheduling
and
other
non-dispositive
issues,
including
all
discovery disputes. With the agreement of the parties the first
phase
of
the
case
focused
on
Dow’s
contract
defense.
After
extensive discovery was conducted on the issue, Dow filed its
motion for summary judgment on May 9 2013 (D.I. 126) which was
granted on October 7, 2013, and affirmed on appeal on October
17, 2014.
The facts as found by Judge Bumb reveal that in 2003 Bayer
decided to divest itself of certain soybean assets.
Consistent
with that decision Bayer entered into a series of agreements in
2004 with Stine Seed Farm, Inc. (“Stine”) and MS Technologies,
LLC (“MS Tech”), under which Stine and MS Tech obtained certain
assets and licenses for soybean technology. As Judge Bumb noted,
two of the agreements are central to the case.
In the first key agreement, Bayer entered into an agreement
with Stine under which Stine was granted a nonexclusive license
to
“market,
1
distribute
for
sale,
sell
and
offer
for
sale”
Judge Andrews wrote: “DAS argues that its actions in connection with
the soybean technology are validly licensed, and therefore, it cannot
infringe Bayer’s patents. This argument, however, asserts a factual defense.
It is not an attack on the pleadings and is misplaced within the context of
the 12(b)(6) motion.” Dec. 6, 2012 Op. at 3.
4
soybean seeds containing “events” already made by Bayer, or new
events made by or for MS Tech. In the second key agreement
executed the same day, Bayer entered into an agreement with MS
Tech titled “Acquisition Agreement of Certain Soybean Assets of
Bayer
CropScience
S.A.
and
License
Agreement”
(hereinafter
“Agreement”). Thereafter, in 2008, MS Tech entered into a series
of agreements to cooperatively develop and sell E3.
As part of
those agreements MS Tech granted Dow a sublicense under the 2004
Bayer/MS
Tech
Agreement.
Without
getting
into
a
detailed
discussion of the language in the Bayer/MS Tech Agreement, the
parties’ central dispute involved whether Bayer granted MS Tech
the right to commercialize under the Agreement. This dispute was
critical
because
if
MS
Tech
did
not
have
the
right
to
commercialize, then MS Tech could not sublicense that right to
Dow. Bayer’s second major argument was that MS Tech only had the
right to sublicense M.S. Soybean Events and that E3 was not a
M.S. Soybean Event. Bayer argued that E3 was not an M.S. Soybean
Event because E3 was not made “by or for” MS Tech. With regard
to
Dow’s
arguments,
Judge
Bumb
and
the
Federal
Circuit
emphatically held that Dow had the right to do what it was
doing.
Because the parties insist it is relevant, the Court will
briefly summarize the different proceedings to which they make
reference. On December 3, 2010 Bayer filed its 2, 4-D lawsuit
5
alleging that Dow infringed its ‘401 Patent (“Bayer I”). That
case was referred to Judge Bumb and then to this Court to handle
non-dispositive matters. On August 24, 2011, Dow filed a motion
for leave to amend its Bayer I complaint to add a claim that Dow
infringed seven additional glyphosate patents. (D.I. 39). When
it opposed the motion Dow produced a copy of the 2011 amendment
to its 2008 sublicense. Bayer subsequently withdrew its motion
to
amend
and
later
filed
Bayer
II
on
March
12,
2002.
On
September 27, 2012 Judge Bumb granted Dow’s motion for summary
judgment in Bayer I holding that Bayer’s patent did not cover
Dow’s product and that under Dow’s construction Bayer’s claim
would fail as a matter of law. Bayer CropScience AG v. Dow
AgroSciences LLC, C.A. No. 10-1045 (RMB/JS), 2012 WL 4498527, at
*10 (D. Del. Sept. 27, 2012). The Federal Circuit affirmed the
decision on September 3, 2013. See 728 F.3d 1324 (Fed. Cir.
2013).
Bayer
filed
another
lawsuit
against
Dow
in
the
Eastern
District of Virginia on January 20, 2012. (Bayer III). Bayer
alleged in that lawsuit that Dow infringed four patents relating
to
crops
genetically
modified
to
tolerate
the
herbicide
“glufosinate.” Dow Opening Brief (“OB”) at 7. (D.I. 317). Dow
argued it had a valid license to the patents. Id. After the
Virginia case was filed the case was stayed and referred to
arbitration
before
the
International
6
Chamber
of
Commerce
International Court of Arbitration. See Bayer CropScience AG v.
