Adjustacam LLC v. Amazon.com, Inc. et al

Filing 829

MEMORANDUM OPINION AND ORDER. It is hereby ORDERED that AdjustaCam LLC shall pay Newegg attorneys' fees and expenses in the amount of $564,865.85. Payment shall be made no later than 30 days from the date of this Order, and AdjustaCam shall promptly notify the Court by a Notice filed on the docket when payment has been made. Signed by District Judge Rodney Gilstrap on 03/15/18. (mll, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION
ADJUSTACAM LLC,

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Plaintiff,
v.
AMAZON.COM, INC., ET AL
Defendants.

CIVIL ACTION NO. 6:10-CV-00329-JRG

MEMORANDUM OPINION AND ORDER
On October 19, 2017, this Court ordered the parties to submit briefing on the issue of the
proper amount of attorneys’ fees, a proper lodestar, the methodology used to arrive at such result,
and all matters related to a proper amount of attorneys’ fees and expenses in this case. (Dkt. No.
821.) Having considered full briefing on these issues, the relevant authorities, and the totality of
the circumstances, including the entirety of the record before the Court, the Court hereby awards
attorneys’ fees pursuant to 35 U.S.C. § 285, as calculated herein, as well as expert fees pursuant
to this Court’s inherent authority.
I.

BACKGROUND

The procedural history of this case is extensive. On July 2, 2010, AdjustaCam, LLC
(“AdjustaCam”) filed suit against 58 defendants, including Newegg, Inc., Newegg.com. Inc., and
Rosewill Inc. (collectively, “Newegg”), alleging infringement of U.S. Patent No. 5,855,343 (“the
’343 Patent”). Prior to the Court’s April 2012 Markman order, AdjustaCam dismissed its claims
against a majority of these defendants. However, AdjustaCam continued its case against some
defendants, including Newegg, beyond claim construction and into expert discovery. On

September 27, 2012, the Court granted AdjustaCam’s unopposed motion to dismiss Newegg with
prejudice. (See Dkt. No. 720.) Shortly thereafter, on October 11, 2012, Newegg filed its first
Motion seeking attorneys’ fees pursuant to § 285. On August 19, 2013, the Court denied that
motion.
On appeal, the Federal Circuit reversed and remanded the Court’s decision for
reconsideration in light of the Supreme Court’s opinion in Octane Fitness, LLC v. Icon Health &
Fitness, Inc., 134 S. Ct. 1749 (2014). On remand, this Court held an evidentiary hearing to
supplement the original record and then determined, on March 28, 2016, that this case was not
exceptional, applying the new standard for exceptionality and deferring heavily to the factual
findings of the district court judge who originally presided over the case and was personally present
for AdjustaCam’s alleged misconduct.
Newegg again appealed. On July 5, 2017, the Federal Circuit found that AdjustaCam’s
case against Newegg was “exceptional” and that this Court abused its discretion in denying
Newegg’s motion for fees, ultimately reversing and remanding “for further proceedings consistent
with this opinion, including the calculation of attorneys’ fees. AdjustaCam, LLC v. Newegg, Inc.,
861 F.3d 1353 (Fed. Cir. 2017). After the Federal Circuit issued its mandate, this Court ordered
the parties to submit briefing on the issue of the proper amount of attorneys’ fees, a lodestar, the
methodology used to arrive at such result, and all matters related to a proper amount of attorneys’
fees and expenses in this case. (Dkt. No. 821.)
II.

APPLICABLE LAW

Under 35 U.S.C. § 285, a court “may award reasonable attorney fees to the prevailing party”
in “exceptional cases.” An “exceptional” case under § 285 is “simply one that stands out from
others with respect to the substantive strength of a party’s litigating position (considering both the

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governing law and the facts of the case) or the unreasonable manner in which the case was
litigated.” Octane Fitness, LLC, 134 S. Ct. at 1751. Ultimately, the exceptionality determination
is made on a “case-by-case” basis based on “the totality of the circumstances.” Id. If the case is
exceptional, courts are to determine whether fees should be awarded and, if so, in what amount.
See, e.g., Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1344 (Fed. Cir. 2001).
III. ANALYSIS
On appeal, the Federal Circuit held that this case was exceptional. AdjustaCam, LLC, 861
F.3d at 1362. The panel reversed and remanded for “further proceedings consistent with this
opinion, including the calculation of attorneys’ fees.” Id. (emphasis added). Given that the Federal
Circuit found this case to be exceptional, the Court, as directed by the Federal Circuit, must next
calculate the proper amount of attorneys’ fees to be awarded to Newegg, recognizing that “this
amount may be zero, even though the case is exceptional.” Special Devices, Inc., 269 F.3d at 1344.
In its supplemental briefing, Newegg maintains that it is entitled to attorneys’ fees of the
amounts set forth in the following categories:
Description of the Fees Sought

