WCM Industries, Inc. v. IPS Corporation et al

Filing 716

ORDER granting 487 Motion for Leave to File; granting in part and denying in part 602 Motion ; granting in part and denying in part 619 Motion to Stay; denying 704 Motion. Signed by Judge Jon Phipps McCalla on 8/26/2016. (McCalla, Jon)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

WCM INDUSTRIES, INC.,
Plaintiff,
v.
IPS CORPORATION,
Defendant.

)
)
) CIVIL ACTION NO.: 2:13-cv-02019-JPM-tmp
)
)
)
Jury Trial Demanded
)
)
)

ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFF’S MOTION FOR EXCEPTIONAL CASE AND AWARD OF FEES;
GRANTING PLAINTIFF’S MOTION FOR LEAVE TO FILE
SUPPORTING MATERIALS;
GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION FOR STAY OF EXECUTION OF JUDGMENT;
AND DENYING DEFENDANT’S MOTION FOR ORDER DIRECTING PAYMENT

Before the Court are Plaintiff WCM Industries, Inc.’s
(“WCM”) Motion for Exceptional Case and Award of Fees (ECF No.
602), filed May 27, 2016, and Motion for Leave to Provide
Supporting Invoices and Attorneys’ Fees Materials (ECF No. 487),
filed December 10, 2015; and Defendant IPS Corporation’s (“IPS”)
Motion for Stay of Execution of Judgment with Assignment of
Certificate of Deposit, or in the Alternative, Depositing Funds
into the Registry of Court In Lieu of Supersedeas Bond (ECF No.
619), filed June 10, 2016, and Motion for Order Directing
Payment (ECF No. 704), filed August 24, 2016.

For the reasons that follow, the Court GRANTS IN PART and
DENIES IN PART WCM’s Motion for Exceptional Case and Award of
Fees, GRANTS WCM’s Motion for Leave to Provide Supporting
Materials, GRANTS IN PART and DENIES IN PART IPS’s Motion for
Stay of Execution of Judgment, and DENIES IPS’s Motion for Order
Directing Payment.
I.

BACKGROUND
Plaintiff WCM brought claims for patent infringement

against Defendant IPS Corporation (“IPS”), alleging that IPS
infringed claims in three of WCM’s patents. 1
Order at 2, ECF No. 424.)

(Joint Pretrial

IPS denied that it infringed the

patents and also asserted claims that WCM’s patents were
invalid.

(Id.)

A jury trial was held over ten days between October 13,
2015, and October 27, 2015.

(Min. Entries, ECF Nos. 430,

432-434, 439, 441, 444, 447, 451, 453.)

On October 27, 2015,

the jury returned a verdict for WCM, finding that IPS had
willfully infringed the asserted claims and that the asserted
claims were not invalid.

(See Jury Verdict Form, ECF No. 454.)

The Court entered a judgment on December 4, 2015.

1

(ECF No.

The three patents at issue are U.S. Patent No. 8,302,220 (“the ’220
Patent”); U.S. Patent No. 8,321,970 (“the ’970 Patent”); and U.S. Patent No.
8,584,272 (“the ’272 Patent”). (Joint Pretrial Order at 2, ECF No. 424.)
The IPS products that WCM alleges infringe WCM’s patents (“the Accused
Products”) include the Original Classic line and the Revised Classic line of
bathtub overflow and drain assemblies. (See id. at 3-4.)

2

478.)

Subsequently, the Court denied Defendant IPS’s motions

for judgment as a matter of law of non-infringement, invalidity,
and no willfulness.

(ECF Nos. 592-94.)

On May 27, 2016, WCM filed a motion for exceptional case
and award of fees.

(ECF No. 602.)

a response in opposition.

On June 10, 2016, IPS filed

(ECF No. 620.)

With leave of Court,

WCM filed a reply brief on June 28, 2016 (ECF No. 640), and IPS
filed a sur-reply on June 30, 2016 (ECF No. 655).
On June 10, 2016, IPS filed a motion for stay of execution
of judgment.

(ECF No. 619.)

June 27, 2016.