Dow AgroSciences LLC, C.A. No. 12-00047, 2012 WL 2878495 (E.D.
Va. July 13, 2012).
Discussion
1.
“Exceptional Case”
Pursuant to 35 U.S.C. § 285, “[t]he court in exceptional
cases
may
award
reasonable
attorney
fees
to
the
prevailing
party.” Prior to the Supreme Court’s decision in Octane Fitness,
LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014),
under Federal Circuit precedent, a case was “exceptional” “only
if a district court either [found] litigation-related misconduct
of an independently sanctionable magnitude or determine[d] that
the litigation was both ‘brought in subjective bad faith’ and
‘objectively baseless.’” Id. at 1756 (quoting Brooks Furniture
Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed.
Cir.
2005)).
This
standard
changed
after
Octane
Fitness
was
issued.
Octane Fitness sought to provide a more “flexible” approach
and
permits
district
courts
to
determine
whether
a
case
is
“exceptional” on a case-by-case basis, considering the totality
of the circumstances. Id. at 1756. The Supreme Court describes
an “exceptional case” as 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
7
the
case)
or
the
unreasonable
manner
in
which
the
case
was
litigated.” Id. The Supreme Court cited a number of nonexclusive
factors district courts may consider, including “frivolousness,
motivation, objective unreasonableness (both in the factual and
legal
components
circumstances
of
to
the
advance
case)
and
the
considerations
need
of
in
particular
compensation
and
deterrence.” Id. at 1756 n.6. Further, “[d]istrict courts may
determine
whether
a
case
is
exceptional
in
case-by-case
exercises of their discretion, considering the totality of the
circumstances.”
designation
Id.
is
at
guided
1756.
by
Because
the
the
district
exceptional
court’s
case
“better
position[]” to decide the issue, the finding is committed to the
sound discretion of the district court. Hishmak Inc. v. Allcare
Health Management System, Inc., 134 S. Ct. 1744, 1748 (2014).
Patent
litigants
are
only
required
to
establish
their
entitlement to fees by a preponderance of the evidence. Octane
Fitness, 134 S. Ct. 1749, 1756.
As the case law has developed litigants have endeavored to
show
“exceptionality”
commonly
cited
ways
in
to
a
variety
establish
of
ways.
Among
exceptionality
the
are:
most
(1)
establishing that the plaintiff failed to conduct an adequate
pre-filing
investigation
or
to
exercise
due
diligence
before
filing suit (see, e.g., Yufa v. TSI Inc., C.A. No. 09-01315,
2014 WL 4071902, at *3 (N.D. Cal. Aug. 14, 2014)); (2) showing
8
the plaintiff should have known its claim was meritless and/or
lacked substantive strength (id.); (3) evidencing the plaintiff
initiated litigation to extract settlements from defendants who
want to avoid costly litigation (Summit Data Sys., LLC v. EMC
Corp., C.A. No. 10-749, 2014 WL 4955689, at *3-4 (D. Del. Sept.
25, 2014)); (4) showing a party proceeded in bad faith (Pure
Fishing,
Inc.
v.
Normark
Corp.,
C.A.
No.
10-2140,
2014
WL
5474589, at *4 (D.S.C. Oct. 28, 2014) (noting that bad faith is
no longer required to support an award of fees but finding the
plaintiff’s position was not reasonable)); and (5) litigation
misconduct (Logic Devices, Inc. v. Apple Inc., C.A. No. 1302943, 2014 WL 6844821, at *4 (N.D. Cal. Dec. 4, 2014)).
Dow is not arguing the case is exceptional because Bayer
proceeded in bad faith. Dow is also not arguing that Bayer filed
the lawsuit to extract a settlement. Instead, Dow is arguing
Bayer should have known its complaint was meritless and lacked
substantive strength, Bayer did not conduct an adequate prefiling
investigation
and
it
did
not
exercise
due
diligence
before filing suit, and Bayer engaged in litigation misconduct.
Because Dow’s arguments overlap and the Court must look at the
“totality
of
the
circumstances,”
the
Court
will
collectively
address defendant’s arguments.2 The Court’s takeaway from its
analysis
2
is
that
the
case
is
exceptional
because
it
is
Frankly, it is not always clear to the Court where the line begins and
ends between each of these arguments.
