Imperium IP Holdings (Cayman), Ltd. v. Samsung Electronics Co., Ltd. et al

Filing 401

MEMORANDUM OPINION AND ORDER - GRANTING IN PART AND DENYING IN PART 363 SEALED MOTION for § 285 Attorneys' Fees and Non-Taxable Costs filed by Imperium IP Holdings (Cayman), Ltd. Signed by Judge Amos L. Mazzant, III on 9/13/2017. (baf, )

United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION

IMPERIUM IP HOLDINGS (CAYMAN),
LTD.
v.
SAMSUNG ELECTRONICS CO., LTD.,
SAMSUNG ELECTRONICS AMERICA,
INC., SAMSUNG
TELECOMMUNICATIONS AMERICA,
LLC, and SAMSUNG SEMICONDUCTOR,
INC.

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Civil Action No. 4:14-CV-371
Judge Mazzant

MEMORANDUM OPINION AND ORDER
Pending before the Court is Imperium IP Holdings (Cayman), Ltd.’s (“Imperium”)
Motion for § 285 Attorneys’ Fees and Non-Taxable Costs (Dkt. #363). After reviewing the
relevant pleadings, the Court grants in part and denies in part Imperium’s motion.
BACKGROUND
On June 9, 2014, Imperium filed the instant action against Defendants, alleging
infringement of United States Patent Nos. 6,271,884 (the “’884 Patent), 7,092,029 (the “’029
Patent”), and 6,836,290 (the “’290 Patent”). On February 8, 2016, the jury returned a verdict
finding the following: (1) Defendants infringed Claims 1, 5, 14, and 17 of the ’884 Patent; (2)
Defendants infringed Claims 1, 6, and 7 of the ’029 Patent; (3) Defendants willfully infringed the
patents-in-suit; and (4) Claim 10 of the ’290 Patent was invalid for obviousness (Dkt. #253).
The jury awarded $4,840,772 in damages for infringement of the ’884 Patent and $2,129,608.50
in damages for infringement of the ’029 Patent (Dkt. #253). The jury’s award represents an
implied royalty rate of four cents per product for the ’884 Patent and two cents per product for

the ’029 Patent.

On August 24, 2016, the Court awarded enhanced damages for willful

infringement and entered final judgment (Dkt. #329; Dkt. #330).
On May 11, 2017, Imperium filed the present motion for attorneys’ fees and non-taxable
costs (Dkt. #363). On May 26, 2017, Defendants filed a response (Dkt. #372). On June 5, 2017,
Imperium filed a reply (Dkt. #381). On June 13, 2017, Defendants filed a sur-reply (Dkt. #387).
LEGAL STANDARD
Section 285 of Title 35 of the United States Code provides, “The court in exceptional
cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. “When
deciding whether to award attorney fees under § 285, a district court engages in a two-step
inquiry.” MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012). The court
first determines whether the case is exceptional and, if so, whether an award of attorney fees is
justified. Id. at 915–16 (citations omitted). The Supreme Court has defined “an ‘exceptional’
case [as] simply one that stands out from others with respect to the substantive strength of a
party’s litigating position (considering both the governing law and the facts of 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).
District courts should consider the “totality of the circumstances” and use their discretion
to determine on a case-by-case basis whether a case is “exceptional.” Id. A nonexclusive list of
factors includes “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 n.6. Cases that may merit an award of attorney fees
include “the rare case in which a party’s unreasonable conduct—while not necessarily
independently sanctionable—is nonetheless so ‘exceptional’ as to justify an award of fees” or “a

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case presenting either subjective bad faith or exceptionally meritless claims.” Id. at 1757. A
party seeking attorney fees under § 285 must prove the merits of their contentions by a
preponderance of the evidence. Id. at 1758.
ANALYSIS
A. Prevailing Party
Defendants contend they are a prevailing party as the jury in this case and the U.S. Patent
Trial and Appeal Board in a parallel proceeding found two of the three patents-in-suit invalid.
Defendants further contend they prevailed because the Patent Office granted ex parte
reexamination of the third patent-in-suit. Imperium counters that it is the prevailing party
because it obtained an infringement judgment for damages.
A plaintiff may be considered a prevailing party for attorney’s fees purposes “if they
succeed on any significant issue which achieve some of the benefit the [party] sought in bringing
suit.” Farrar v. Hobby, 506 U.S. 103, 109 (1992) (quoting Hensley v. Eckerhart, 461 U.S. 424,
433 (1983)).