WCM responded in opposition on

(ECF No. 633.)

reply brief on July 28, 2016.

With leave of Court, IPS filed a
(ECF No. 686.)

On August 24, 2016, IPS filed a motion for order directing
payment.

(ECF No. 704.)

IPS seeks an order from the Court

“allowing IPS to deposit the sum of the sunset period royalties
with the Court.”

(Id.)

August 25, 2016.

(ECF No. 710.)

II.

WCM filed a response in opposition on

LEGAL STANDARDS
A.

Motion for Exceptional Case

Thirty-five U.S.C. § 285 provides that: “The court in
exceptional cases may award reasonable attorney fees to the
prevailing party.”

An “exceptional case” is “one that stands

out from others with respect to the substantive strength of a
party’s litigating position (considering both the governing law

3

and the facts of the case) or the unreasonable manner in which
the case was litigated.”

Octane Fitness, LLC v. ICON Health &

Fitness, Inc., 134 S. Ct. 1749, 1756 (2014).

The district court

has discretion to determine whether a case is “exceptional”
under the totality of the circumstances.

Id.

In a copyright

case involving a similar provision, the Supreme Court provided a
nonexclusive list of factors the court can consider, including
“frivolousness, motivation, objective unreasonableness (both in
the factual and legal components of the case) and the need in
particular circumstances to advance considerations of
compensation and deterrence.”

Id. at 1756 n.6 (quoting Fogerty

v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)).

The Federal

Circuit has “repeatedly identified as ‘exceptional’ those cases
involving ‘inequitable conduct before the [Patent Office];
litigation misconduct; vexatious, unjustified, and otherwise bad
faith litigation; a frivolous suit or willful infringement.’”
Forest Labs, Inc. v. Abbott Labs., 339 F.3d 1324, 1329 (Fed.
Cir. 2003) (quoting Brasseler, U.S.A. I, L.P. v. Stryker Sales
Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001)) (alteration in
original).
A district court may, at its discretion, deny fee awards
even in exceptional cases.

Icon Health & Fitness, Inc. v.

Octane Fitness, LLC, 576 F. App’x 1002, (Fed. Cir. 2014); see
also S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d

4

198, 201 (Fed. Cir. 1986) (“an exceptional case does not require
in all circumstances the award of attorney fees”).

The award of

enhanced damages is independent from the award of attorneys’
fees; the Federal Circuit has found that it is not an abuse of
discretion to award enhanced damages yet not award attorneys’
fees.

See Va. Panel Corp. v. MAC Panel Co., 133 F.3d 860, 867

(Fed. Cir. 1997).
B.

Motion to Stay Judgment

Federal Rule of Civil Procedure 62(d) provides in pertinent
part that: “If an appeal is taken, the appellant may obtain a
stay by supersedeas bond . . . .”

The rule “entitles a party

who files a satisfactory supersedeas bond to a stay of money
judgment as a matter of right.”

Arban v. W. Pub. Corp., 345

F.3d 390, 409 (6th Cir. 2003) (citing Fed. Prescription Serv.,
Inc. v. Am. Pharm. Ass’n, 636 F.2d 755, 759 (D.C. Cir. 1980)).
Federal Rule of Appellate Procedure 8(a) provides in pertinent
part that a party seeking a stay “must ordinarily move first in
the district court for . . . a stay of the judgment . . . ;
approval of a supersedeas bond; or an order suspending,
modifying, restoring, or granting an injunction while an appeal
is pending.”

5

III. ANALYSIS
A.

Motion for Exceptional Case

WCM asserts that it is the prevailing party and that this
is an exceptional case for which it is entitled to reasonable
attorneys’ fees.

(ECF No. 602.)

IPS argues its behavior in the

case has not been egregious and that a finding that the case is
exceptional is not warranted based on IPS’s conduct throughout
the entire litigation.

(ECF No. 620.)