9
exceptionally meritless and Bayer knew or should have known this
before it filed its complaint. In addition, as the litigation
progressed and it became apparent that Bayer’s case was going
nowhere, Bayer insisted on forging ahead while it unsuccessfully
searched
for
a
theory
to
defeat
Dow’s
license
or
contract
defense. The better and prudent course of action would have been
to abandon the action.
The Court agrees that simply because summary judgment was
granted does not necessarily equate to the fact that the case is
exceptional.
Nevertheless,
Judge
Bumb’s
Opinion
evinces
recognition that Bayer’s claim was exceptionally weak.
no
other
arguments
explanation
were
for
built
why
Judge
upon
Bumb
found
“contorted
her
There is
that
Bayer’s
theor[ies]”
and
“conjectural conclusions” that “[d]id not trump … reality” and
“amount[ed] to distraction.”
2013 WL 5539410, at *7-10, 7 n.12,
n.13. And, why Judge Bumb held “that the Agreement is subject to
only one reasonable interpretation.” Id. at *6 n.6. It is not
insignificant
that
this
ruling
was
issued
after
extensive
discovery and after a 1½ day oral argument and hearing which
included live testimony from the parties’ experts on English
law.
Further evidence that Bayer’s case was exceptionally weak
is the fact that Bayer’s contract arguments were denied “for
seven
reasons”
as
“inconsistent
10
with”
and
“contrary
to”
the
“full context,” “plain language,” and “business purpose” of the
key agreements. Id. at 7-8. Further, after Judge Bumb examined
the “factual matrix and commercial circumstances surrounding the
[relevant] agreements,” she found that they did not “give rise
to any ambiguity of the plain meaning of the agreements … and it
[was] clear that the language contained in Section 3.1.2 of the
Agreement [gave] MS Tech commercialization rights.” Id. at *9
(citation and quotation marks omitted). Stated succinctly, the
2004 MS Tech/Bayer Agreement was “subject to only one reasonable
interpretation.” Id. at *6 n.6. That is, that the Agreement
granted MS Tech the right to commercialize soybeans under the
asserted patents. Id. at *4, 6 n.6. This explains why Judge Bumb
“poured
over
the
record
searching
for
objective
evidence
support [Bayer’s] arguments … [and she] … found none.”
to
Id. at
*6 n.10.
By
no
means
was
exceptionally weak.
improper
extrinsic
just
Bayer’s
commercialization
argument
Bayer’s “by or for” argument relied upon
evidence
and
ignored
the
“crystal
clear”
testimony of Justice Mansfield, an outside counsel working on
the
transaction
Justice.
Id.
and
at
now
*9.
sitting
Further,
as
the
an
Iowa
Court
Supreme
rejected
Court
Bayer’s
“conjectural conclusions” in favor of the clear understanding of
the parties to the MS Tech and Dow contract that E3 was “made
for”
MS
Tech.
Id.
at
*10.
Moreover,
11
the
transcript
of
the
appellate argument before the Federal Circuit reveals that the
panel thought so little of Bayer’s “by or for” argument that it
seemingly dismissed the argument out of hand and did not even
give Bayer a meaningful opportunity to address the issue. Def.
Supp.
Br.
(D.I.
foregoing,
the
358),
Court
Ex.
B,
reaches
Tr.
the
6:1-6.
Given
inescapable
all
of
conclusion
the
that
this is an exceptional case in the sense that it “stands out
from others with respect to the [lack of] substantive strength
of [Bayer’s] litigating position (considering both the governing
law and the facts of the case)”[.] Octane, 134 S.Ct. at 1756.
One remarkable aspect about Bayer’s arguments in opposition
to Dow’s license defense was their implausibility. Even Dow does
not dispute that it decided in 2003 to divest itself of its
soybean assets. That being the case, it made no sense for Bayer
to retain commercialization rights. That is why Bayer’s in-house
counsel testified, “the best thing to do was to liquidate the
value that [Bayer] currently had in [its] hands through the
divestment process to other parties.” Bayer II, 2013 WL 5539410
at *8 (citation omitted.); see also id. at n.3 (summarizing the
unrebutted extensive deposition testimony to the effect that Dow
was getting out of the soybean business). Indeed, plaintiff’s
expert concurred that divestiture does not include the retention
of
rights.
testified
it
Id.
was
Bayer’s
Fed.
R.
“ridiculous”
12
Civ.