This occurs when a plaintiff “obtain[s] an enforceable judgment against the

defendant from whom fees are sought, or comparable relief through a consent decree or
settlement.” Id. at 111 (citations omitted). “In short, 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.” Id. at 111–12. There can
be only one prevailing party, but a “party is not required . . . to prevail on all claims in order to
qualify.” Shum v. Intel Corp., 629 F.3d 1360, 1367–68 (Fed. Cir. 2010).
Because there can be only one prevailing party, the Court finds that Imperium is the
“prevailing party” in this case.

Imperium was successful in proving Defendants infringed

asserted claims in the ’884 and ’029 Patents.

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The jury awarded Imperium $4,840,772 in

damages for infringement of the ’884 Patent and $2,129,608.50 in damages for infringement of
the ’029 Patent. Following trial, the Court trebled the jury’s damages award for Defendants’
willful infringement. Imperium’s damages judgment against Defendants “materially alters the
legal relationship” between the parties. This is true because “[a] judgment for damages in any
amount . . . modifies [Defendants’] behavior for [Imperium’s] benefit by forcing [Defendants’]
to pay an amount of money [they] otherwise would not pay.” Farrar, 506 U.S. at 113. While
the jury found the ’290 Patent invalid, the Court recognizes that Imperium is not required to
succeed on every claim to be the prevailing party. Shum, 629 F.3d at 1367–68. Further, the
Court is unconvinced that the Patent Office’s grant of ex parte reexamination for the ’884 Patent
has any significant bearing on the Court’s determination of the prevailing party.
Accordingly, Imperium is a prevailing party and thus is eligible for its attorney’s fees.
B. Exceptional Case
After considering the totality of the circumstances, the Court finds this case is
“exceptional” based on the unreasonable conduct of Defendants.
First, there was ample evidence at trial of Defendants’ willful infringement that
warranted the Court’s enhancement of damages. For instance, Mr. Melfi testified regarding
allegations of Defendants’ copying. Mr. Melfi testified that during his time working for ESS,1
Defendants sought information on how ESS made its camera and how to duplicate ESS’s camera
testing lab. He further testified that Defendants asked specifically about the patented technology
and requested source code. The evidence showed that Defendants used obtained information to
duplicate ESS’s camera testing lab. In addition, Mr. Bang, who testified for Defendants, stated
Defendants did not follow Imperium’s patents after 2011 or monitor Imperium’s previous
litigation regarding the patents-in-suit. Mr. Lee testified that in 2011, Defendants dropped
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ESS is short for ESS Technology, Inc., an entity that assigned its rights in the patents-in-suit to Imperium.

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pursuit of the Imperium’s patents. However, evidence produced at trial indicated the testimony
of Mr. Lee and Mr. Bang was untrue. In fact, Defendants knew of Imperium’s patents for years,
tracked those patents in other litigation, and tried to obtain those patents through a patent broker
before this case began. Despite knowing of Imperium’s patents since at least 2011, Defendants
never investigated to form a good faith belief as to non-infringement and invalidity. Instead, the
record indicates that Defendants used a patent broker to try to purchase the patents-in-suit
without revealing their identity.
A finding of willful infringement for purposes of enhanced damages does not require a
finding that a case is exceptional under § 285. Brooktree Corp. v. Advanced Micro Devices, Inc.,
977 F.2d 1555, 1582 (Fed. Cir. 1992). Nevertheless, “the willfulness of the infringement by the
accused infringer may be a sufficient basis in a particular case for finding the case ‘exceptional’
for purposes of awarding attorney fees to the prevailing patent owner.” Golight, Inc. v. WalMart Stores, Inc., 355 F.3d 1327, 1340 (Fed. Cir. 2004); see Serio-US Indus., Inc. v. Plastic
Recovery Techs. Corp., 459 F.3d 1311, 1321 (Fed. Cir. 2006) (“Exceptional cases usually feature
some material, inappropriate conduct related to the matter in litigation, such as willful
infringement, fraud or inequitable conduct . . . .”).
Second, Defendants made multiple material misrepresentations under oath and in their
pleadings. At the beginning of the case, Imperium points out that Defendants represented in its
September 2014 answer that it did not know of Imperium’s patents until the June 2014 filing of
this lawsuit. Later, in an interrogatory response, Defendants again represented that they did not
know of Imperium’s patents until June 2014. Defendants’ responses remained unchanged after
deposition and other discovery showed these statements to be incorrect. During trial, Mr. Bang
and Mr. Lee gave false testimony regarding Defendants’ knowledge of the patents-in-suit.