The Court finds that WCM

is entitled to attorneys’ fees to the extent that the fees were
incurred as a result of IPS’s deficient first and second notice
letters and/or as a result of IPS’s incomplete delivery of the
third notice letter.
As an initial matter, the Court finds that WCM is the
prevailing party. 2

“[A] plaintiff ‘prevails’ when actual relief

on the merits of his claim materially alters the legal
relationship between the parties by modifying the defendant’s
behavior in a way that directly benefits the plaintiff.”
v. Hobby, 506 U.S. 103, 111-12 (1992).

Farrar

WCM was awarded actual

relief on its claims of patent infringement (see, e.g., Jury
Verdict Form, ECF No. 454), and IPS is required to modify its

2

IPS asserted in its response to WCM’s motion for leave to file
supporting materials that “[i]t is IPS’s position that WCM is not the
prevailing party in this litigation.” (ECF No. 510 ¶ 3.) There is no
further argument, however, in IPS’s response to WCM’s motion for exceptional
case that WCM is not the prevailing party. (See, e.g., ECF No. 620 at 13-14
(comparing WCM to the prevailing party in an analogous case).)

6

behavior by way of a monetary judgment and an injunction (see
J., ECF No. 478; Permanent Injunction, ECF No. 614).

Thus, the

Court finds that WCM is the prevailing party such that 35 U.S.C.
§ 285 could apply to WCM.
WCM asserts that based on the willful infringement found in
this case, the lack of substantive strength of IPS’s litigation
positions, and comparison to similar cases, the instant case is
exceptional.

(ECF No. 602 at 7-12.)

IPS argues that its

litigation position did not lack substantive strength and that
its litigation of the case was not unreasonable or in bad faith.
(ECF No. 620 at 7-9, 11-13.)

The Court finds that WCM is

entitled to certain reasonable attorneys’ fees based on IPS’s
conduct with regard to providing notice of the permanent
injunction to its distributors and manufacturer’s
representatives.
When considering the totality of the circumstances pretrial and through the end of trial, it appears that the only
factor favoring attorneys’ fees is willful infringement.

Even

if, as WCM asserts, IPS’s litigation positions were
substantively weak, the Court has not found that IPS’s strategic
decisions rose to the level of litigation misconduct or bad
faith litigation.

(See ECF No. 594 at 8.)

In MarcTec, LLC v.

Johnson & Johnson, for example, the Federal Circuit affirmed a
finding of litigation misconduct when a party misrepresented the

7

law and relied on unreliable expert testimony that prolonged the
litigation.

664 F.3d 907, 920 (Fed. Cir. 2012).

throughout trial was not so egregious.

IPS’s conduct

In fact, it was a WCM

opinion witness whose testimony was precluded because it was
unreliable.

(See ECF No. 389.)

Further, “[i]n Octane Fitness,

the Supreme Court made clear that it is the ‘substantive
strength of the party’s litigating position’ that is relevant to
an exceptional case determination, not the correctness or
eventual success of that position.”

SFA Sys., LLC v. Newegg

Inc., 793 F.3d 1344, 1348 (Fed. Cir. 2015).

The fact that IPS

was ultimately unsuccessful on the merits does not necessarily
warrant a finding of exceptional case.

Thus, the Court DENIES

WCM’s motion for attorneys’ fees with the exception of one
aspect of the case which the Court finds to be exceptional, see
infra pp. 8-12.
Post-trial, IPS has been less than forthcoming to the Court
and, it appears, to its own counsel, which has resulted in
additional communications, briefing, and hearings before the
Court that would otherwise have been unnecessary.
Min. Entries, ECF Nos. 673, 677, 682, 696.)

(See, e.g.,

On June 30, 2016,

WCM filed a motion to enforce the permanent injunction,
asserting that IPS’s notice letters to its distributors and
manufacturer’s representatives provided insufficient notice of
the permanent injunction entered in the instant case (ECF No.

8

614).

(ECF No. 656.) 3

After expedited briefing and several

hearings, the Court ordered IPS to send to its distributors and
manufacturer’s representatives an electronic notice letter with
language approved by the Court and with the permanent injunction
order attached.

(See ECF No. 678.)

The Court further ordered

IPS to provide delivery and read receipts to WCM within a set
period of time.

(See id.)