P.
to
view
the
30(b)(6)
witness
Agreement
as
a
limitation on MS Tech’s rights. Id. at 2 n.2. Nevertheless,
despite its implausibility, Bayer’s pursued an argument that led
to the inescapable conclusion that Bayer retained certain rights
even though it was divesting. This makes no sense. The Court
agrees
with
Dow
that
Bayer’s
theories
“demanded
suspending
reality … to find it credible that, in a ‘divestment’ of its IP
and
assets,
soybeans
Bayer
at
divestment.”
the
OB
retained
insistence
at
3.
This
valuable
commercial
of
beneficiaries
the
explains
in
part
why
rights
to
of
the
Judge
Bumb
rejected Bayer’s “contorted theory to harmonize its construction
of the contract[.]”
Id. at *7 n.12.
Bayer’s arguments were also implausible to the extent it
argued that although MS Tech ($1 million) and Stine ($4 million)
paid a significant sum of money for their licenses, MS tech only
had the right to sublicense development rights and not the right
to commercialize. This argument also makes no sense. Bayer’s
position is also remarkable in the face of the language in the
Bayer/MS Tech agreement where MS Tech was given the right to
“exploit.” As Judge Bumb noted, “it makes little sense to define
‘exploit’ broadly at the outset and use that term in Article
3.1.2, if the parties’ intent for 3.1.2. was for MS Tech to have
much more limited rights.” Id. at *7.
Not
only
does
the
October
17,
2013
summary
judgment
decision show that Bayer’s arguments were exceptionally weak,
13
but this is also evidenced by the Federal Circuit’s October 17,
2014 summary affirmance. Pursuant to Federal Circuit Rule 36,
this procedure is used “only when the appellant/petitioner has
utterly failed to raise any issues in the appeal that require an
opinion to be written in support of the court’s judgment of
affirmance.” D.I. 353, Exhibit A at 5.
The transcript of the
oral argument before the Federal Circuit (D.I. 353, Exhibit B)
evinces
the
panel’s
skepticism
of
Bayer’s
arguments.
Bayer’s
failure to articulate a reasonable basis for its interpretation
of the relevant licensing agreements evidences that its claim
was
objectively
baseless.
See
Pure
Fishing,
Inc.
v.
Normark
Corporation, C.A. No. 10-2140, 2014 WL 5474589, at *4 (D. Minn.
Oct. 28, 2014).
Another remarkable aspect of Bayer’s defeat is that much of
Dow’s
best
evidence
came
from
the
deposition
testimony
of
Bayer’s witnesses, not Dow’s witnesses. Dow cites to a litany of
deposition
testimony
from
witnesses
presently
or
formerly
associated with Bayer, and not Dow, whose testimony supports the
notion that Bayer’s case was baseless. These witnesses include
Margaret Keating, Esquire, Dow’s Vice-President and Associate
General
Counsel,
Agricultural
Bayer’s
Crops
witnesses
Fed.
who
R.
David
and
Civ.
Morgan,
head
P.
testified
of
Bayer’s
30(b)(6)
to
the
14
Bayer’s
former
Head
of
divestment
team,
and
witness
same
(Schulte).
effect
were
Other
Justice
Mansfield, Joe Saluri, MS Tech’s corporate counsel, and Harry
Stine, an officer of Stine Seed, who deemed Bayer’s litigation
“absolutely ridiculous.” OB, Ex. N, Stine Dep. 52:2-4. If Bayer
had conducted a modicum of due diligence before it filed its
complaint it would have learned from these witnesses that its
case was doomed. As another court wrote, “[p]atent litigation is
a burdensome venture for all parties involved.
Thus, plaintiffs
must conduct careful investigation before bringing suit.” Linex
Technologies, Inc. v. Hewlett-Packard Company, C.A. No. 13-159,
2014 WL4616847, at *3 (N.D. Ca. Sept. 15, 2014); see also Lumen
view Tech. LLC v. Findthebest.com, Inc., C.A. No. 13-3599, 2014
WL
2440867,
“exceptional”
at
*6
(S.D.N.Y)
because
“the
(finding
most
basic
the
case
pre-suit
to
be
investigation
would have revealed” that the infringement allegations had no
merit); Kilopass Tech. Inc. v. Sidense Corp., C.A. No. 10-2066,
2014
WL
3956703,
(concluding
at
that
*3-*4,
the
*14
case
(N.D.
was
Cal.
Aug.
exceptional
12,
2014)
because
the
plaintiff’s official “had already set their mind” that there was
infringement
and
filed
suit
after
“failing
to
conduct
an
adequate pre-filing investigation”).
