DRONE TECHNOLOGIES, INC. v. PARROT S.A. et al
Filing
403
MEMORANDUM OPINION RE: POST-TRIAL DAMAGES MOTIONS. See Memorandum Opinion for the Court's discussion of 378 Motion for Royalty for Future Infringement; 380 Motion for Fees under Rule 37; 382 Motion for an Order Awarding Pre-Judgment Interest; 383 Renewed Motion for an Exceptional Case Finding and an Award of Attorneys' Fees; and 386 Motion for Post-Judgment Interest. An appropriate Order follows. Signed by Judge Arthur J. Schwab on 06/12/2015. (lcb)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
DRONE TECHNOLOGIES, INC.,
Plaintiff,
14cv0111
ELECTRONICALLY FILED
v.
PARROT S.A., PARROT, INC.,
Defendants.
MEMORANDUM ORDER OF COURT RE: POST-TRIAL DAMAGES MOTIONS
(DOC. NOS. 378, 380, 382, 383, 386)
I. Introduction
A.
Jury Determination of Damages Due to Plaintiff for Defendants’ Infringement
After unprecedented disruptive and dilatory discovery actions by Defendants, the Court
was constrained to enter default judgment against Defendants as to infringement of two United
States Patents. The only issue presented during the recent three-day jury trial was the amount of
damages, if any, due to Plaintiff for Defendants’ infringement.
After deliberating for approximately seven (7) hours over two (2) days, the jury
determined that Plaintiff was due $3,783,950 for damages from January 31, 2012 through June
30, 2015 (“past damages”) and $4,016,050 for damages from July 1, 2015 through expiration of
the patents (7,584,071 patent (“the ‘071 patent”)-March 2028; 8,106,748 (“the ‘748 patent”)November 2030) (“future damages”–advisory jury verdict). Doc. No. 371.
B.
The Jury’s Damages Verdict was Based Upon the Georgia-Pacific Factors
Before the trial commenced, based upon the Court’s Pretrial Orders, the Parties worked
to draft proposed preliminary jury instructions, motions in limine, evidentiary objections,
proposed final jury instructions, and a proposed verdict form such that the trial would be solely
focused on a determination of damages derived from the application of relevant legal principles
to relevant evidence. Doc. No. 127. As agreed-to by the Parties, the jury was instructed from
the Court’s first remarks and throughout the trial that their deliberations and eventual verdict
must be based upon fifteen (15) enumerated factors (“Georgia-Pacific factors”). The importance
of these factors was impressed upon the jurors by:
providing the factors in a written document prior to preliminary jury instructions;
reference by attorneys and witnesses to the factors throughout the trial;
the Court’s instruction at several points to re-read the provided factors; and
the Court’s preliminary and final jury instructions
Once seated, the jury was provided background on patents and patent litigation through a
video from the Federal Judicial Center and then instructed by the Court that:
[i]t has already been established that Parrot is liable for infringing Drone
Technologies’ ‘071 and ‘748 patents as to four specific models of Parrot Drone
Products. Those four Parrot drone models are called: 1. AR.Drone; 2. AR.Drone
2.0 (pronounced “A R Drone Two Point Oh”); 3. Minidrones; and 4. Bebop
Drones. The only issue for you to decide is: What is the proper amount of
damages to be paid by Parrot to Drone Technologies, if any?
Doc. No. 320, pg. 2.
Following these preliminary instructions, the Court provided each juror with a two-page
document entitled “Reasonable Royalty-Relevant Factors” that set forth factors to guide the
jury’s determination of a reasonable royalty. Doc. No. 308. These fifteen factors were agreed-to
by the Parties and were derived from applicable case law. Georgia-Pacific Corp. v. United
States Plywood Corp., 318 F.Supp. 1116 (S.D. NY. May 28, 1970). The Court emphasized the
importance of these factors to the jury and explained that:
. . . I give this to you because I want you to read it now, we will read it one more
time before we start the trial. But as the evidence comes in, I want you to see why
you are hearing that evidence, because the evidence will relate to one or more of
these factors as you see documents, as you hear testimony . . . I realize that it is
not generally the vocabulary you use in your day-to-day life, but I just thought it
was important that you see those criteria, those factors, prior to hearing all the
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evidence. You will see them again, but I just know that you are going to get three
days of evidence and I want you to see what the evidence relates to, and you will
obviously hear the opening and closing statements of counsel as to what they
think the facts show as to those particular items.
Doc. No. 347, pgs. 85-86.
The jury was instructed that the enumerated factors were not the only potentially
applicable factors but, rather, were “some of the kinds of factors” that may be considered along
with “any other factors which in your mind would have increased or decreased the royalty Parrot
would have been willing to pay and Drone Technologies would have been willing to accept,
acting as normally prudent business people.” Doc. No. 308, pg. 2.
Once the trial began, the proceedings were consistently focused on the Georgia-Pacific
factors, which is demonstrated by the following:
the attorneys explicitly referenced the Georgia-Pacific factors during opening
arguments (Mr. Hopenfeld: “First, what is the invention and how does it differ
from the technology that came before it? You have those Georgia-Pacific factors
in front of you in your notebooks. You might want to get them out. If you have
got your pen, you might want to think about circling factor No. 9. Take a look at
factor No. 9. That’s the advantages of the invention over the prior art.” Doc. No.
