Icon Health & Fitness, Inc. v. Octane Fitness, LLC et al

Filing 296

MEMORANDUM OPINION AND ORDER granting in part and denying in part 286 Defendant's Application for Reasonable Attorney's Fees and Expenses (Written Opinion). Signed by Judge Ann D. Montgomery on 09/01/2015. (TLU)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Icon Health & Fitness, Inc.,
Plaintiff,
v.
MEMORANDUM OPINION
AND ORDER
Civil No. 09-319 ADM/SER
Octane Fitness, LLC,
Defendant.
______________________________________________________________________________
Larry R. Laycock, Esq., David R. Wright, Esq., and Jared J. Braithwaite, Esq., Maschoff
Brennan, Salt Lake City, UT; and Lawrence M. Shapiro, Esq., Robert J. Gilbertson, Esq., and X.
Kevin Zhao, Esq., Greene Espel, PLLP, Minneapolis, MN, on behalf of Plaintiff.
Rudolph A. Telscher, Jr., Esq., Kara R. Fussner, Esq., and Daisy Manning, Esq., Harness,
Dickey & Pierce, P.L.C., St. Louis, MO, and Michael A. Lindsay, Esq., Dorsey & Whitney,
LLP, Minneapolis, MN, on behalf of Defendant.
______________________________________________________________________________
I. INTRODUCTION
This matter is before the undersigned United States District Judge for a ruling on
Defendant Octane Fitness, LLC’s (“Octane”) Application for Reasonable Attorney’s Fees and
Expenses [Docket No. 286] (“Application”). Plaintiff Icon Health & Fitness, Inc. (“Icon”) has
filed a Response [Docket No. 292] objecting to the Application. For the reasons set forth below,
Octane’s Application is granted in part and denied in part.
II. BACKGROUND1
On July 1, 2015, the Court granted Octane’s renewed motion for attorney’s fees and costs

1

A more complete background of this patent infringement case is recited in the Court’s
Memorandum Opinion and Orders dated June 17, 2011 [Docket No. 187]; September 6, 2011
[Docket No. 220]; and July 1, 2015 [Docket No. 284], which are incorporated by reference.

[Docket No. 260], holding that this patent case is exceptional under the Patent Act’s fee-shifting
statute, 35 U.S.C. § 285. See Mem. Opinion & Order, July 1, 2015. Based on this ruling, the
Court directed Octane to file documentation supporting its request for reasonable attorney’s fees
by July 15, 2015, and allowed Icon to file a response by July 22, 2015. In the Application,
Octane requests $2,486,578.50 in attorney’s fees and $362,582.95 in expenses. Fussner Decl.
[Docket No. 287] ¶ 52. Icon raises several objections to the Application and argues that any
award to Octane should total no more than $1,055,613.35 in fees and $129,711.23 in expenses.
III. DISCUSSION
A. Legal Standard
“The court in exceptional cases may award reasonable attorney fees to the prevailing
party.” 35 U.S.C. § 285. District courts are afforded considerable discretion in determining the
amount of reasonable attorney’s fees under § 285. Homeland Housewares, LLC v. Sorensen
Research, 581 F. App’x 877, 881 (Fed. Cir. 2014). Federal Circuit law controls claims for
attorney’s fees under § 285 because the statute addresses an area of substantive law within the
Federal Circuit’s exclusive jurisdiction. Bywaters v. United States, 670 F.3d 1221, 1227 (Fed.
Cir. 2012); see also Q Pharma, Inc. v. Andrew Jergens Co., 360 F.3d 1295, 1299 (Fed. Cir. 2004)
(“We apply Federal Circuit law to the issue of attorney fees in patent infringement cases.”).
The starting point for determining reasonable attorney’s fees is the “lodestar” calculation,
which multiplies the number of hours reasonably expended on the litigation by a reasonable
hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983); Bywaters, 670 F.3d at 1228–29. A
reasonable hourly rate considers the rates commonly charged by attorneys for similar work in the
forum court. Bywaters, 670 F.3d at 1228. In calculating a reasonable fee amount, courts should