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Further, Defendants misrepresented key facts bearing on infringement and willfulness, including
the fact that Defendants were tracking Imperium’s patents in an earlier litigation, the extent of
Defendants’ discussions about obtaining Imperium’s patents, and Defendants’ alleged pre-suit
analysis of them.
Third, Defendants failed to produce relevant documents timely.

During discovery,

around July 2015, Imperium specifically requested emails or other documents relating to
discussions that Mr. Kaler had with counsel for Imperium in 2011, 2012, 2013, and 2014.
Apparently, Defendants never searched for any such documents until the fourth day of trial at
2:19 a.m. on February 4, 2016, when Defendants finally produced the requested documents.
Defendants, however, produced only documents found on Mr. Kaler’s laptop, omitted any
requested documents from Defendants’ own files. Only after Imperium and the Court raised the
issue of sanctions did Defendants search their own files for Kaler-related documents. On the
fifth day of trial, Defendants then produced a handful of hard-copy documents along with an
affidavit from Mr. Bang. This affidavit revealed these communications and documents between
Defendants and Mr. Kaler were kept on Mr. Bang’s computer in a separate folder titled,
“Imperium.”
Last, Defendants have continued to infringe the ’884 and ’029 Patents—after the jury
found infringement, after the Court entered judgment, after the Court enhanced damages. The
Court considers Defendants’ continued infringement to be unreasonable, deliberate and willful in
nature, especially in light of the Court’s orders and the jury’s verdict. Affinity Labs of Tex., LLC
v. BMW N. Am., LLC, 783 F. Supp. 2d 891, 899 (E.D. Tex. 2011) (“Following a jury verdict and
entry of judgment of infringement and no invalidity, a defendant’s continued infringement will
be willful absent very unusual circumstances.”).

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It should be noted that none of Defendants’ conduct in isolation makes this case
exceptional. However, when a party does all of these things mentioned above and continues to
infringe the patents-in-suit, the Court can only conclude this case is exceptional. Accordingly,
the Court awards Imperium its attorney’s fees incurred during this litigation.
C. Reasonableness of the Fee Request
“[T]he awarding of attorney fees pursuant to 35 U.S.C. § 285 is unique to patent law and
therefore subject to Federal Circuit law.” Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340,
1343 (Fed. Cir. 2001). The Federal Circuit has “approv[ed] of use of the lodestar method in
calculating an award of § 285 attorneys’ fees.” Innovention Toys, LLC v. MGA Entm’t, Inc., No.
07-6510, 2014 WL 1276346, at *2 (E.D. La. March 27, 2014) (citing Mathis v. Spears, 857 F.2d
749, 755 (Fed. Cir. 1988) (citing Hensley v. Eckerhart, 461 U.S. 424 (1982))). Therefore, the
Court will apply the two-step lodestar method.
The Court first calculates the “lodestar” by multiplying the number of hours an attorney
reasonably spent on the case by an appropriate hourly rate, which is the market rate in the
community for this work. See Smith & Fuller, P.A. v. Cooper Tire & Rubber Co., 685 F.3d 486,
490 (5th Cir. 2012). “A reasonable hourly rate is the prevailing market rate in the relevant legal
community for similar services by lawyers of reasonably comparable skills, experience, and
reputation.” Norman v. Hous. Auth. of City of Montgomery, 836 F.2d 1292, 1299 (11th Cir.
1988) (citing Blum v. Stenson, 465 U.S. 886, 895–96 n.11 (1984)).