347, pg. 112, lines 8-14);
the expert witnesses relied on the factors during their testimony (“I believe the
Court handed out as part of the jury’s binder the actual 15 factors, we call them
the Georgia-Pacific factors. But what the Georgia-Pacific factors really are is
they provide an economic framework for people like myself who are in this
business to – kind of a checklist for us to go through a determine what type of
information should be looking at, what type of analysis should we be doing, what
are the important considerations that go to determining what a reasonable royalty
would be or what the amount of damages that would be appropriate in a given
case.” Doc. No. 347, pg. 204, lines 1-11);
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the Court reminded the jury of the factors before transitioning to the Defendants’
case-in-chief (“I’d like you to take a few moments and re-read the two-page
document again in front of you so that that’s in front of your mind as we begin the
Defendants’ case. And I would ask that you give the Defendants’ part of the case,
called the Defendants’ case-in-chief, the same careful attention that you paid to
the Plaintiff’s case.” Doc. No. 357, pg. 2, lines 12-17); and
the attorneys centered their presentation of closing arguments on the GeorgiaPacific factors (Mr. Tabachnick: “Georgia-Pacific factors No. 9 and 10. You
remember Mr. Barnes talked about the advantages of the old over the new. All
the comments about it being a breakthrough in the flying business, flying devices
business, this absolute control mode and accelerometer mode, that it being
revolutionary, that it be – the Popular Science article where it said it drastically
simplifies piloting. All of these things that demonstrate, that are evidence of the
fact that this is valuable technology.” Doc. No. 361, pg. 13, lines 9-17)
Once the jury was ready to begin deliberations, the Court again instructed the jury
members that the Georgia-Pacific factors were to be employed to determine damages. (“Now
we are going to review the reasonable – the relevant factors that apply to a reasonable royalty
determination. You will be familiar with these by now.”) Doc. No. 361, pg. 61, lines 9-11.
In sum, all aspects of the trial were focused on the Georgia-Pacific factors and the jury’s
verdict necessarily reflects the jurors’ appropriate consideration of these guiding principles.
C.
The Jury was Presented with Competing Testimonial and Documentary Evidence
The presentation of the Parties’ opinions as to an appropriate damages awards was
primarily presented through three expert witnesses; namely, Ned Barnes for Plaintiff and John
Jarosz and Francois Callou for Defendants. Doc. Nos. 187, 195, 198-199. The difference
between the expert witnesses’ damages calculations was approximately $24 million. Mr. Barnes
testified for Plaintiff that total damages due for Defendants’ infringement was $24.8 million,
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while Mr. Jarosz opined that a lump sum payment of $680,000 was the highest appropriate sum.
Doc. Nos. 187 and 344. These estimates were presented to the jury and calculated as follows:
Mr. Barnes’ estimate: ($24.8 million)
Reasonable royalty rates of:
$16/unit for A.R. Drone and Bebop
$6/unit for the MiniDrone
Multiplied by the number of sales
Through June 2015=$7.5 million
Estimated through expiration of the patents=$17.3 million
Total =$24.8 million
Mr. Jarosz’s estimate: ($680,000)
Past Damages-Reasonable royalty rate of:
$.50/unit for patents at issue (based upon a collaboration
agreement between Defendants and Thomas Barse)
Multiplied by the number of sales
Through June 2015=$647,670
Reduced to no more than $400,000
Future Damages-Reasonable royalty rate of:
$.10/unit (based upon a collaboration agreement between
Defendants and Thomas Barse)
Multiplied by the estimated number of sales
Estimated from June 2015 through the expiration of the
patents=$467,343
Reduced to no more than $280,000
Implied total payment=$1.1 million
Reduced total=$680,000
The jury was informed how to incorporate these expert witness opinions into its separate
calculation of damages. Specifically, the Court instructed that the opinions of expert witnesses
may be given the weight each juror believed it deserved, and, if a determination was made that
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the expert witness’s opinion was based on insufficient education or experience or not supported
by sound evidence, the juror “may disregard the opinion entirely.” Doc. No. 361, pg, 52, line 23pg. 53, line 5. An expert witness’s testimony could also be rejected, in whole or in part, based
upon a finding that the expert had lied in any material portion of his testimony. Id. at pg. 53,
lines 17-24.
Because the jury was faced with such varied damages calculations, the Court further
instructed the jury members that they were not bound to adopt the damages calculation of one
expert witness or the other. Rather, the Court stated that:
[n]ow that you’ve heard the opening statements, to get ourselves re-centered,
there has already been a determination of infringement of the two patents. It’s
your job then to determine the damages in the case. You’ve heard one number
from the Plaintiff, you heard another number from the Defendant[s]. But you,
applying those factors, determine what the number will be. So you’re not bound
by the Plaintiff’s version or the Defendants’ version. You are the fact finder and
you’re the ones that will be applying the law to facts that you find and will then
determine the dollar amount.
Doc. No. 347, pg. 119, lines 1-11.
This point was reiterated again the next day as to the expert witnesses’ evaluation of the
value of the patented technology when the Court notified the jury members that:
[y]ou’ve heard some evidence and some argument that the two functionalities
have great value. You have the other side – that’s the Plaintiff’s position.
Defendants’ position is they have little or no value. You have to make that
decision. You have to make that evaluation of whether it’s A or B or somewhere
in between. That’s part of what you’re going to hear today into tomorrow.