2

exclude hours that were not “reasonably expended,” such as excessive or redundant hours or
instances where overstaffing or poor billing judgment has occurred. Hensley, 461 U.S. at 434.
B. Icon’s Objections
Icon argues the Application includes fees and expenses that are not compensable under
applicable law or are unreasonable. Each of Icon’s objections is addressed below.
1. Fees and Expenses Related to Appeals
Icon first contends that Octane should not recover its fees and expenses in connection
with any appeal in this litigation. Briefly, the appellate and remand proceedings in this case are
as follows. In 2011, Icon appealed this Court’s claim construction and summary judgment
rulings. See Icon Health & Fitness, Inc. v. Octane Fitness, LLC., 496 F. App’x 57 (Fed. Cir.
2012) reh’g en banc denied (Dec. 27, 2012). Octane cross-appealed this Court’s decision that
under the Federal Circuit’s Brooks Furniture standard,2 Octane had not shown that this case was
exceptional to allow fee shifting under § 285. See Icon Health & Fitness, Inc. v. Octane Fitness,
LLC, No. 09-319, 2011 WL 3900975, at *1 (D. Minn. Sept. 6, 2011) (denying Octane’s first
motion to find case exceptional). Icon’s appeal and Octane’s cross-appeal were consolidated by
the Federal Circuit.
The Federal Circuit affirmed this Court’s claim construction and summary judgment
rulings as well as the ruling on the § 285 fee issue. Icon, 496 F. App’x at 61–65. Thereafter,
Octane appealed the § 285 issue to the Supreme Court, which reversed. See Octane Fitness,

2

In the absence of misconduct in litigation or in securing a patent, a case was deemed
“exceptional” under Brooks Furniture only if a party could show by clear and convincing
evidence “both (1) the litigation is brought in subjective bad faith, and (2) the litigation is
objectively baseless.” Brooks Furniture Mfg., Inc. v. Dutailier Intern., Inc., 393 F.3d 1378, 1381
(Fed. Cir. 2005).
3

LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014). The Supreme Court held that the
Brooks Furniture standard was unduly rigid, and stated that an exceptional case under § 285 was
“simply one that stands out from others with respect to the substantive strength of a party’s
litigating position . . . or the unreasonable manner in which the case was litigated. Id. at 1756.
The Supreme Court then remanded the case to the Federal Circuit, which in turn remanded to
this Court. This Court thereafter held that the case is exceptional based on Icon’s exceptionally
weak litigation position and its unreasonable manner of litigation. See Mem. Op. & Order, July
1, 2015.
The Application submitted by Octane includes $851,432.34 in attorney’s fees and
$100,153.86 in costs incurred in the appeal and remand proceedings. Fussner Decl. ¶ 13, Ex. C.
Icon argues that those fees and costs should not be included in the award because the appeal and
remand proceedings were not exceptional.
The fee-shifting statute of § 285 does not prohibit a district court from awarding fees for
the entire case, including subsequent appeals. Therasense, Inc. v. Becton, Dickinson & Co., 745
F.3d 513, 517 (Fed. Cir. 2014). Thus, appellate and remand fees may be awarded “where those
stages of litigation are deemed independently exceptional within the meaning of § 285.” Id.
(citing Rohm & Haas Co. v. Crystal Chem. Co., 736 F.2d 688, 692–93 (Fed. Cir. 1984)).
Here, Icon’s appeal of this Court’s claim construction and summary judgment rulings are
independently exceptional. In its appeal, Icon repeated the same exceptionally weak
infringement arguments that had been squarely rejected by this Court. Therefore, Octane is
entitled to recover the attorney’s fees and costs it expended in defending against Icon’s appeal of
the claim construction and summary judgment rulings.