The Court has poured over the record to find evidence that
Bayer’s case had anything other than a “puncher’s chance” of
success.
The
Court
has
found
none.
Rather
than
citing
to
objective facts and colorable arguments, Dow’s opposition to the
15
present motion is reminiscent of the obfuscation it practiced
during the course of the litigation.3 For example, Bayer argues
it
had
a
good
faith
basis
to
file
its
patent
infringement
complaint. However, whether this is true or not is beside the
point. Bayer knew about and had copies of the key 2004 Bayer/MS
Tech
and
2008
MS
Tech/Dow
agreements
when
it
filed
its
complaint. Bayer knew or should have known that its patent claim
was undercut by the plain and unambiguous language in these
agreements.
In
addition,
Dow’s
argument
that
the
denial
of
Bayer’s motion to dismiss shows that its complaint was colorable
is meritless. Pl.’s Opp. at 2. Judge Andrew’s Order did not
address the merits of Bayer’s claims. As noted in Yufa, supra,
the fact that a plaintiff survives a motion to dismiss does not
necessarily equate to the fact that the plaintiff’s claim is
colorable. 2014 WL 4071902, at *3 (“The pleadings stage does not
require factual support . . . . That [plaintiff’s] case survived
the pleadings stage is not proof that he possessed evidence of
infringement.”).
Bayer’s obfuscation is also evidenced by the fact that it
ignores some of Dow’s key arguments.
For example, much of Dow’s
motion challenges Bayer’s failure to conduct any due diligence
before it filed its complaint. Bayer is silent on the issue.
Also, Bayer did not and does not explain why it did not talk to
3 Accord Bayer II, 2013 WL 5539410, at *8 n.13.
(“While the Court has
considered Plaintiff’s arguments, they largely amount to distraction in the
factual matrix.”)
16
key individuals.4 These were not adverse witnesses or witnesses
presently or formerly employed by Dow. These are witnesses who
easily could have been contacted with a phone call. If contacted
these
witnesses
would
have
confirmed
to
Bayer
that
its
infringement claims against Dow were meritless because of the
relevant licensing agreements. As noted, if Bayer had exercised
a modicum of due diligence it would have recognized that its
complaint was going nowhere.
Bayer’s obfuscation is also evidenced by its argument that
its complaint was justified by the fact that Dow did not produce
the 2011 amendment to the MS Tech/Dow sublicense until November
20, 2012. Bayer’s argument that the 2011 sublicense “served as
the cornerstone for Dow’s defense” and that “it is the most
relevant document to Dow’s ‘sublicense’ defense” (Pl.’s Opp. at
2)
is
frivolous.
summary
amendment
judgment
was
The
2011
decision.
produced,
amendment
By
Bayer
played
raising
raises
the
a
no
part
in
the
date
the
2011
strawman
and
then
attempts to knock it down. Bayer essentially posits it could not
have known Dow had a strong contract defense until it received
the 2011 amendment in November 2012. However, the fact of the
matter is that the 2011 amendment was irrelevant to the summary
judgment
decision.
The
amendment
is
not
mentioned
in
Judge
Bumb’s decision nor was it mentioned at oral argument before the
4 Keating testified that Dow’s due diligence amounted to two brief
telephone calls, no written analysis, and no involvement of outside counsel.
OB at 12.
17
Federal Circuit. Further, the key language at issue is contained
in the 2004 Bayer/MS Tech and 2008 MS Tech/Dow agreements. Bayer
acknowledges
it
had
copies
of
these
agreements
before
the
complaint in this action was filed.
Having failed to cite to evidence in the record to support
its positon that this is not an exceptional case, Bayer resorts
to citing to other proceedings that are irrelevant to the motion
before the Court. Bayer’s references to its ongoing arbitration
with Bayer (i.e., Bayer III) have no place here. That proceeding
addressed Dow’s 1992 License Agreement which was being decided
under French law. That agreement was not part of this case.
Further,
although
arbitration,
“tentative”
all
and
Bayer
parties
argues
it
acknowledge
non-binding.