Doc. No. 358, pg. 7, lines 2-8.
In sum, the jury was presented with two very different methods of calculating damages as
well as widely different resultant opinions as to an appropriate award. The competing expert
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witness opinions reflect the inability or unwillingness of the Parties to settle this business dispute
and necessitated that a jury determine the final outstanding issues between the Parties.1
D.
The Jury’s Verdict was Driven by Credibility Determinations
Faced with such diametrically opposed evidence in terms of the Parties’ damages
estimates, the jury necessarily had to undertake numerous credibility determinations in arriving
at a unanimous verdict. Credibility determinations present a jury with one of its most difficult
tasks. Doc. No. 361, pg. 51, lines 12-14 (“This is your toughest job in many ways, to judge the
credibility and believability of witnesses.”).
The core nature of these credibility disputes precluded an entry of summary judgment
and necessitated that a jury resolve the matter, as reflected in the Court’s Memorandum Order
Re: Defendants’ Motion for Partial Summary Judgment. Doc. No. 228, pgs. 2-3 (The Plaintiff’s
expert witness’s report and anticipated testimony “is sufficient to allow a jury to assess a
reasonable royalty damages award. Further, genuine issues of material fact exist that could
influence a jury’s determination of damages, including the credibility of the Parties’ experts.”).
Credibility disputes existed on both sides of the case and, importantly, included whether
Defendants had the capability to “design-around” the infringing features and could have
implemented non-infringing products that were so substantially similar to the infringing
technologies “that the user [wouldn’t] even notice it” within four weeks and at a total cost of
approximately $20,000.00. Doc. No. 357, pgs. 142-146.
Other underlying necessary credibility determinations included the measure of
importance of Plaintiff’s patents in Defendants’ products (as demonstrated by Plaintiff through
testimony and documents created prior to litigation and obtained from Defendants and by
1
The Parties attempted to mediate their dispute on at least two occasions, neither of which were
successful. 7/17/14 (Report of mediation by Robert Lindefjeld)(Doc. No. 60); 3/26/15 (Report of
mediation by David Oberdick)(Doc. No. 235).
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Defendants through a demonstration of their products and its packaging), the relevance of past
licensing agreements between Defendants and third-party companies, the impact of the removal
of the infringing features on sales, and the testimony of the expert witnesses.
The Court noted the dichotomy between the Parties’ positions and the difficulty of the
jury’s task because “[t]his is a hard case in many ways, a lot of issues, a lot of conflicting
testimony” and, further noted the importance of the jury’s role because “the parties have been
unable to resolve the matter among themselves and have decided that they want the [eight] of
you to decide for them.” Doc. No. 361, pg. 2, lines 7-10.
In conformance with the model civil jury instructions of the United States Court of
Appeals for the Third Circuit, the jury was instructed, at length, how to undertake credibility
determinations, including those of expert witnesses. Doc. No. 361, pgs. 51-54. The Court’s
instructions informed the jury that they were to be guided by the appearance and conduct of the
witness, the manner in which the witness testified, the character of the testimony given, and the
evidence or testimony to the contrary. Doc. No. 361, pg. 51, lines 19-22, pg. 52, line 14-pg. 53,
line 5.
As previously noted, the jury’s verdict did not wholly conform to either Plaintiff’s or
Defendants’ request for damages. Therefore, the jury’s balanced verdict necessarily represents
the resolution of numerous credibility determinations. Further, the verdict was based upon the
application of Georgia-Pacific factors and the presentation of testimony and documentary
evidence, which allowed the lay jury members to employ the necessary tools to finally resolve
the Parties’ business dispute.
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II. Plaintiff’s Post-Trial Damages Motions
Presently before this Court are the following five (5) motions, all of which have been
filed by Plaintiff, disposition of which may affect the jury’s damages award and the Court’s entry
of a Final Judgment Order:
Motion for Royalty for Future Infringement (Doc. No. 378);
Motion for Fees under Rule 37 (Doc. No. 380);
Motion for an Order Awarding Pre-Judgment Interest (Doc. No. 382);
Renewed Motion for an Exceptional Case Finding and an Award of Attorneys’
Fees (Doc. No. 383); and
Motion for Post-Judgment Interest (Doc. No. 386)
Each of these Motions is now fully briefed and ripe for disposition. Doc. Nos. 378-383,
385-386, 388-392, 394-398.
A. Motion for Royalty for Future Infringement (Doc. No. 378)
The Parties continue to drastically disagree as to both the proper amount of damages due
to Plaintiff for future infringement and whether the amount of any award should be determined
by the jury or the Court.
The distinct positions as to the amount of the award are reflected in the opinions of the
damages experts who testified extensively during trial. As previously noted, Plaintiff’s expert
witness testified that, in his opinion, reasonable royalty rates were $16 per unit for the A.R.
Drone and Bebop and $6 per unit for the MiniDrone, which results in future damages of
$17,326,867.00. Doc. No. 187. Defendants’ expert witness testified that a much lower rate of
10 cents per unit was appropriate, which results in a calculation for future infringement
$467,343.00 and a reduced total of $280,000 after application of various factors. Doc. No. 344.