IPS represented to the Court and to WCM that it had the
capability to send the electronic notice letter to and receive
receipts from all of the 6,000-plus individual distributors and
manufacturer’s representatives in its distribution channel.
(See, e.g., Tr. 37:14-16, July 15, 2016, ECF No. 683; Tr. 23:1524, July 20, 2016, ECF No. 680.)

Once the delivery and read

receipts were obtained by WCM, however, the documentation and
subsequently-developed record showed that IPS had affirmatively

3

The Court granted the permanent injunction on May 16, 2016. (ECF No.
596; see also ECF No. 614.) Thus, the sunset period of ninety days was to
last until August 14, 2016. The first two notice letters sent by IPS, dated
May 23, 2016, and June 10, 2016, failed to provide the requisite actual
notice of the terms of the permanent injunction to the recipients. (See ECF
No. 666-1 at PageID 39452, 39454.) Further, the notice letters included
legal conclusions that IPS’s distributors and end users were not restricted
by the permanent injunction (see id.), even though specific determinations
had not been made as to whether every recipient was not an “Enjoined Party”
as defined by the permanent injunction. IPS failed to provide a satisfactory
notice letter until after WCM moved the Court to enforce the injunction on
June 30, 2016, at which point half of the sunset period had already passed.
Moreover, the third notice letter was not even sent until July 20, 2016,
after telephonic hearings with the Court regarding the language of the letter
(see Min. Entries, ECF Nos. 673, 677; ECF No. 678), and as of August 24,
2016, it still was not ascertainable whether every asserted distributor and
manufacturer’s representative of IPS’s had received notice of the permanent
injunction (see infra at 11; see also ECF No. 706 ¶¶ 3-6).

9

misled both the Court and WCM as to its ability to communicate
with all those in its distribution channel.

(See, e.g., ECF No.

690 at 3 (“The notice letter was sent to no more than 1,177
unique email addresses; and . . . 98 resulted in failure
messages.”).)

IPS, in response to WCM’s renewed motion to

enforce the permanent injunction (id.), later stated that it did
not actually “possess the physical address or email addresses
for many of the individual locations in its wholesale
distribution channel.”
also ECF No. 694.)

(Cassella Decl. ¶ 7, ECF No. 694-1; see

Rather, “for many of [the distribution

locations], there is a single point of contact through which IPS
communicates.”

(ECF No. 694 at 2 (listing companies and buying

groups that encompass between 399 and 1,400 individual
entities).)

IPS acknowledged that it “does not communicate

directly with each distribution location controlled by a single
corporate entity.”

(Id.)

Thus, the Court and WCM were made to go through the process
of expedited briefing and hearings on WCM’s first motion to
enforce the permanent injunction, only to discover that IPS had
withheld critical information all along about how it
communicated with its distributors and manufacturer’s
representatives.

The Court, after receiving additional briefing

and holding another hearing, then ordered IPS to provide an
affidavit from an individual at each “point-of-contact” company

10

or buying group detailing the dissemination of the third notice
letter to its individual locations or members.

(ECF No. 698.)

As of August 9, 2016, less than a week before the sunset period
expired, two affidavits still had not been produced by IPS.
(See ECF No. 701 at 5.)

On August 24, 2016, WCM informed the

Court that all the information IPS was ordered to provide had
been received, save for an “as received copy” of the third
notice letter referenced in one declaration.

(See ECF No. 706.)

The Court finds that IPS’s failure to clarify its ability
to communicate the notice letter and permanent injunction order
to all its distributors and manufacturer’s representatives and
the delay IPS created in providing the requisite notice is
objectively unreasonable and resulted in vexatious litigation.
Since this particular aspect of the case has been exceptional,
the Court finds that certain attorneys’ fees are warranted.

But

see AAT Bioquest, Inc. v. Tex. Fluorescence Labs., Inc., Case
No. 14-cv-03909-DMR, 2015 WL 7708332, at *16 (N.D. Cal. Nov. 30,
2015) (“the court’s award of trebled . . . damages . . . means
that [the defendant] will surrender to [the plaintiff] an amount
that is more than five times the actual revenue it made from its
sales . . . .
deterrence.