The
was
successful
that
Court
the
will
at
the
decision
was
not
give
the
arbitrators’ non-binding decision any weight when it does not
know who decided the matter, the record before the arbitrators,
and
any
procedural
or
evidentiary
constraints
put
on
the
parties’ and arbitrators. Bayer’s acknowledgement that Bayer III
is irrelevant is evidenced by the fact it did not raise Bayer
III in its appeal to the Federal Circuit.5 Nor has Bayer moved to
undercut Judge Bumb’s summary judgment decision by citing to
Bayer III. The issue presently before the Court is whether this
5 Bayer hints that the decision undercuts the validity of the grant of
summary judgment. Pl.’s Opp. at 5. The argument is completely meritless as
shown by the fact that Bayer has never moved to undercut the decision.
18
is
an
exceptional
case,
not
what
happened
in
the
parties’
arbitration.
The weakness of Bayer’s attempt to show it had a colorable
basis to pursue its case is also evidenced by the fact that it
relies on documents not part of the summary judgment record.
Pl.’s Reply Br. at 9-10 (D.I. 345) (citing Bayer’s attempt to
use Dow’s regulatory filings and patent markings and the 2011
contract amendment as new bases to support its theories). If
these documents had any relevance they would have been brought
to the attention of Judge Bumb and the Federal Circuit. Further,
Bayer’s
efforts
to
show
that
Dow
has
“unclean
hands”
is
an
unneeded distraction and is irrelevant. Pl.’s Opp. at 5. The
Court is focusing on whether this is an exceptional case and
does not intend to referee the parties’ “name calling.”
In
sum,
described
plainly
based
herein
on
the
the
Court
non-meritorious
that
totality
finds
no
that
of
the
Bayer’s
reasonable
circumstances
claim
party
or
was
so
attorney
could realistically expect success. Bayer’s complaint should not
have
been
filed.
The
exceptional
nature
of
the
case
is
compounded by the lack of pre-suit due diligence. The fact that
Bayer had at best a “puncher’s chance” of success does not take
the case out of the realm of being an exceptional case.6
6 Dow spends much of its brief arguing that Bayer’s litigation
misconduct makes this case exceptional. Because the Court is so convinced
that the lack of strength of the merits of the case combined with Bayer’s
failure to exercise due diligence makes the case exceptional, the Court does
19
2. Attorneys’ Fees
As a threshold matter the parties do not dispute that Dow
is a prevailing party. Having found this case is exceptional,
the
Court
attorneys’
computed
turns
fees
by
to
to
determining
award.
multiplying
the
reasonable
Reasonable
the
reasonable
attorneys’
hourly
amount
of
fees
are
rate
by
the
reasonable number of hours expended, i.e., the lodestar. As of
November
17,
$5,857,639.28
2014,
(which
Dow
seeks
includes
total
the
fees
cost
of
in
the
amount
defending
of
Bayer’s
appeal and preparing its fee petition) for its work from August
2011 through the oral argument on the present motion. Included
in this amount is fees incurred in Bayer I.7 The time expended in
Bayer I will be deducted from Dow’s fee award because those fees
were not incurred in defending this litigation. Therefore, the
Court will deduct $95,702.49 from the total amount requested by
Dow.8
not see the need to “pile on.” Therefore, the Court will not address Dow’s
contention, inter alia, that Bayer (1) engaged in forum shopping and
gamesmanship regarding the service of its complaint, (2) regularly shifted
its theories in this case and Bayer III, and (3) filed a meritless
preliminary injunction motion.
7
Bayer sought to amend its complaint in Bayer I to cover the claims
litigated in Bayer II. The Bayer II complaint was served on June 29, 2012.
8 Within the affidavit of Peter A. Bicks, Esquire, is a table which
“includes fees for the work carried out in responding to Bayer’s request to
amend its complaint in a prior action [Bayer I] to add, then withdraw, the
claims that were ultimately the subject of this lawsuit[.]” Aff. of Peter A.
Bicks (D.I. 323). After analyzing the bills noted on the chart it appears
that the first four bills correspond to fees incurred in Bayer I. The total
amount of these four bills is $95,702.49. Therefore, $95,702.49 will be
deducted from Dow’s fee request.
20
In
Bates
v.
Board
of
Education
of
the
Capital
School
District, C.A. No. 97–394, 2000 WL 1292677, at *2 (D. Del. Aug.
29,
2000),
the
court
articulated
four
factors
courts
should
consider in determining whether a fee application is reasonable:
(1) whether the documentation submitted adequately supports the
hours claimed by the attorneys; (2) whether the hours claimed
were
reasonably
expended;
(3)
whether
the
attorneys'
hourly
rates are reasonable; (5) whether reductions are appropriate;
and
(5)
whether
reasonable.
the
Philips
applicant's
Electronics
request
N.