4

The appellate and remand proceedings related to the § 285 issue were not exceptional. In
defending against Octane’s appeals, Icon relied on longstanding Federal Circuit precedent to
argue the case was not exceptional under the Brooks Furniture standard. Significantly, Icon
prevailed on this issue in the Federal Circuit appeal. In the Supreme Court appeal, the Supreme
Court broke new ground on this subject by rejecting the Brooks Furniture standard and
announcing a new and more flexible standard for determining whether a case is exceptional
under § 285. Thus, Icon’s litigation position on the § 285 issue in the Federal Circuit and
Supreme Court appeals was not exceptional. Similarly, the remand proceedings were not
exceptional because Icon was not unreasonable in arguing that the case was not exceptional
under the newly announced standard.
The claim construction and summary judgment issues comprised two-thirds of the issues
involved in the Federal Circuit consolidated appeal (the third being the § 285 issue).
Accordingly, the Court will award Octane $130,000 in fees and $15,800 in costs relating to the
Federal Circuit appeal, which equals two thirds of the $195,140 in fees and $23,696 in costs
requested by Octane in relation to that proceeding. See Fussner Decl. Ex. C. The fees and costs
relating to all other appeal and remand proceedings are denied.
2. Fees and Expenses Related to ’120 Patent
Icon argues Octane is not entitled to attorney’s fees and expenses related to Icon’s United
States Patent No. 5,104,120 (the “’120 Patent”). On May 27, 2009, Icon and Octane filed a
Stipulation [Docket No. 77] in which the parties agreed to “the dismissal with prejudice of any
and all claims against the other, asserted or unasserted,” relating to the ’120 Patent. Stipulation
at 1. Icon argues, and this Court agrees, that Octane could have but did not preserve its claim for

5

attorney’s fees under § 285 with respect to the ’120 Patent. Therefore, this claim has been
released under the terms of the Stipulation, and Octane’s request for an award of $125,719 in
fees relating to the ’120 Patent is denied.
3. Distribution of Work to Senior Level Attorneys
Icon further argues that Octane’s fees must be reduced because Octane overstaffed this
case with partner-level attorneys that were performing tasks typically performed by lower
billing-rate associates. Icon contends that 85% of attorney billings before appeal were
attributable to partner-level attorneys, and that high level attorneys engaged in routine tasks such
as document review and legal research.
The Court has reviewed the billing statements supporting Octane’s Application and
concludes that the requested reduction is not warranted. This case was also aggressively
litigated by Icon, and Octane properly employed skilled and experienced attorneys to defend
itself against Icon’s claims. Although partner-level attorneys performed some document review
and legal research, a substantial majority of the time entries identified by Icon as purported
examples of overstaffing were performed by a partner whose hourly rate was $300 to $320
during the course of this litigation. See Laycock Decl. [Docket No. 293] Table 4; Fussner Decl.
¶ 31f. A survey conducted by the American Intellectual Property Law Association lists the
average hourly rate in 2012 for an intellectual property litigator practicing in the Minneapolis
area as $413 for partners and $287 for associates. Fussner Decl. ¶¶ 33–34; Ex. S. Thus, the rate
charged by this partner were more commensurate with that of an associate than a partner.
Indeed, the third quartile (75%) average for intellectual property associates in Minneapolis in
2012 was $339 per hour, which exceeds the hourly rate charged by this partner. Additionally,

6

this partner was responsible for conducting fact and expert discovery, and thus it is neither
surprising nor unreasonable for the partner to engage in some level of document review. Id. ¶
31f.
As further assurance that this matter was neither overstaffed nor unreasonably billed,
Octane’s attorney rates and monthly bills were scrutinized by its patent insurance carrier,
Intellectual Property Insurance Services Corporation (“IPISC”). Id. ¶¶ 15, 39. IPISC has a
vested business interest in ensuring it does not pay above-market rates or overspend on patent
litigation. For these reasons, no reduction for alleged overstaffing is warranted.
4. Expert Witness Fees
Icon objects to Octane’s request for $110,714.89 in expert witness fees. Expert fees are
not authorized under § 285. Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 377
(Fed. Cir. 1994). “[A]n award under section 285 encompasses only attorney fees; expert witness
fees fall under 28 U.S.C. § 1920, subject to the 28 U.S.C. § 1821(b) limitation.” Id. Although
the Federal Circuit has held that a district court may exercise its inherent power to award expert
fees as a sanction for a patent litigant’s egregious conduct, such power is reserved for conduct
involving fraud on the court or an abuse of the judicial process. Id. at 378–79.
Icon did not commit fraud on the Court or engage in other conduct that warrants a
remedy beyond that provided in § 285. Therefore, Octane’s recovery of expert witness fees is
limited by 28 U.S.C. § 1821(b), which provides a $40 per day attendance fee for traveling to and
attending federal court or a deposition.3 The billing statements underlying Octane’s Application