Due to the Parties’ disagreement as to the availability of future damages, inclusion of a
question on future damages on the jury’s verdict form was extensively discussed during pretrial
proceedings. Plaintiff originally proposed that past and future damages be combined such that
9
the sole question presented to the jury would be “the proper amount of damages due to Drone
Technologies, Inc.” Doc. No. 262. Defendants, in their proposed verdict form, also did not
differentiate between past and future damages, but rather included separate questions as to each
patent for “the total amount of damages you award to Plaintiff[].” Doc. No. 261. Consistent
with these proposals, the first draft of the Court’s Jury Verdict Form Re: Damages did not
distinguish between past and future damages. Doc. No. 289. At this stage, Defendants’ expert
witness Jarosz had only submitted an expert report as to damages for past infringement. Doc.
No. Doc. No. 199.
The Court discussed the expert witnesses’ opinions on past and future damages and
whether a determination of future damages should be submitted to the jury during the April 16,
2015 Preliminary Pretrial Conference. Doc. No. 313. Defendants objected to submitting an
interrogatory on future damages to the jury because they argued that an assessment of future
damages is an issue for the Court to decide as a matter of law. Doc. No. 277, pg. 1; Doc. No.
317, pg. 3. However, Defendants contended that, if the jury was asked to determine future
damages, the question should be put to the jury apart from a determination of past damages.
Doc. No. 321, pg. 4. As a result of this protracted discussion, the Court determined that the jury
should separately determine damages for past and future infringement. The Court further
notified the Parties that the jury’s determination of future damages would be advisory. Doc. No.
313, pg. 41, lines 4 and lines 19-22 (“I’ll at least then have an advisory jury verdict. . . . . From
the jury’s standpoint, the concept of an advisory jury will not be discussed with them. They will
just assume they are doing both pieces, the past and the future, and we’ll go from there.”). Based
upon these determinations, Defendants were provided with an opportunity to supplement their
expert report to address the appropriate measure of future damages. Doc. No. 322.
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As noted, the jury awarded Plaintiff $4,016,050 for damages from July 1, 2015 through
expiration of the patents, which is approximately $1.43 per unit. Doc. No. 371. Plaintiff, in this
Motion, moves this Court to disregard the jury’s verdict as to future damages and determine,
consistent with Plaintiff’s expert witness’s opinion, that a higher per unit royalty is appropriate.
Doc. No. 378.
Plaintiff, in essence, moves this Court to substitute its own judgment for that of the jury
based upon essentially the same facts and evidence and apply a future royalty between $5 and
$16 (the jury’s royalty rate for past damages and Barnes’s opinion of a reasonable royalty rate
per unit for A.R. Drone and Bebop). In doing so, Plaintiff admits the jury, through its verdict,
did not adopt Barnes’s proposed rates of $16 and $6 per unit for either past or future damages
(past damages verdict would equate to a $5 per unit royalty, future infringement damages of
$1.43/unit) and acknowledges in its Motion that the Parties’ damages conclusions were “widely
divergent.” Doc. No. 378, ¶ 2.
Plaintiff, in its Motion, does not assail the past damages verdict, presumably because the
difference between Plaintiff’s requested future damages and the jury’s award for this period is
much larger than that for past damages (approximately $13 million vs. $3.8 million). Doc. No.
379, pg. 7. Defendants, in response, argue that having to face a damages trial and a jury verdict
is “punishment enough” and no future damages should be included in the final judgment because
it is a form of equitable relief. If future damages are awarded, Defendants urge the Court to
adopt the jury’s verdict of $1.43/unit, for a total of $4,016,050. Doc. No. 392, pgs. 2-3.
A Court may employ equitable remedies for future infringement in the form of: (1) an
injunction; (2) an order directing the parties to attempt to negotiate terms for future use of an
11
invention; or (3) an ongoing royalty. Whitserve, LLC v. Computer Packages, Inc., 694 F.3d 10,
35 (Fed. Cir. 2012). A District Court may also conclude that no relief is appropriate. Id.
The Court finds that the jury’s determination of damages for future infringement is
appropriate. As noted, the jury was repeatedly focused on the Georgia-Pacific factors and the
Parties presented their case through these factors. The jury actively engaged with these factors,
including the expert witnesses’ opinions, and applied the facts to the guiding principles, as
demonstrated by the following questions, which were submitted to the Court during
deliberations:
May we please have the Barse and Jarosz expert reports?
With regard to future royalty – will Parrot be allowed to use the technology in the
[‘]071 Patent and the [‘]748 Patent in its future products through 2028 and 2030,
for the appropriate patent, at the conclusion of this case, or will the parties have to
negotiate a licensing agreement to cover the time period from the jury’s verdict
through the life of each patent?
Will the Parties have to negotiate a licensing agreement for Parrot’s future use of
the patented technology to cover the time period from the jury’s verdict through
the life of each patent, regardless of what amount the jury awards[?]
Doc. No. 370.
Plaintiff contends that the jury’s verdict for future damages should not be adopted
because it does not account for the apparent $5/unit royalty rate incorporated in the past damages
award. Doc. No. 379, pg. 8. As previously noted, the jury’s verdict represents the consideration
of a voluminous record based upon the applicable legal principles. The jury members
necessarily rejected the Parties’ positions, including Defendants’ request that they award no
future damages. Doc. No. 361, pg. 36, line 25-pg. 37, line 3 (“I suggest you start with the second
piece of it, the future damages. They have to prove that, but all we have heard is speculation
about the future, so that one should be easy, write in zero.”). The verdict is not flawed because it
does not comport with the Parties’ positions or with the damages for past infringement.