Am.
for
Corp.
other
v.
costs
Compo
is
Micro
Tech, Inc., C.A. No. 02-123, 2006 WL 3020724, at *2 (D. Del.
Oct. 23, 2006) (citing Bates, 2002 WL 1292677, at *2). The Court
will consider each factor in turn.
a. Adequate Documentation
Dow has submitted its billing records from August 2011 to
present.9 Dow has submitted for the Court’s in camera review
unredacted line-item billing and time records which include the
date its work was performed, by whom, a detailed record of the
work performed, and the hours expended. Additionally, Dow has
provided charts summarizing costs and fees by month throughout
9 Dow’s counsel includes Orrick, Herrington & Sutcliffe LLP, a New York
firm, and Ashby and Geddes, P.A., Dow’s local counsel in Delaware.
21
the course of the litigation. Based on these submissions, the
Court finds the documentation is adequate.10
b. Hours Reasonably Expended
Dow
has
submitted
detailed
bills
documenting
the
fees
claimed. Bayer has not made any specific objections to Dow’s
fees. Rather, Bayer simply characterizes Dow’s requested fees as
“unreasonable and excessive.” Bayer Opp. Br. at 29. (D.I. 335).
In the Third Circuit, a district court may not reduce attorneys’
fees
sua
sponte
because
they
are
excessive,
redundant
or
otherwise unnecessary. United States v. Eleven Vehicles, Their
Equip. & Accessories, 200 F.3d 203, 212 (3d Cir. 2000); Smith v.
Astrue, 843 F. Supp. 2d 486, 490 (D. Del. 2012) (accord); Ongay
v. Astrue, C.A. No. 09-0610 (RMB), 2011 WL 2457692, at *2 n.3
(D. Del. June 20, 2011). Indeed, “when an opposing party has
been afforded the opportunity to raise a material fact issue as
to the accuracy of representations as to hours spent, or the
necessity
reason
for
their
[exists]
for
expenditure,
permitting
and
the
declines
trial
court
to
to
do
so,
no
disregard
uncontested affidavits filed by a fee applicant.” Id. (citing
Cunningham v. City of McKeesport, 753 F.2d 262, 266 (3d Cir.
10 Bayer argues it is entitled to review unredacted bills. Bayer Opp. at
28. The Court has reviewed the redacted versions of the billing records and
compared them to the unredacted versions. The Court finds the redacted bills
adequate for Bayer to have evaluated the reasonableness of the fees
requested. See, e.g., Floe Int'l, Inc. v. Newmans' Mfg. Inc., C.A. No. 045120, 2006 WL 2472112, at *7 (D. Minn. Aug. 23, 2006) (ordering fee
petitioner to produce redacted billing records to non-prevailing party in
patent case).
22
1985)). The justification behind this policy is two-fold. First,
a sua sponte reduction by a court deprives the fee applicant the
right to offer evidence in support of the reasonableness of the
request.
Id.
(citation
omitted).
Second,
in
adversarial
litigation, “there is no need to allow the district court to
reduce
a
omitted).
fee
award
In
short,
on
its
since
own
initiative.”
Bayer
raises
Id.
only
(citation
“generalized
conclusory objections” to the time claimed by Dow, the Court may
not award less in fees than requested by the fee petitioner.
Chaaban v. Criscito, C.A. No. 08-1567, 2013 WL 1737689, at *14
(D.N.J. Apr. 3, 2013) report and recommendation adopted, C.A.
No. 08-1567, 2013 WL 1730733 (D.N.J. Apr. 22, 2013) (citing
Eleven Vehicles, 200 F.3d at 211). As such, the Court will not
sua sponte make an adjustment to the total number of allowable
hours claimed.
c. Reasonable Hourly Rate
In determining the reasonable hourly rate courts look to
the “prevailing market rates in the relevant community.” Steiner
v.
Hercules
“Reasonable
Inc.,
hourly
835
F.
rates
Supp.
for
771,
786
purposes
(D.
of
Del.
the
1993).
lodestar
calculation should generally use the rate of the forum court.”
Chalumeau Power Sys. LLC v. Alcatel-Lucent USA Inc., C.A. No.
11-1175, 2014 WL 5814062, at *1-2 (D. Del. Nov. 6, 2014) (citing
Bywaters v. United States, 670 F.3d 1221, 1233 (Fed. Cir.),
23
reh'g
denied,
684
F.3d
1295
(Fed.