3

Section 1821(a) and (b) provide in relevant part:
(a)(1) Except as otherwise provided by law, a witness in attendance
7

show that Octane’s expert traveled to Chicago and had his deposition taken on May 5, 2010.
Fussner Decl. Ex. BB-10. Thus, Octane may recover $40 in expert fees, and the remaining
balance of expert fees requested ($110,674.89) is denied.
5. Consulting Fees
Octane paid $27,513.24 in consulting fees to assist Octane’s counsel in briefing and
presenting the § 285 issue to the Supreme Court. Fussner. Decl. ¶¶ 47-51; Ex. BB-9. As
discussed above, Icon’s defense of Octane’s appeals—both to the Federal Circuit and the
Supreme Court—was not exceptional, because Icon was relying on the longstanding Brooks
Furniture standard in arguing that Octane had not met the demanding burden required for an
award of attorney’s fees under § 285. Therefore, it is not unjust for Octane to bear the costs of
the consulting fees it incurred in connection with the Supreme Court appeal. Accordingly,
Octane’s request for $27,513.24 in consulting fees is denied.
6. Fees Related to Co-Defendant
Icon also objects to Octane’s request for $3,186.50 in attorney’s fees related to the
defense of Nellie’s Exercise Equipment, Inc. (“Nellie’s”), a California entity that was initially

at any court of the United States, or before a United States Magistrate
Judge, or before any person authorized to take his deposition
pursuant to any rule or order of a court of the United States, shall be
paid the fees and allowances provided by this section.
...
(b) A witness shall be paid an attendance fee of $40 per day for each
day's attendance. A witness shall also be paid the attendance fee for
the time necessarily occupied in going to and returning from the
place of attendance at the beginning and end of such attendance or at
any time during such attendance.
28 U.S.C. § 1821.
8

named as a defendant in this action but who was later dismissed. Icon argues that Nellie’s has
not moved for fees, and that even if Octane paid Nellie’s legal fees, it cannot assert a claim for
fees on behalf of a third-party co-defendant.
In support, Icon cites In re AmericanWest Bancorporation, in which a bank sought to
recover attorney’s fees it paid to defend a third party co-defendant. No. 10-6097-PCW11, 2013
WL 3010822, at *4-5 (Bankr. E.D. Wash. Oct. 4, 2013). The court in that case held that the
bank could not recover such fees from the plaintiff because the entitlement to attorney’s fees was
governed by a contract between the plaintiff and the bank, and the co-defendant was not a party
to that contract. Id. at *5. Unlike AmericanWest Bancorporation, the entitlement to attorney’s
fees here is governed by statute rather than contract. The governing statute entitles the
prevailing party in an exceptional patent case to attorney’s fees. 35 U.S.C. § 285. Nellie’s was a
prevailing party, as the claims against it were successfully terminated. The Court sees no reason
to disallow Nellie’s reasonable attorney’s fees merely because they were paid by a prevailing codefendant, rather than Nellie’s itself. Therefore, Icon’s objection to this category of fees is
overruled.
7. Law Firm Overhead
Icon contends the Application improperly requests recovery of two categories of
expenses associated with law firm overhead. First, the Application includes $6,095 for time
billed by administrative staff, and approximately $1,614 in fees for time entries that Icon
characterizes as secretarial-type work or administrative tasks. See Fussner Decl. Ex. A at 5
(reflecting $6,095 in administrative staff fees); Laycock Decl. Table 7 (listing time entries).
Generally, the cost of a law firm’s overhead is incorporated into the attorney’s hourly rate and is