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To that end, the jury was not instructed or obliged to award past and future damages
using the same reasonable royalty rate, and its varied rates for damages reflects the difficulty in
determining an appropriate amount of damages, especially where sales have not yet occurred.
The Court finds that in whatever manner it is described, be it an ongoing $1.43/unit reasonable
royalty or a segment of a lump sum payment, the jury’s future damages award reflects the
Georgia-Pacific factors, the continually disputed patents and products, the unpredictable drone
business, and the credibility determinations that underscore all of these considerations. This
award is not meant either to “further” “punish” Defendants nor to reward Plaintiff for
Defendants’ unprecedented conduct. Rather, the Court finds that this reasonable award
compensates Plaintiff for Defendants’ future uncondoned use of its patents.
Therefore, Plaintiff’s Motion for a Royalty for Future Infringement (Doc. No. 378) will
be DENIED. Plaintiff’s damages for infringement from July 1, 2015 through expiration of the
patents are $4,016,050. Doc. No. 371, ¶ 2.
B. Motion for Fees Under Rule 37 (Doc. No. 380)
In this Motion, Plaintiff timely moves for an award of reasonable expenses, including
attorneys’ fees, in connection with discovery disputes. Doc. No. 380 (requested amount:
$174,702.00). Defendants object both to the imposition of fees pursuant to Rule 37 as well as
the amount requested by Plaintiff. Doc. No. 390.
The expenses requested in this Motion were incurred over a four-month period and
culminated in Plaintiff’s Motion for an Order to Show Cause Why Defendants Should Not be
Held in Contempt and ultimately this Court’s Order of Court entering default judgment against
Defendants as to liability. Doc. Nos. 78, 106, 107. The following documents were filed by
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Plaintiff, between June and November 2014, related to Defendants’ failure to comply with
discovery obligations:
Plaintiff’s Motion to Compel Initial Disclosure Documents (June 19, 2014, Doc.
No. 41), which was granted by this Court on July 1, 2014: Defendants were
ordered to comply on or before July 9, 2014 (Doc. No. 48);
Plaintiff’s Response (Doc. No. 55) to Defendants’ Emergency Motion for
Reconsideration of this Court’s July 1, 2014 Order (July 3, 2014, Doc. No. 51):
Defendants’ Motion was denied by this Court on July 8, 2014 (07/08/2014 Text
Order);
Plaintiff’s Motion to Compel Defendants to Obey this Court’s July 1, 2014 Order
(July 22, 2014, Doc. No. 61), which was granted by this Court on July 25, 2014:
Defendants were given until August 13, 2014, to comply with the July 1, 2014
Order (Doc. No. 63);
Plaintiff’s Response to Defendants’ Emergency Motion to Modify the Protective
Order (August 1, 2014, Doc. No. 64): Defendants’ Motion was denied by this
Court (August 7, 2014, Doc. No. 70);
Plaintiff’s Response (Doc. No. 76) to Defendants’ Motion for Relief from the
Court’s Order Dated July 25, 2014, or in the Alternative, for a Stay Pending a
Petition for Writ of Mandamus (August 13, 2014, Doc. No. 74): Defendants’
Motion was denied by this Court (August 14, 2014, Doc. No. 77); and
Plaintiff’s Motion for Order to Show Cause Why Defendants Should Not Be Held
in Contempt (August 18, 2014, Doc. No. 78), which was granted by this Court
(November 3, 2014, Doc. Nos. 107-108) after a hearing (October 23, 2014) and
briefing from the Parties (Doc. No. 102-103)
Federal Rule of Civil Procedure 37(a)(5)(A) provides that the Court must require the
party whose conduct necessitated the motion at issue or the attorney advising the conduct to pay
the movant’s reasonable expenses in connection with the motion unless the motion was filed
before a good faith effort was made to resolve the dispute, the opposing party’s actions were
substantially justified, or other circumstances would make an award of expenses unjust. The
same rule further provides that the Court must order a disobedient party, the attorney advising
the party, or both to pay reasonable expenses caused by the failure to obey a discovery order,
unless the failure was substantially justified or other circumstances would make an award unjust.
Fed.R.Civ.P. 37(b)(2)(C).
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As noted throughout this Opinion, Defendants’ conduct has stymied Plaintiff’s
prosecution of its claims and the administration of justice during the pendency of the Parties’
dispute. Rule 37 sanctions are available “not merely to penalize those whose conduct may be
deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in
the absence of such a deterrent” and can be used to compensate the opposing party for the
expense caused by the abusive conduct. Nat’l Hockey League v. Metro. Hockey Club, 427 U.S.
639, 643 (1976). Defendants’ dilatory actions increased the financial, temporal, and mental costs
of prosecuting this case and may serve to give small companies pause to file a complaint
including claims for patent infringement, dissuade local law firms from representing these
potential plaintiffs, and/or encourage defendants with sufficient resources to attempt to delay
resolution of the case on the merits in order to “punish” opponents. Defendants’ behavior and
the risk of future similar behavior from other parties warrants an imposition of fees as both a
punitive and deterrent measure.
These sanctions are necessary apart from the Court’s entry of default judgment, which
was the Court’s only option when confronted with Defendants’ extraordinary discovery actions.
