Touchtunes Music Corp. v. Rowe International Corp. et al
Filing
311
OPINION: Based on the conclusions set forth above, the application of TouchTunes in the amount of $2,728,471.54 is granted. It is so ordered. (See Order.) (Signed by Judge Robert W. Sweet on 10/21/2014) (ajs)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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TOUCHTUNES MUSIC CORP.,
07 Civ. 11450
Plaintiff,
OPINION
-againstROWE INTERNATIONAL CORP., ARACHNID, INC.,
AMI ENTERTAINMENT, INC. and MERIT
INDUSTRIES, INC. d/b/a MERIT ENTERTAINMENT,
Defendants.
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A P P E A RA N C E S:
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Attorneys for Plaintiff
KAYE SCHOLER LLP
425 Park Avenue
New York, NY 10022
By:
James S. Blank, Esq.
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NIXON & VANDERHYE, P.C.
901 North Glebe Road
Suite 1100
Arlington, VA 22203
By:
Joseph S. Presta, Esq.
Jonathon Taylor Reavill, Esq.
Attorneys for Defendant Arachnid,
KANE KESSLER, P.C.
1350 Avenue of the Americas
26th Floor
New York, NY 10019
By:
James E. Hanft, Esq.
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SCHIFF HARDIN LLP
233 South Wacker Drive
Suite 6600
Chicago, IL 60606
By: Ronald Scott Safer, Esq.
Sweet, D. J.
Plaintiff TouchTunes Music Corp.
("Touchtunes" or the
"Plaintiff") has again moved for attorneys' fees, witness fees,
and expenses in def ending counterclaims by defendant and
counter-claimant Arachnid, Inc.
the amount of $3,261,731.13.
("Arachnid" or "Defendant") in
The motion is granted to the
extent of an award of $2,728,471.54.
Prior Proceedings
The prior proceedings in this long contested patent
action were set forth in the Court's prior opinion of March 24,
2014
(the "March 24 Opinion").
TouchTunes originally sought fees and expenses in the
amount of $5,349,862 and the March 24 Opinion granted fees and
expenses but set certain parameters limiting the TouchTunes
application.
TouchTunes has since filed affidavits in support
of, and Arachnid filed affidavits in opposition to, the fee
application and a hearing was held on May 28, 2014, at which
time the application was marked fully submitted.
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The Rates Are Reasonable
The March 24 Opinion concluded that the hourly rates
charged for counsel, experts, paralegals, and support staff were
reasonable.
(March 24 Op. 42.)
Nothing has been presented that
alters that conclusion.
The Practice Of Block Billing Warrants A Fee Reduction
The March 24 Opinion noted the desirability of
specifying the patents which were the subject of the billing.
Arachnid has identified block billing in the amount of
$258,300.08.
According to TouchTunes, the amount attributed to
the block billing has been reduced in proportion to the other
more specific charges for that time period.
Predictably,
Arachnid has proposed additional percentage reductions.
Without becoming the green-eyeshade accountant
referred to in Fox v. Vice, 131 S. Ct. 2205, 2216 (2011), a
reduction of 10% of the amount identified by Arachnid will be
made to compensate for the block billing problem.
2
Discovery-Related Billing Is Appropriate
Arachnid has asserted that "discovery-related" tasks
not directed to the '780 patent should have been resolved before
the respective recoverable time periods began, and therefore,
are not recoverable.
(See Hanft Deel.
~
10.)
However, as the
Court has found, Arachnid already had sufficient information by
the time the recoverable periods began to know that it could not
reasonably maintain its infringement allegations.
March 24 Op. 29-30, 33-34, 43.)
(See, e.g.,
Arachnid however made continued
demands for additional discovery from TouchTunes.
Touch Tunes
accommodated its demands and properly updated discovery
responses in view of the Court's claim construction decisions.
Excessive Charges
Arachnid has challenged the work incurred after the
claim construction decision and until the summary judgment as
excessive while also conceding work is necessary to develop
strategy, assist and work with experts and prepare for summary
judgment.
As a matter of judgment, Arachnid proposes that 60%
of the time spent during the period be allocated to the '780
Patent as opposed to TouchTunes' 24.4%.
3
It has not been
established that the TouchTunes allocation is inaccurate and
that it was not made in good faith.
1
Fees And Expenses Related To The Inequitable Conduct Defense Are
Not Recoverable
The March 24 Opinion concluded that fees and expenses
attributable to TouchTunes inequitable defense were not
recoverable as non-compulsory.
(March 24 Op. 39 n. 10.)
TouchTunes has revisited this issue.
TouchTunes moved to amend its complaint to include a
claim of inequitable conduct in September 2011 (nearly four
years after its initial complaint for a declaratory judgment of
non-infringement) based on conduct that occurred during the
rexaminations, which did not take place until three years into
the case.
Counterclaims are compulsory only if "at the time of
its service .
. the claim
arises out of the transaction
or occurrence that is the subject matter of the opposing party's
claim.u
Fed. R. Civ. P. 13(a)
Rule 13(e), governing
1
This conclusion is equally applicable to the allocation with respect to the
fees and expenses of the expert Schonfeld, fee entries which Arachnid alleges
relate to '780 Patent related work, and costs.