Amount of the Fees

Attorneys’ fees incurred prior to AdjustaCam’s dismissal in
the district court
Expert fees incurred prior to AdjustaCam’s dismissal in the
district court
Attorneys’ fees incurred litigating the motion for fees in the
district court after the initial Federal Circuit remand
Attorneys’ fees incurred pursuing the second appeal to the
Federal Circuit
TOTAL

$286,102.52
$68,183.93
$43,423.40
$167,156
$564,865.85

(Dkt. No. 822 at 1.) AdjustaCam disagrees with these calculations, including the reasonableness
or excessiveness of certain billed hours and rates. Accordingly, the Court will address each of these
categories and the issues of reasonableness or excessiveness in turn.
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A. Fees incurred prior to AdjustaCam’s dismissal.
Newegg urges that this Court should award all attorneys’ fees incurred by Newegg prior to
Newegg’s dismissal with prejudice—a sum equal to $286,102.52. (Id. at 10.) This amount includes
fees incurred by Newegg from the filing of the complaint to the Court’s dismissal with prejudice,
and were, as explained by Newegg, necessarily and reasonably incurred in the defense of this
action. (Id.) Furthermore, Newegg argues that “[t]he total fees and costs incurred on behalf of
Newegg are in line with, and significantly below, the total fees and costs billed on average in patent
infringement cases in Texas and nationally for cases of this size.” (Id. at 16.)
AdjustaCam argues in response that this Court should not award fees incurred prior to the
Court’s Markman Order. (Dkt. No. 826 at 18.) Specifically, AdjustaCam urges that there is no
basis for this Court (or for the Federal Circuit) to conclude that AdjustaCam’s claims were
exceptionally weak or baseless until after the Magistrate Judge’s Markman Order issued.
Demonstrating this, AdjustaCam claims, is the Federal Circuit’s statement that “AdjustaCam’s suit
became baseless after the district court’s Markman order.” (Id. (emphasis added)). This statement
indicates “that [the Federal Circuit] did not deem AdjustaCam’s pre-Markman” as weak or
exceptional. (Id. at 19.) However, AdjustaCam argues that even if this Court concluded that
AdjustaCam’s initial case was weak, there is not a sufficient basis in this case for a pre-Markman
fee award. (Id.)
Newegg replies that the Federal Circuit’s opinion clearly states that “AdjustaCam filed a
weak infringement case against Newegg that became objectively baseless after the district court’s
Markman order . . .” AdjustaCam, LLC, 861 F.3d at 1362; (Dkt. No. 827 at 6). In addition, Newegg
contends that AdjustaCam litigated this case in an unreasonable manner throughout the case,