Otherwise, if such unprecedented behavior goes unsanctioned, the discovery process is reduced
to a virtually useless optional component of litigation. This erosion is untenable because
discovery is designed to prevent civil trials from being “carried on in the dark.” Hickman v.
Taylor, 329 U.S. 495, 501 (1947); see also United States v. Procter & Gamble Co., 356 U.S.
677, 682 (1958)(“Modern instruments of discovery . . . together with pretrial procedures make
trial less a game of blind man’s bluff and more a fair contest.”).
In accordance with the forthcoming accompanying Order, Plaintiff shall file a Petition
pursuant to Federal Rule of Civil Procedure 37, including reasonable attorneys’ fees and
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expenses. David White, Esq. will be appointed as Special Master and shall issue a Report and
Recommendation to the Court on the appropriate total sum for these items.
C. Motion for an Order Awarding Pre-judgment Interest (Doc. No. 382)
35 U.S.C. § 284 provides for an award of pre-judgment interest as fixed by the Court.
Plaintiff moves the Court to award pre-judgment interest from January 31, 2012 through the date
of entry of judgment and moves that the interest be applied to past and future damages as well as
any attorneys’ fees awarded by the Court. Doc. No. 382.
“[P]rejudgment interest should ordinarily be awarded [to prevailing plaintiffs in patent
litigation.]” Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 655 (1983); Telcordia Techs., Inc.
v. Cisco Sys., Inc., 612 F.3d 1365, 1378 (Fed. Cir. 2010). It is not a punitive measure. Oiness v.
Walgreen Co., 88 F.3d 1025, 1033 (Fed. Cir. 1996). Rather, pre-judgment interest is designed to
compensate a patent holder for the funds it would have obtained prior to judgment had
infringement not occurred. Whiteserve, LLC v. Computer Packages, Inc., 694 F.3d 10, 35 (Fed.
Cir. 2012).
The United States Court of Appeals for the Federal Circuit has held that because the
amount of pre-judgment interest is not unique to patent law, the law of the appropriate regional
circuit is applicable. Tronzo v. Biomet, Inc., 318 F.3d 1378, 1381 (Fed. Cir. 2003) (citing
Transmatic, Inc. v. Gulton Indus., Inc., 180 F.3d 1343, 1347-48 (Fed. Cir. 1999)). The United
States Court of Appeals for the Third Circuit has recognized that interest should generally be
awarded in patent litigation. See Poleto v. Consol. Rail Corp., 826 F.2d 1270, 1278 (3d Cir.
1987), abrogated on other grounds; Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S.
827 (1990).
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Four factors should be employed when determining if pre-judgment interest should be
awarded:
(1) whether the claimant has been less than diligent in prosecuting the action;
(2) whether the defendant has been unjustly enriched;
(3) whether an award would be compensatory; and
(4) whether countervailing equitable considerations militate against a surcharge.
Feather v. United Mine Workers of America, 711 F.2d 530, 540 (3d Cir. 1983).
In this case, Plaintiff has been diligent in prosecuting the action despite Defendants’
dilatory actions, Defendants have been unjustly enriched by this delay, including entry of a final
judgment, and an award of pre-judgment interest would compensate Plaintiff for the delayed
compensation due to Defendants’ infringement. There are no countervailing equitable
considerations that mitigate against an award of pre-judgment interest. Therefore, the Court
finds that pre-judgment interest should be awarded. This interest applies to the approximately
$3.8 million awarded by the jury for past damages, but will not apply to future damages because
an award of pre-judgment interest for future damages would be improperly punitive, rather than
compensatory.
Mindful of the tension between the provision that an award of pre-judgment interest is
not designed to be punitive in nature and a District Court’s authority to award pre-judgment
interest on attorneys’ fees in cases of “bad faith or other exceptional circumstances,” the Court
will grant Plaintiff’s motion for an award of pre-judgment interest on attorneys’ fees and
expenses. See Mathis v. Spears, 857 F.2d 749, 761 (Fed. Cir. 1988). Such an award is
reasonable in light of the facts and circumstances of this case, aligns with other Courts who have
awarded pre-judgment interest on attorneys’ fees when a case presents instances of bad faith, and
attempts to fully compensate Plaintiff for attorneys’ fees that have been incurred in conjunction
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this litigation. See e.g. Stryker Corp. v. Zimmer Inc., 2013 WL 6231533 (W.D. Mich. Aug. 7,
2013) aff’d in part, vacated in part, reversed in part on other grounds: 782 F.3d 649 (Fed. Cir.
2015); Raymond v. Blair, 2012 WL 1135911 (E.D. La. Apr. 4, 2012); Nilssen v. General Electric
Co., 2011 WL 633414 (N.D. Ill. Feb. 11, 2011).
If pre-judgment interest is awarded, the Court has the discretion to award simple or
compound interest. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1555 (Fed. Cir. 1995). If the
Court awards compound interest, the Court may determine how often the interest should be
compounded. Studiengesellschaft Kohle v. Dart Indus., Inc., 862 F.2d 1564, 1580 (Fed. Cir.
1988).