4
counterclaims not existing at the time of filing, makes such
counterclaims permissive rather than compulsory.
Civ. P. 13 (e)
See Fed. R.
("The court may permit a party to file a
supplemental pleading asserting a counterclaim that matured or
was acquired by the party after serving an earlier pleading.")
(emphasis added); Tommy Hilfiger Licensing, Inc. v. Badlees,
Inc., No. 99 Civ. 4677, 2001 WL 1702151 (S.D.N.Y. Jan. 11, 2002)
(when parties' "counterclaims matured or were acquired after
they served their original Answer [and are filed]
under Rule
13(e) the new counterclaims are permissive in nature and not
compulsory"); Johnson Prods. Co. Inc. v. Brodt & Co. Inc., No.
72 Civ. 1009, 1973 WL 19848, *2
(E.D.N.Y. Mar. 27, 1973)
(proposed affirmative defenses and counterclaims in trademark
action, including unclean hands, were permissive as they arose
out of acts occurring after the complaint was filed) .
The authority cited by TouchTunes as support for its
position recognizes that regional circuit law (here, the Second
Circuit) applies "where general principles of res judicata are
at issue."
Cummins, Inc. v. Tas Distributing Co., Inc., 700
F.3d 1329, 1335 (Fed. Cir. 2012)
(citing Acumed LLC v. Stryker
Corp., 525 F.3d 1319, 1323 (Fed Cir. 2008)); Media Tech.
Licensing, LLC v. Upper Deck Co., 334 F.3d 1366, 1369 (Fed Cir.
5
2003)).
In the Second Circuit, res judicata does not apply when
the facts supporting a claim or defense occur after the
litigation is commenced, even if "they are premised on facts
representing a continuance of the same course of conduct."
Storey v. Cell Holdings, L.L.C., 347 F.3d 370, 383 (2d Cir.
2003); see also Legnani v. Alitalia Linee Aeree Italiane,
S.p.A., 400 F.3d 139, 141-42 (2d Cir. 2005)
(holding that where
employee was not discharged until after the initial litigation
commenced, her claim for retaliatory discharge was not barred by
res judicata even where her motion to amend the complaint was
denied) .
filed."
"The crucial date is the date the complaint was
Curtis v. Citibank, N.A., 226 F.3d 133, 139 (2d Cir.
2000); see also Legnani, 400 F.3d at 141-42.
[A]s a matter of logic, when the second action
concerns a transaction occurring after the
commencement of the prior litigation, claim preclusion
generally does not come into play. Accordingly, if,
after the first suit is underway, a defendant engages
in actionable conduct, plaintiff may - but is not
required to - file a supplemental pleading setting
forth defendant's subsequent conduct.
Plaintiff's
failure to supplement the pleading of his already
commenced lawsuit will not result in a res judicata
bar when he alleges defendant's later conduct as a
cause of action in a second suit.
Maharaj v. Bankamerica Corp., 128 F.3d 94, 97
(internal citations omitted).
(2d Cir. 1997)
Even if a claim or defense "could
have been brought" in a lawsuit, that is not determinative to a
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finding of res judicata and "require[s] some additional
context."
Superior Indus. LLC v. Thor Global Enterprises Ltd.,
700 F.3d 1287, 1293 (Fed. Cir. 2012)
(clarifying that "could
have brought" is limited to those claims or causes of action
concerning the "same transactional nucleus of facts" and that
"in a subsequent suit on a different cause of action, parties
are free to litigate points which might have been tendered in
the first suit")
(citations omitted).
Cummins, relied on by TouchTunes, is distinguishable
from the present action.
In Cummins
(applying Seventh Circuit
and Illinois law), the basis for the declaratory action existed
at the time of the initial filing of the first action, a breach
of contract action to enforce a patent licensing agreement.
F.3d at 1334.
700
The validity and enforceability of the patent
being licensed was therefore held to be part of a "single group
of operative facts" that existed at the time of the filing of
the first action.
Id. at 1337 (holding that facts supporting
invalidity contentions were "a single group of operative facts"
and were related in "time, space, origin, or motivation").
Additionally, in Cummins the Federal Circuit applied Illinois
law, which does not apply here.
7
TouchTunes has also relied on Mahmood v. Research in
Motion Ltd., 905 F. Supp. 2d 498
Deel.
~
13.)
(S.D.N.Y. 2012).
(See Presta
There the successive actions for correction of
inventorship turned on the same operative facts
(namely, the
same communications between the parties), and the court held
that a facial claim that the actions were directed to different
patents within the same family was insufficient to avoid res
judicata.
905 F. Supp. 2d at 503-04.
The authorities referred to above, cited by Arachnid,
support the earlier conclusion in the March 24 Opinion and fees
and expenses relating to TouchTunes' inequitable defense are not
granted.
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Conclusion
Based on the conclusions set forth above, the
application of TouchTunes in the amount of $2,728,471.54 is
granted.
It is so ordered.
New York, NY
October
2014
i/,
,/
U.S.D.J.
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