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including AdjustaCam’s pattern of low and erratic settlements, which reinforces a conclusion of
unreasonableness. Id.
AdjustaCam’s arguments are unavailing. District Courts look to “the ‘totality of the
circumstances,’ and not just discrete acts of litigation conduct,” when awarding attorneys’ fees/
Homeland Housewares, LLC v. Sorensen Research, 581 Fed. Appx. 877, 881 (Fed. Cir. 2014). In
this unique case, the Federal Circuit has already determined that this case was an “exceptional”
one. AdjustaCam, LLC, 861 F.3d at 1362. The Federal Circuit stated that “AdjustaCam’s suit
became baseless after the district court’s Markman order.” Id. at 1360. “[T]here [was] no possible
way for Newegg’s products to infringe the ’343 patent. No reasonable factfinder could conclude
that Newegg’s products infringe; therefore, AdjustaCam’s litigation position was baseless. These
are the traits of an exceptional case.” Id. at 1361.
However, as the Federal Circuit identified, this was not the extent of AdjustaCam’s
misconduct. AdjustaCam also “litigated the case in an ‘unreasonable manner.’” Id. “This measure
of exceptionality is evident through AdjustaCam’s repeated use of after-the-fact declarations.” Id.
The Federal Circuit also took note of the irregularities of AdjustaCam’s damages model:
Asserting seemingly low damages against multiple defendants—or settling with
defendants for less than the cost of litigations—does not necessarily make a case
‘exceptional’ under § 285. But here, AdjustaCam asserted nuisance-value damages
against many defendants, settled with them for widely varied royalty rates, and
continued to press baseless infringement contentions well past an adverse Markman
order and expert discovery.
Id. at 1361–62.
In light the totality of the circumstances, including the above misconduct, this Court, in an
exercise of its discretion and as guided by the Circuit’s opinion and directive, finds that it is
appropriate in this exceptional case to award Newegg the fees it incurred from the time of filing
through dismissal. See, e.g., Homeland Housewares, LLC v. Sorensen Research, 581 Fed. Appx.
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877, 881 (Fed. Cir. 2014) (“We have long afforded district courts ‘considerable discretion’ in
determining the amount of reasonable attorney fees under § 285.”)
B. Fees incurred after the initial Federal Circuit remand.
Newegg asks this Court to award attorneys’ fees incurred in preparing and litigating the
renewed motion for attorneys’ fees on remand from the Federal Circuit—an amount of $43,837.15.
(Dkt. No. 822 at 13.) These fees were “necessarily and reasonably incurred in the pursuit of
Newegg’s attorneys’ fees” and “the average billing rates for Newegg’s attorneys are reasonable
and within the range market rates for patent litigation counsel in Texas and nationally.” (Id.)
In response, AdjustaCam first argues that Judge Davis’s opinion was never held to be
erroneous—i.e., the Federal Circuit merely remanded the case due to a change in the law from the
Brooks Furniture standard to the standard set out in Octane Fitness. (Dkt. No. 826 at 20.)
Accordingly, AdjustaCam “did not act exceptionally in connection with this Court’s hearing on
remand by essentially arguing that Judge Davis’s reasoned opinion was still correct.” (Id.) In
addition, AdjustaCam argues that, as to the hearing on remand, and although Newegg takes issue
with AdjustaCam providing expert declarations, AdjustaCam’s fundamental non-infringement
positions were unchanged and were consistent with AdjustaCam’s prior briefing and deposition
excerpts. (Dkt. No. 826 at 20.)
Newegg replies that “[h]ad AdjustaCam never filed this ‘weak’ lawsuit, there would be no
occasion for Newegg to seek fees at all.” (Dkt. No. 827 at 9.) Newegg also compares this case to
Rothschild Connected Devices Innovations, LLC v. ADS Security, L.P., 2:15-cv-1431-JRG-RSP,
2017 WL 5178998, at *1 (E.D. Tex. Nov. 8, 2017). As in this case, the Court in Rothschild denied
the Defendant’s motion for fees pursuant to § 285 and held that the case was not exceptional. That
ruling was appealed to the Federal Circuit, who reversed and remanded and directed the Court to

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calculate attorneys’ fees. Upon remand, the Court awarded attorneys’ fees incurred both at the
district court and at the Court of Appeals. Rothschild Connected Devices Innovations, LLC, 2017
WL 5178998, at *1 (“[the Defendant’s] efforts focused exclusively on seeking attorneys’ fees,
both at this Court and at the Court of Appeals. The fees associated with those efforts would never
have been incurred if [the plaintiff] had not filed this lawsuit.”).
The Court agrees with Newegg. First, “a case should be viewed as an ‘inclusive whole’
rather than as a piecemeal process when analyzing fee-shifting under § 285” and “§ 285 does not
bar the trial court from awarding fees for the entire case, including any subsequent appeals.”
Therasense v. Betcon, 745 F.3d 513, 516 (Fed. Cir. 2014). Secondly, the Court also finds this case
to be comparable to Rothschild. As in Rothschild, after dismissal in this case, Newegg’s efforts
focused exclusively on seeking fees, both at this Court and at the Federal Circuit. See Rothschild
Connected Devices Innovations, LLC, 2017 WL 5178998, at *1. If AdjustaCam had never filed its
case against Newegg, the fees incurred by Newegg would never have been incurred at all. See id.
The Court acknowledges that it has the discretion to decline to award attorneys’ fees for
appeal, rehearing, or remand. Therasense, Inc., 745 F.3d at 518 (“[T]he district court did not abuse
its discretion by declining to award fees for appeal, rehearing, and remand.”). However, in this
particular case, the Court exercises its discretion to award to Newegg the fees Newegg incurred
during this stage of the proceedings.
Accordingly, the Court finds that Newegg shall be awarded the fees incurred by Newegg
after the first remand.
C. Fees incurred pursuing the Second Appeal to the Federal Circuit.
Newegg argues that the attorneys’ fees incurred during the second appeal to the Federal
Circuit—an amount totaling $167,156—should be awarded by this Court. These fees were