As in other cases, the Court finds that a six percent statutory interest rate, the
Pennsylvania statutory rate, will be applied and will be compounded quarterly from January 31,
2012 (the date of the hypothetical negotiation) through June 2015. See University of Pittsburgh
v. Varian Medical Systems, Inc., 2012 WL 1436569 (W.D. Pa. April 25, 2012) (“This Court
finds that it is in the interest of justice to have a consistent rate at which pre-judgment interest is
awarded, and that the local statutory rate is an appropriate benchmark.”)(“The Court finds that a
quarterly remittance period is reasonable.”). Application of this rate to the jury’s verdict award
does not necessitate further discovery.
Therefore, Plaintiff’s Motion for an Order Awarding Pre-judgment Interest (Doc. No.
382) will be GRANTED IN PART AND DENIED IN PART. Plaintiff’s Motion will be
GRANTED in so far as Plaintiff seeks an award of pre-judgment interest on the award for past
damages and attorneys’ fees and expenses and will be DENIED as to a request for pre-judgment
interest as applied to the award for future damages. An appropriate Order follows.
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D. Renewed Motion for an Exceptional Case Finding and an Award of Attorneys’ Fees
(Doc. No. 383)
35 U.S.C. § 285 provides that “the court in exceptional cases may award attorney fees to
the prevailing party.” In considering a motion for attorneys’ fees pursuant to Section 285, a
District Court must determine if the prevailing party has proved by clear and convincing
evidence that the case is exceptional, and, if so, whether an award of attorneys’ fees is justified.
MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012). “A case may be
deemed exceptional when there has been some material inappropriate conduct related to the
matter in litigation, such as . . . misconduct during litigation, vexatious or unjustified litigation,
conduct that violates Fed.R.Civ.P. 11, or like infractions.” Brooks Furniture Mfg. v. Dutaillier
Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005).
Plaintiff moves this Court to find that this case is exceptional and award it attorneys’ fees
pursuant to 35 U.S.C. § 285, in the amount of $1,832,676.73.2 Doc. No. 383. Both sides agree
that this case may be described as “exceptional,” but Defendants contend that it is Plaintiff
whose conduct has made the case as such and caused Defendants to be subject to the
“punishment” of a damages trial and verdict. Doc. No. 389, pg. 1; Doc. No. 392, pg. 3. Despite
these protestations, it is Defendants’ continued and flagrant refusal to comply with this Court’s
discovery orders and their obligations pursuant to the Federal Rules of Civil Procedure that has
created the case’s untenable procedural posture.
i.
This is an Exceptional Case under 35 U.S.C. § 285
By nature, litigation can be contentious and the Court recognizes the Parties’ need to
zealously advocate their positions. To this end, the Parties were not obligated to settle their
2
Plaintiff previously moved for an exceptional case finding under 35 U.S.C. § 285 and for attorneys’ fees
in November 2014. Doc. No. 117. The Court denied this requested relief as premature and notified
Plaintiff that this issue may be re-raised at the conclusion of the damages trial. 12/01/2014 Text Order.
19
dispute through a business solution or to concede to their opponent’s position. However, in part
because the public has an interest in the administration of justice in all matters, the Parties were
required to comply with the Federal Rules of Civil Procedure and this Court’s Orders, all of
which were entered in an attempt to facilitate the “just, speedy, and inexpensive determination”
of this matter. Fed.R.Civ.P. 1.
As noted by Plaintiff, the Supreme Court of the United States has held that an exceptional
case is “simply one that stands out from others with respect to the . . . unreasonable manner in
which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct.
1749, 1756 (2014). Here, Defendants’ litigation actions go beyond zealous advocacy and
presented “this Court with the first instance of such tactical and pervasive defiance in a patent
case.” Doc. No. 106, pg. 16. As set forth in the Court’s Memorandum Opinion Re: Plaintiff’s
Motion to Show Cause Why Defendants Should Not be Held in Contempt (Doc. No. 78),
Defendants proactively and steadfastly refused to comply with Orders of Court and advanced
inconsistent and presumably false positions, which resulted in extensive motions practice and
repeated Court involvement with otherwise routine matters. Doc. No. 106. Defendants’
systematic actions stymied both Plaintiff’s prosecution of its claims and the Court’s
administration of this dispute and, after repeated Court action over a four month period, left no
further option than to enter default judgment against Defendants as to infringement because
further orders or monetary or other sanctions would be ineffective in obtaining Defendants’
compliance with discovery obligations. See Doc. No. 106, Memorandum Opinion Re: Plaintiff’s
Motion for Order to Show Cause Why Defendant Should Not Be Held in Contempt (Doc. No.
78).
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Even after this sanction, Defendants have refused to provide relevant documents
(included a potentially crucial licensing agreement “Asia-Pacific License Agreement”) and have
attempted to impede this litigation through motions practice, including:
Defendants’ Motion to Dismiss for Lack of Standing (February 5, 2015)(Doc. No.