Cir.
2012)).
The
Federal
Circuit recognizes a narrow exception to this rule where “no
local
attorneys
possess
the
‘special
expertise’
necessary
to
take the case or that no local attorneys were willing to take
the case.” Bywaters, 670 F.3d at 1234. Certainly, the Delaware
legal
community
is
not
wanting
of
intellectual
property
expertise. Thus, the narrow exception to the forum rule does not
apply. Therefore, the forum rate in this matter must be governed
by the rate for Delaware intellectual property attorneys and not
New York. See Chalumeau Power Sys. LLC, 2014 WL 5814062, at *1-2
(applying
Delaware
rates
where
attorneys
were
located
in
Boston).
Based on Third Circuit precedent, and since Bayer has not
challenged
Dow’s
rates,
the
Court
declines
to
conduct
an
independent analysis as to whether the hourly rates requested
are reasonable in the Delaware intellectual property community.
See Phillips Corp. v. Compo Micro Tech, Inc., C.A. No. 02-123,
2006
WL
accepting
3624022,
hourly
at
*3
rate
(D.
Del.
requested
Dec.
by
12,
2006)
prevailing
(summarily
party
in
“exceptional case” where rate was not challenged); Summit Data
Sys., LLC v. EMC Corp., C.A. No. 10-749, 2014 WL 4955689, at *5
(D. Del. Sept. 25, 2014) (summarily awarding attorneys’ fees of
$1.3M
in
“exceptional
case”).
Given
the
ferocity
of
this
litigation and the amount claimed, if Bayer had a legitimate
24
basis to object to Dow’s billing rates it would have raised an
objection. Thus, Dow’s billing rates will be applied.
d. Appropriate Reductions
Adjustments of the lodestar calculation upward or downward
“are
proper
only
in
certain
‘rare’
and
‘exceptional’
cases,
supported by both ‘specific evidence’ on the record and detailed
findings by the lower courts.” Bywaters v. U.S., 670 F.3d 1221,
1229-30 (Fed. Cir. 2012) (citation omitted); see also Perdue v.
Kenny A. ex rel. Winn, 130 S. Ct. 1662, 1673 (2010) (finding
that enhancements to the lodestar figure may be awarded in only
“rare”
and
“exceptional”
circumstances).
Bayer
has
not
requested, and the Court does not find, a basis to make an
adjustment to the lodestar.
e. Costs
At
Dow’s
request
the
costs
associated
with
Dow’s
fee
petition will be separately decided in conjunction with Dow’s
bill of costs (D.I. 367). Dow originally sought $299,047.69 in
costs in its refiled fee petition (D.I. 323). Bicks Aff. at 12.
These costs have now been submitted through a bill of costs and
will therefore be deducted from the instant fee application.
In
incurred
sum,
in
the
Bayer
Court
I
will
+
deduct
$299,047.69
$394,750.18
in
costs)
($95,702.49
from
the
$5,857,639.28 requested by Dow. Therefore, the Court recommends
an award of $5,462,889.10 in attorneys’ fees. The Court also
25
recommends that Dow be permitted to update its claimed fees if
this Report and Recommendation is adopted.
Conclusion
Accordingly, for all the foregoing reasons, it is this 22nd
day
of
December,
2014,
respectfully
recommended
that
Dow’s
Motion for Fees and Costs as Prevailing Party be GRANTED in part
and DENIED in part.
It is respectfully recommended that Dow’s
motion be granted to the extent it asks the Court to find that
this is an “exceptional case” within the meaning of 35 U.S.C. §
285. It is also respectfully recommended that Dow be awarded
a substantial sum in attorney’s fees.
It is only recommended
that Dow’s motion be denied to the extent the motion asks for
the reimbursement of the fees Dow incurred before June 29, 2012,
and
to
the
extent
Dow
seeks
reimbursement
of
costs.
These
amounts have already been taken into account in the Court’s
computation that Dow should be awarded $5,462,889.10 in fees.
Last, the Court recommends that Dow be permitted to update its
claimed fees if this Report and Recommendation is adopted.
Pursuant to Fed. R. Civ. P. 72 and L. Civ. R. 72.1(c)(2),
the parties have fourteen (14) days after being served with a
copy of this Report and Recommendation to serve and file any
objections.
s/Joel Schneider
JOEL SCHNEIDER
United States Magistrate Judge
26
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