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“necessarily and reasonably incurred in the pursuit of Newegg’s attorneys’ fees” and “the average
billing rates for Newegg’s attorneys are reasonable and within the range market rates for patent
litigation counsel in Texas and nationally.” (Id.)
In response, AdjustaCam maintains that “the law provides for appellate fees only where
those stages of litigation are determined to be independently exceptional within the meaning of §
285.” (Dkt. No. 826 at 19 (citing to Therasense, 745 F.3d at 517)). Since this stage of the litigation
was not exceptional, “Newegg has no basis to assert . . . that AdjustaCam acted exceptionally
during the second appeal of this matter.” (Dkt. No. 826 at 21.) Even though the Federal Circuit
“took issue with the clarity with which AdjustaCam made use of its expert declarations generated
for the second exceptional case hearing before this Court, . . . AdjustaCam’s fundamental noninfringement positions were unchanged . . . and neither Newegg nor the Federal Circuit have
pointed to anything in these expert declarations that was inconsistent with AdjustaCam’s prior
briefing based upon expert reports and deposition excerpts . . .” (Id.) Furthermore, AdjustaCam
did not act in an exceptional manner in connection with defending an appeal of this Court’s valid
Order. (Id.)
The Court finds AdjustaCam’s arguments to be unavailing and, for the same reasons as
stated above, the Court exercises its discretion to award to Newegg the fees Newegg incurred
during the second appeal.
D. Expert Fees incurred by Newegg after this Court’s Markman Order.
In addition to attorneys’ fees, Newegg urges this Court to award, pursuant to its inherent
authority, expert fees that Newegg incurred after the issuance of this Court’s Markman Order.
(Dkt. No. 822 at 11.) First, Newegg maintains that all of its “expert fees [that] were incurred after
AdjustaCam’s case became ‘objectively baseless’” and that “AdjustaCam only proceeded post-

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Markman into expert discovery to apply more pressure to Newegg for a nuisance value
settlement.” (Id. at 11–12.) Newegg argues that having to spend huge sums of money on experts
to rebut AdjustaCam’s experts’ baseless allegations is “a grave injustice that should not go
unremedied.” (Id. at 12.)
AdjustaCam asserts there is no basis upon which § 285 can be interpreted to include an
award of expert fees or other costs and that a finding of exceptionality is not sufficient to justify
an award of expert fees (Dkt. No. 826 at 32–33.) There is nothing in the Federal Circuit’s opinion
or the facts of this case that “show bad faith, a finding of fraud or abuse of the judicial process, or
otherwise justifies the extreme relief of awarding expert fees to Newegg.” (Id.)
While acknowledging that § 285 does not authorize an award of expert fees, the Court
agrees with Newegg that expert fees should be awarded in this case pursuant to the Court’s inherent
authority. As the Federal Circuit found, this case became “objectively baseless” after the Court’s
Markman Order. Nonetheless, AdjustaCam pressed forward into expensive expert discovery.
While AdjustaCam’s conduct does not amount to fraud, AdjustaCam did abuse the judicial
process. See Takeda Chem. Indus. Ltd. v. Mylan Labs., 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.” (quotations removed)). If not for this conduct, Newegg would not have incurred expert
fees. Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1187 (2017) (“Compensation for a
wrong, after all, tracks the loss resulting from that wrong.”)
Accordingly, the Court, pursuant to its inherent authority, awards expert fees of
$68,183.93.

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E. The reasonableness of the requested Attorneys’ Fees.
Newegg and AdjustaCam agree that the hourly rates charged by Newegg’s counsel “in the
fee invoices appended to Newegg’s original Motion for exceptional case were reasonable for this
community.” (Dkt. No. 826 at 28.) However, AdjustaCam takes issue with Newegg’s claims of
attorneys’ fees in connection with its Motion of first remand—i.e., $43,423.40—and in connection
with its second appeal—i.e., $167,156. (Id. at 29.) AdjustaCam argues that these amounts are
unreasonable and excessive. (Id.)
AdjustaCam urges that the billing rates of Mr. Frenkel and Mr. Lemley are excessive. Mr.
Frenkel’s hourly rate for work on this matter was $805.50, and this rate has increased year over
year and is currently $832.50. (Id.) Mr. Lemley’s rate has ranged between $900 and $910 per hour.
AdjustaCam argues that the best evidence of reasonable and community rates for appropriate work
on this matter are the billing rates from Newegg’s original counsel. (Id. at 30) Accordingly,
AdjustaCam suggests a few alternative reasonable rates from this evidence—Mr. Yarbough’s
billing rate of $400 per hour or the reasonable highest billing rate of $460 per hour. (Id. at 30.)
AdjustaCam also takes issue with the “redundancy of the work performed by Newegg’s
counsel.” (Id.) According to AdjustaCam, much of Newegg’s work on its fee motion upon remand
was redundant because Newegg brought in new counsel. In addition, AdjustaCam claims that
apparent from the fee invoices submitted by Newegg is that Mr. Breen is the author of Newegg’s
renewed fee briefing before this Court on remand and that Mr. Breen and Mr. Clark are the authors
of Newegg’s appellate briefing. (Id.) In light of this, other than the 13.4 hours Mr. Frenkel spent
preparing for and arguing the renewed motion, Mr. Frenkel appears to have “a largely redundant
client relationship role and supervisory role.” Likewise, Mr. Lemley argued Newegg’s appeal