172);
Defendants’ Motion for Leave to File Affirmative Defense to Plaintiff’s Damages
Claims and Request for Equitable Relief Based Upon Unclean Hands (February
18, 2015)(Doc. No. 188); and
Defendants’ Motion for Summary Judgment (March 2, 2015)(Doc. No. 210)
In response to this Motion for Attorneys’ Fees, Defendants continue to argue the merits
of the finding of default judgment. Doc. No. 389. Defendants apparently believe that Plaintiff is
a patent troll and any of its claims are without merit. Doc. No. 389, pg. 1 (“Plaintiff well knows
any resolution on the merits would put an end to its scheme to shake down Parrot for millions of
dollars.”) The Court notes that in light of the deluge of patent suits that are initiated merely to
recover unjustified settlements, this stance is not exceptional. See Commil USA, LLC v. Cisco
Sys., Inc., No. 13-896 _ U.S. _ (May 26, 2015) (“[s]ome companies may use patents as a sword
to go after defendants for money, even when their claims are frivolous.”). To that end, the Court
embraces its “authority and responsibility to ensure frivolous cases are dissuaded.” Id. In
conformance with this responsibility, the Court has been available to the Parties to resolve
disputes and has entered Orders directing certain actions, where the Court found appropriate; the
Parties are bound to comply with these orders. Defendants’ failure to comply with repeated and
varied Orders of Court results in an inescapable inference that Defendants have consciously and
deliberately strategized to delay this litigation rather than have the dispute settled on the merits,
which Defendants should have welcomed if Plaintiff were truly a meritless litigant. This dilatory
and unreasonable conduct merits a finding that this case is exceptional pursuant to 35 U.S.C. §
285.
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ii.
An Award of Attorneys’ Fees to Plaintiff is Appropriate
Defendants’ exceptionally disruptive actions in this matter:
prevented Plaintiff from reviewing information prior to the October 24,
2014, claim construction hearing;
caused Plaintiff to expend substantial funds, time, and energy on Motions
to Compel and responses in opposition to Defendants’ Motions on settled
discovery issues;
necessitated that Plaintiff incur further legal fees and costs to prepare a
Motion to Show Cause Why Defendants Should Not be Held in Contempt
and a resultant evidentiary hearing and argument; and
inhibited Plaintiff’s ability to prepare this case for trial
See Doc. No. 106, pg. 16. As with each motion, the Court has reviewed the entire record of this
case and has objectively applied the law to the best of its ability. This process unfortunately
leads to the inescapable finding that Defendants never intended to present their defenses in this
forum and, instead, made every effort to obtain complete relief in their chosen venue, on their
schedule, and on their terms. Such a tactical strategy has prejudiced Plaintiff, inhibited a timely
decision on the merits and this Court’s administration of its docket, and violated the public’s best
interests.
Therefore, an award of attorneys’ fees and expenses is appropriate and Plaintiff’s Motion
for an Exceptional Case Finding and an Award of Attorneys’ Fees will be GRANTED.3 In
accordance with the forthcoming accompanying Order, Plaintiff shall file a Petition for
Attorneys’ Fees and Expenses. David White, Esq. will be appointed as Special Master and shall
issue a Report and Recommendation to the Court on the appropriate total sum for these items.
3
Plaintiff’s request for expert witness fees (in the amount of $130,114.09) will be denied because the
causal link between Defendants’ conduct and the portion of Plaintiff’s fees associated with its expert
witness that would not have been incurred without Defendants’ disruptive conduct cannot be determined.
Doc. No. 385, pgs. 14-15.
22
E. Motion for Post-Judgment Interest (Doc. No. 386)
Plaintiff moves this Court for an award of post-judgment interest on the damages and
royalty award, attorneys’ fees and expenses, and the total pre-judgment interest, at the rate set
forth in 28 U.S.C. § 1961(a), compounded annually. Post-judgment interest is “allowed on any
money judgment in a civil case recovered in a district court.” 28 U.S.C. § 1961(a). This interest
shall be “calculated from the date of the entry of the judgment, at a rate equal to the weekly
average 1-year constant maturity Treasury yield, as published by the Board of Governors of the
Federal Reserve System, for the calendar week preceding the date of the judgment.” Id. Interest
is computed daily and compounded annually. 28 U.S.C. § 1961(b).
Defendants object to this Motion only to the extent that interest would be computed for
future damages beginning on the date of the judgment. Doc. No. 391. The Court has previously
found that future damages in the amount of $4,016,050 is appropriate. This sum will be included
in the “money judgment” and will be subject to post-judgment interest. Therefore, Plaintiff’s
Motion for Post-Judgment Interest (Doc. No. 386) will be GRANTED.
An appropriate Order follows.
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III.
Conclusion
Each party to a lawsuit has the right to vigorously pursue its position before this Court.
Here, Defendants were provided with sufficient procedures and protections to receive a just, fair,
and inexpensive determination of Plaintiff’s claims and their defenses on the merits. However,
the Court was constrained to enter default judgment as to liability against Defendants based upon
their unprecedented actions from a very early stage. After careful consideration of Plaintiff’s
Post-Trial Damages Motions, the Court finds that the jury’s award of $4,016,050 for damages
from July 1, 2015 through expiration of the patents is an appropriate measure of future damages
and will be adopted by the Court. Attorneys’ fees and expenses will be awarded to Plaintiff
pursuant to Federal Rule of Civil Procedure 37. Pre-judgment and post-judgment interest will
also be awarded pursuant to 35 U.S.C. § 284 and 28 U.S.C. § 1961(a). Finally, based upon
Defendants’ actions, the Court finds that this case is exceptional and therefore, attorneys’ fees
and expenses will be awarded pursuant to 35 U.S.C. § 285.
An appropriate Order follows.
s/ Arthur J. Schwab
Arthur J. Schwab
United States District Judge
cc:
All Registered ECF Counsel and Parties
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