This is sufficient compensation, punishment, and
After considering the totality of the

circumstances, the court will exercise its discretion and
decline to award attorneys’ fees under 35 U.S.C. § 285 for the

11

two aspects of the case that it finds to be exceptional.”
(emphasis added)).

Unlike the award in AAT Bioquest, the

Court’s award of enhanced damages in the instant case is not
adequate to compensate, punish, or deter the conduct of IPS in
relation to the permanent injunction.

The enhanced damages were

related to IPS’s infringing activities, which were established
at trial; an award of limited attorneys’ fees now concerns IPS’s
lack of candor post-trial.
The Court therefore GRANTS WCM’s motion for exceptional
case and awards attorneys’ fees specifically related to IPS’s
deficient first and second notice letters and/or IPS’s
incomplete delivery of the third notice letter and GRANTS WCM’s
motion for leave to provide supporting invoices and related
attorneys’ fees materials.

The Court also awards post-judgment

interest on the award of attorneys’ fees. 4

The majority of

circuits include attorneys’ fees as part of “any money judgment”
under 28 U.S.C. § 1961(a).

See Associated Gen. Contractors of

Ohio, Inc. v. Drabik, 250 F.3d 482, 485 (6th Cir. 2001)
(collecting cases).

Upon WCM’s submission of the supporting

documentation, and the establishment of the amount of attorneys’
4

In an earlier order, the Court granted WCM’s motion for post-judgment
interest, but noted that post-judgment interest on attorneys’ fees was, at
the time, undetermined and premature because WCM had not yet filed a motion
for attorneys’ fees. (ECF No. 595.) The Court granted post-judgment
interest “on the judgement amount, prejudgment interest, and any other
monetary relief granted by the Court when the judgment is paid.” (Id. at 89.)

12

fees entitled to WCM, the Court will enter a final amended
judgment in this case. 5
B.

Motion to Stay Judgment

IPS requests a stay of the monetary judgment 6 pending appeal
upon the assignment of a certificate of deposit in the amount
awarded by this Court.

(ECF No. 619.)

In the alternative, IPS

requests that it be permitted to deposit the funds into a
registry of the Court.

(Id. at 2.)

WCM argues that the Federal

Rules of Civil and Appellate Procedure require a supersedeas
bond and that the amount proposed by Defendant is not
sufficient, given post-trial sales and post-trial orders by the
Court.

(ECF No. 633 at 2-5.)

The Court finds that a stay of

the monetary judgment is appropriate upon the Court’s approval
of a supersedeas bond posted by IPS in an amount sufficient to
secure full satisfaction of the final amended judgment. 7
Rule 62(d) does not “necessarily impl[y] that filing a bond
is the only way to obtain a stay.

5

It speaks only to stays

The Federal Circuit has awarded post-judgment interest on attorneys’
fees and has determined that interest is calculated “from the date of the
judgment establishing the right to the award.” Mathis v. Spears, 857 F.2d
749, 760 (Fed. Cir. 1988).
6
WCM asserts in its response that only the monetary judgment should be
stayed and that other orders, such as the permanent injunction order, should
not be disturbed. (ECF No. 633 at 5.) Based on IPS’s filings, there is no
dispute that a stay shall apply only to the monetary judgment. (See ECF No.
662 at 3 (“IPS has not moved the Court for a stay of any non-monetary relief
including the permanent injunction.”).)
7
The Court will enter a final amended judgment when all monetary
damages are determinable. The final amended judgment will include
compensatory and punitive damages; pre- and post-judgment interest; sunset
period royalties; and the limited attorneys’ fees granted by this order.

13

granted as a matter of right[;] it does not speak to stays
granted by the court in accordance with its discretion.”
345 F.3d at 409.

Arban,

The Court not only has the power to permit

satisfaction of the judgment with a bond in a lesser amount but
also “to permit security other than the bond.”