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before the Federal Circuit for which he billed approximately 53.1 hours. Otherwise, like Mr.
Frenkel, Mr. Lemley appears to have a largely redundant supervisory role.
Section 285 permits a district court to award reasonable attorneys’ fees in an exceptional
case. See 35 U.S.C. § 285; Octane Fitness, LLC, 134 S. Ct. at 1755. “In calculating an attorney fee
award, a district court usually applies the lodestar method, which provides a presumptively
reasonable fee amount by multiplying a reasonable hourly rate by the reasonable number of hours
required to litigate a comparable case.” Lumen View Tech. LLC v. Findthebest.com, Inc., 811 F.3d
479, 483 (Fed. Cir. 2016) (citations omitted). “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.” Imperium IP Holdings (Cayman), Ltd. v. Samsung Elecs. Co.,
Ltd., 4:14-CV-371, 2017 WL 4038883, at *4 (E.D. Tex. Sept. 13, 2017) (citing Norman v. Hous.
Auth. of City of Montgomery, 836 F.2d 1292, 1299 (11th Cir. 1988)). “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 evidence.” Imperium IP Holdings
(Cayman), Ltd., 2017 WL 4038883, at *4 (citing 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.
In this case, the parties do not contest the reasonableness or excessiveness of the initial
attorneys’ fees incurred by Newegg between filing and dismissal. AdjustaCam, as indicated above
however, does contest the reasonableness of certain specific rates and hours—i.e., the rates of Mr.
Frenkel and Mr. Lemley. While the rates of Mr. Frenkel and Mr. Lemley are indeed higher than
average, they are not so high as to fall outside of the realm of reason. Likewise, the number of

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hours spent by Mr. Lemley and Mr. Frenkel on this case are not unreasonable. Contrary to
AdjustaCam’s arguments, it does not appear that Mr. Lemley and Mr. Frenkel’s roles were
supervisory or redundant with respect to their client relationships. Furthermore, the hours and rates
expended by Newegg for the entirety of the case are well-documented and in the record before the
Court. (See, e.g., Dkt. No. 728, Declaration of John N. Zarian; Dkt. No. 823, Declaration of Kent
E. Bauldauf; and attached exhibits.)
As to AdjustaCam’s arguments that the work on this case by the new counsel hired by
Newegg to argue the renewed Motion was redundant, the Court finds them to be unavailing. In its
first opinion, the Federal Circuit remanded to this Court in light of new law from the Supreme
Court in Octane Fitness. Octane Fitness, LLC, 134 S. Ct. at 1752–53. Indeed, Octane Fitness
significantly changed the law concerning an award of fees pursuant to § 285. Id. The Court finds
that work relating to this change in the law could reasonably cause Newegg to incur the fees and
expenses it now claims. Therefore, such work was likely to have been necessary and was not
unreasonable or redundant.
Accordingly, and for the reasons set forth above, the Court finds that the attorneys’ fees
Newegg incurred are reasonable in amount and hours expended and should be awarded in full. As
the Supreme Court has stated, “[t]he essential goal in shifting fees (to either party) is to do rough
justice, not to achieve auditing perfection.” See, e.g., Fox v. Vice, 563 U.S. 826, 838 (2011). In
light of the specific circumstances of this case, the Court concludes that this award is reasonable
and just.
IV.

CONCLUSION

Accordingly, and as set forth above, it is hereby ORDERED that AdjustaCam LLC shall
pay Newegg attorneys’ fees and expenses in the amount of $564,865.85. Payment shall be made

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no later than 30 days from the date of this Order, and AdjustaCam shall promptly notify the Court
by a Notice filed on the docket when payment has been made.

So Ordered this
Mar 15, 2018

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