The relevant legal

community is the community where the district court sits. See Tollett v. City of Kemah, 285 F.3d
357, 368 (5th Cir. 2002).
The party seeking reimbursement of attorney’s fees bears the burden of establishing the
number of hours expended through the presentation of adequately recorded time records as

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evidence. See Watkins v. Fordice, 7 F.3d 453, 457 (5th Cir. 1993). The Court should use this
time as a benchmark and then exclude any time that is excessive, duplicative, unnecessary, or
inadequately documented. Id. The hours remaining are those reasonably expended. Id. There is
a strong presumption of the reasonableness of the lodestar amount. See Perdue v. Kenny A.,
559 U.S. 542, 552 (2010); Saizan v. Delta Concrete Prod. Co., 448 F.3d 795, 800 (5th Cir.
2006).
After calculating the lodestar, the Court then considers whether the circumstances of the
particular case warrant an upward or downward lodestar adjustment. Migis v. Pearle Vision,
Inc., 135 F.3d 1041, 1047 (5th Cir. 1998). In making any lodestar adjustment, the Court looks to
twelve Johnson factors. Id. (citing Johnson v. Ga. Highway Express, Inc., 488 F.2d 714, 717–19
(5th Cir. 1974) (“(1) the time and labor required for the litigation; (2) the novelty and difficulty
of the questions presented; (3) the skill required to perform the legal services properly; (4) the
preclusion of other employment by the attorney due to acceptance of the case; (5) the customary
fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the
circumstances; (8) the amount involved and the result obtained; (9) the experience, reputation
and ability of the attorneys; (10) the ‘undesirability’ of the case; (11) the nature and length of the
professional relationship with the client; and (12) awards in similar cases.”)).
Here, Imperium asks the Court to award it $6,950,000 in attorney’s fees and $738,079.23
in non-taxable costs and expenses for litigating this case. In support of its attorney’s fee request,
Imperium provides the affidavit of its lead counsel, Mr. Alan Fisch (Dkt. #363, Exhibit 6). Mr.
Fisch’s affidavit does not give the Court enough information to determine the reasonableness of
Imperium’s fair estimate of attorney’s fees. Particularly, Imperium has not provided the Court
with the number of hours Imperium’s attorneys spent on this case. Watkins v. Fordice, 7 F.3d at

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457.

Without this information, the Court cannot calculate the lodestar.

Before granting

attorney’s fees for a specific amount, the Court orders Imperium to submit documentation, that
indicates the hours and billing rates for all legal assistants, associates, and partners who worked
on this case.2 See Fed. R. Civ. P. 54(d).
The Court finds Imperium is entitled to its non-taxable costs or expenses. The Federal
Circuit interprets § 285 to “include those sums that the prevailing party incurs in the preparation
for and performance of legal services related to the suit.” Mathis, 857 F.2d at 757 (quoting
Central Soya, Inc. v. Geo. Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983)). Nevertheless,
the Court further finds Imperium may not recover its expert fees. “Section 285 does not include
shifting of expert fees . . . .” Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 379
(Fed. Cir. 1994). A district court may, however, “invoke its inherent power to impose sanctions
in the form of reasonable expert fees in excess of what is provided for by statute.” Takeda
Chem. Indus., Ltd. v. MylanLabs., Inc., 549 F.3d 1381, 1391 (Fed. Cir. 2008). “The use of this
inherent power is reserved for cases with ‘a finding of fraud or abuse of the judicial process.’”
Id. (quoting Amsted Indus., 23 F.3d at 378). The Court elects not to impose sanctions in the form
of Imperium’s expert fees.

Imperium has made no evidentiary showing that Defendants

committed fraud or abused the judicial process to warrant such a sanction. See MarcTec, LLC,
664 F.3d at 921 (“[N]ot every case that qualifies as exceptional under § 285 will also qualify for
sanctions under the court's inherent power.”). Section 285 and the Court’s award of attorney’s
fees is adequate to compensate Imperium for the circumstances of this case. Therefore, the
Court reduces Imperium’s requested non-taxable costs by $156,397.79.

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The Court recognizes that Imperium offered to provide the Court with additional documentation on the particular
hours and work performed by each Imperium attorney (Dkt. #363 at p. 10).

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CONCLUSION
It is therefore ORDERED that Imperium IP Holdings (Cayman), Ltd.’s Motion for § 285
Attorneys’ Fees and Non-Taxable Costs (Dkt. #363) is GRANTED IN PART and DENIED IN

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PART.

The Court awards Imperium $581,681.44 in non-taxable costs or expenses.

To

determine the amount of attorney’s fees awarded to Imperium, the Court ORDERS Imperium to
submit to the Court within seven days of this Order documentation that indicates the hours and
billing rates for all legal assistants, associates, and partners who worked on this case.

SIGNED this 13th day of September, 2017.

___________________________________
AMOS L. MAZZANT
UNITED STATES DISTRICT JUDGE

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