United States ex

rel. Lefan v. Gen. Elec. Co., 397 F. App’x 144, 151 (6th Cir.
2010) (quoting 11 Charles Alan Wright, Arthur R. Miller, & Mary
Kay Kane, Federal Practice and Procedure § 2905 p. 522 (4th ed.
2008)).
Although the substitution of a supersedeas bond with
another form of security is permissible, the Court finds no
reason to deviate from the standard procedure set forth by the
Federal Rules.

As WCM notes, “the bond includes a written and

signed promise to pay another.”

(ECF No. 633 at 3.)

The

accountability to WCM that accompanies a supersedeas bond, as
opposed to another form of surety, is critical, given that IPS
has demonstrated a lack of urgency in complying with orders by
the Court.

See supra Part III.A.

Thus, the Court GRANTS the

stay of the judgment upon the filing of the supersedeas bond and
its approval by the Court; the Court DENIES IPS’s request to
substitute a certificate of deposit for a supersedeas bond.

14

C.

Motion for Order Directing Payment

IPS requests that the Court direct payment of the sum of
the sunset period royalties 8 so that IPS may deposit the funds
with the Court to comply with the permanent injunction.
No. 704 at 1-2.)

(ECF

WCM opposes the relief requested because even

if the Court were to grant a stay, it would not apply to the
permanent injunction.

(ECF No. 710 at 1-2.)

As noted above,

the Court finds that the sum of the sunset period royalties must
be secured by the supersedeas bond.

See supra Part III.B n.7.

WCM argues that IPS has conceded that a stay, if granted,
would not apply to the permanent injunction.
2.)

(ECF No. 710 at 1-

IPS, however, stated only that a stay should not apply to

“non-monetary relief.”

See supra Part III.B n.6.

The permanent

injunction necessarily entails certain monetary relief.

(See

Part II.c, ECF No. 614 (“The total royalty for sales of Classic
Products during the 90-day sunset period shall be paid no later
than fifteen (15) days after the expiration of the sunset
period.”).)

Even though the royalties are a condition of the

permanent injunction, “[t]hat characterization of the monetary
award for the sunset period does not render Rule 62(d)
inapplicable.”

ActiveVideo Networks, Inc. v. Verizon Commc’ns,

Inc., Nos. 2011-1538, -1567, 2012-1129, -1201, 2012 WL 10716768,

8

It does not appear that IPS has specified the sum of the sunset period
royalties. IPS must do so by August 29, 2016.

15

at *1 (Fed. Cir. Apr. 2, 2012) (per curiam).

While the Court’s

stay does not apply to the other terms of the permanent
injunction, the stay shall include the monetary relief described
in the permanent injunction.

See id. (“royalty payments

constitute monetary relief that is normally subject to Rule
62(d)”).
Although the effect of a stay is to deprive [the
plaintiff]
of
immediate
access
to
the
royalty
payments, the supersedeas bond ensures that those
payments will be readily available to [the plaintiff]
if it should prevail on appeal. At the same time the
bond ensures that if [the defendant] should prevail on
appeal, it will not run the risk of being unable to
recoup the payments made during the sunset period.
Id.
Thus, the Court DENIES IPS’s motion for order directing
payment because the sum of the sunset period royalties should
not be deposited with the Court but rather secured by the
supersedeas bond.
IV.

CONCLUSION
For the foregoing reasons, WCM’s motion for exceptional

case is GRANTED IN PART and DENIED IN PART; WCM’s motion for
leave to file supporting materials is GRANTED; IPS’s motion for
stay of execution of judgment is GRANTED IN PART and DENIED IN
PART; and IPS’s motion for order directing payment is DENIED.
IPS shall disclose the sum of the sunset period royalties
by August 29, 2016.

WCM shall submit detailed documentation in

16

support of the limited award of attorneys’ fees by September 6,
2016.

IPS shall post a bond sufficient to secure full

satisfaction of the final amended judgment, said bond to be
posted within ten (10) days of the entry of the final amended
judgment.
IT IS SO ORDERED, this 26th day of August, 2016.

/s/ Jon P. McCalla
JON P. McCALLA
UNITED STATES DISTRICT JUDGE

17