9

not separately recoverable under § 285. Codex Corp. v. Milgo Elec. Corp., 541 F. Supp. 1198,
1201 n.1 (D. Mass. 1982); CTS Corp. v. Electro Materials Corp. of Am., 476 F. Supp. 144, 145
(S.D.N.Y. 1979). Therefore, the requested amount of $6,095 for administrative staff fees will
not be awarded. However, the Court disagrees with Icon’s characterization of time entries
amounting to $1,614 that are described by Icon as secretarial-type work or administrative tasks.
See Laycock Decl. Table 7. Most of these entries were performed by a paralegal and involved
monitoring case activity and providing updates to the legal team. See id. Therefore, these tasks
were not merely administrative and will be compensated.
The second expense category that Icon argues is non-compensable is computerized legal
research. Icon contends that legal research expenses are firm library service expenses which are
not recoverable under § 285. “The prevailing view among . . . circuits is to permit awards to
reimburse counsel for the reasonable costs of online legal research.” In re UnitedHealth Grp.
Inc. S’holder Deriv. Litig., 631 F.3d 913, 918–19 (8th Cir. 2011). It is customary in many
communities to bill separately for computerized legal research. Ludlow v. BNSF Ry. Co., 788
F.3d 794, 805 (8th Cir. 2015). This billing practice “can be readily defended because the cost of
online research is normally matched with reduction in the amount of time an attorney researches,
or with better quality research.” Id. (internal quotation marks and alterations omitted). As such,
online legal research expenses are properly included in an award under § 285. See, e.g.,
Kilopass Tech., Inc. v. Sidense Corp., No. 10-cv-2066, — F. Supp. 3d —, —, 2015 WL
1065883, at *14 (awarding § 285 costs of $125,131.03 related to online legal research).
The Application requests $48,137 in computerized legal research expenses. See
Application 20; Fussner Decl. ¶ 44, Ex. AA. However, the underlying documentation for these

10

expenses consists of invoices amounting to only $6,108.70. See Fussner Decl. ¶ 45, Ex. BB-8.
Therefore, the Court awards $6,109 for electronic research costs.
8. Other Miscellaneous Expenditures
Icon also objects to three miscellaneous categories of expenditures that Icon argues are
not compensable. First, Icon contends that the Application includes $41,607.50 billed for time
entries that Icon argues were duplicative or vague. See Laycock Decl. Table 8. The Court has
reviewed the identified time entries and concludes that the identified time entries are not
duplicative or vague.
Second, Icon argues that $1,296 in fees for Octane’s paralegal to attend the Supreme
Court oral argument were not necessary. This objection is mooted by the Court’s denial of fees
related to Octane’s appeal to the Supreme Court.
Third, Icon objects to $667.93 in expenses related to the construction of a demonstrative
prototype of an elliptical machine. Icon argues that although the demonstrative may have been
helpful, it was not necessary for the resolution of the case and was therefore not compensable.
The Court finds the prototype was beneficial in assisting an understanding mechanical aspects of
the devices, and as such contributed to resolution of the case. Therefore, under the
circumstances of this case, the relatively modest expense for the prototype was both reasonable
and necessary.
9. Enhancement
Finally, Icon opposes Octane’s request that the Court consider an enhancement of the
attorney’s fee award. Octane contends an enhancement may be appropriate “to deter Icon from
further misuse of the patent system.” Application 24. Upward or downward adjustments to the
lodestar calculation should be made “in only ‘rare’ and ‘exceptional’ cases.” Bywaters, 670 F.3d
at 1229-30. An enhancement is not warranted here because the fees awarded under the lodestar
11

calculation are substantial and will deter Icon from bringing similar patent cases in the future.
C. Amount of Award
Having thoroughly reviewed Octane’s Application and supporting documentation, as
well as Icon’s objections, the Court concludes that Octane is entitled to attorney’s fees of
$1,633,333 and costs of $144,697. The attorney fee award consists of the total fees requested in
Octane’s Application ($2,486,579), minus fees related to the § 285 issue in the appeal and
remand proceedings ($721,432), minus fees pertaining to the ’120 Patent ($125,719), minus fees
charged for administrative personnel ($6,095). The cost award consists of the total costs
requested ($362,583), minus costs related to the § 285 issue in the appeal and remand
proceedings ($84,354), minus expert witness fees ($110,675), minus undocumented
computerized legal research costs ($22,857).4
IV. CONCLUSION
Based upon the foregoing, and all of the files, records and proceedings herein, IT IS
HEREBY ORDERED that:
1.

Defendant Octane Fitness LLC’s Application for Reasonable Attorney’s Fees and
Expenses [Docket No. 286] is GRANTED in PART and DENIED in PART;

2.

Plaintiff Icon Health & Fitness, Inc. shall pay Defendant $1,633,333 in attorney’s
fees and $144,697 in costs.

LET JUDGMENT BE ENTERED ACCORDINGLY.
BY THE COURT:

s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: September 1, 2015.

4

Of the $48,137 in requested computerized legal research costs, $19,171 were deducted
from the costs of the appeal and remand proceedings and $6,109 were allowed, leaving a balance
of $22,857 in undocumented online research costs to be deducted.
12