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B-K Lighting, Inc. v. Vision3 Lighting

November 16, 2009

B-K LIGHTING, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
VISION3 LIGHTING, A BUSINESS ENTITY OF UNKNOWN FORM, AND FRESNO VALVES & CASTINGS, INC., A CALIFORNIA CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Margaret M. Morrow, United States District Judge

ORDER AWARDING FVC ATTORNEYS' FEES

This case involved a patent dispute between plaintiff B-K Lighting, Inc. and defendant Fresno Valves & Casting, Inc. Having previously declared the case exceptional and concluded that it was appropriate to award attorneys' fees to FVC, which prevailed on B-K's affirmative claims, the court now evaluates the reasonableness of the fees requested.

I. FACTUAL AND PROCEDURAL BACKGROUND

The court has issued multiple orders detailing the factual and procedural background of this litigation. By way of summary, on May 23, 2008, the court granted FVC's motion for summary judgment, finding, based on undisputed evidence, that the patent-in-suit was invalid as obvious.*fn1 Given this conclusion, the court declined to consider the other invalidity and enforceability arguments FVC raised, as well as the parties' arguments concerning infringement.*fn2

Also on May 23, the court addressed B-K's motion for summary judgment on FVC's counterclaim alleging violation of California Business and Professions Code § 17200.*fn3 The counterclaim had three bases: first, FVC argued that a press release issued by B-K was timed to damage FVC's business relationships; second, it asserted that B-K had filed the litigation in bad faith and that its claims were meritless; and third, FVC alleged that B-K had stolen a FVC prototype from a lighting industry exhibition.*fn4 The court found that FVC had raised triable issues of fact regarding the § 17200 claim only to the extent it was based on the alleged theft. Summary judgment on that aspect of the claim was denied; it was entered, however, on so much of the claim as concerned the issuance of the press release and the filing of this litigation.*fn5 The court subsequently directed the parties to file a stipulation permitting entry of an order of dismissal on the theft of the prototype § 17200 counterclaim,*fn6 which the parties did on July 7, 2008.*fn7

Also on July 7, FVC filed a motion seeking a declaration that the case was exceptional and an award of attorneys' fees and expenses under 35 U.S.C. § 285 as well as sanctions under 28 U.S.C. § 1927. FVC asserted that B-K had engaged in inequitable conduct before the patent office, as well as misconduct during the course of the litigation, and that the action was frivolous and pursued in bad faith.*fn8 After a hearing on the attorneys' fees motion on August 25, 2008, the court took the matter under submission to consider the arguments of counsel.*fn9 On November 14, 2008, the court issued an order awarding FVC attorneys' fees under 35 U.S.C. § 285.*fn10

Meanwhile, FVC filed an application to tax costs.*fn11 B-K opposed the application on the ground that FVC had not prevailed and was therefore not entitled to a costs award.*fn12 As a consequence, the court clerk notified the parties that a court order identifying the prevailing party was needed before action on the application for costs could be taken. FVC moved for a determination that it was the prevailing party.*fn13 On November 25, 2008, the court granted FVC's motion in part, finding that it was the prevailing party with respect to B-K's affirmative claims.*fn14

In view of the fact that B-K prevailed on two-thirds of FVC's tripartite § 17200 counterclaim, however, the court held that B-K had also prevailed, albeit to a limited extent.*fn15 Accordingly, the court exercised its discretion to apportion costs between the parties, concluding that FVC should recover 80 percent of the costs deemed recoverable by the clerk of the court.*fn16

Because FVC had submitted no documentation supporting its fees motion, the court directed it to provide a detailed accounting of the hours expended and rates charged, as well as further legal and/or evidentiary support for the amount sought.*fn17 FVC filed a supplemental pleading on December 1, 2008.*fn18 B-K filed a responsive pleading on December 15.*fn19 On June 17, 2009, the court issued an order directing FVC to file additional evidence in support of its requested hourly rates.*fn20 FVC filed additional evidence pursuant to the court's order on June 23, 2009.*fn21

II. DISCUSSION

A. Legal Standard Governing Attorneys' Fees in Patent Cases

"The court in exceptional [patent] cases may award reasonable attorneys fees to the prevailing party." 35 U.S.C. § 285. The statute is designed "to compensate the prevailing party for its monetary outlays in the prosecution or defense of the suit," Central Soya Co. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983), and to serve " as a deterrent to 'improper bringing of clearly unwarranted suits' for patent infringement," Automated Business Companies, Inc. v. NEC America, Inc., 202 F.3d 1353, 1355 (Fed. Cir. 2000) (quoting Mathis v. Spears, 857 F.2d 749, 754 (Fed. Cir. 1988)).*fn22

"A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions." Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005) (citing Cambridge Prods. Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050-51 (Fed. Cir. 1992)); see Braessler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001) ("The prevailing party may prove the existence of an exceptional case by showing: inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement").

"[U]se of the term 'exceptional' in § 285 is not to be taken lightly." Visto Corp. v. Sproqit Technologies, Inc., No. C-04-0651 EMC, 2007 WL 160942, *2 (N.D. Cal. Jan. 17, 2007). "Congress in choosing to limit district court authority to award attorney's fees to 'exceptional' cases has made clear that this should occur only in rare or extraordinary cases.... [Thus,] courts elucidating this statutory language have generally found that 'exceptional' cases are those rare or extraordinary cases blighted and marked by a party's bad faith or inequitable conduct." KnorrBremse Systeme Fuer Nutzfarzeuge GmbH v. Dana Corp., 372 F.Supp.2d 833, 848 (E.D. Va. 2005). Consequently, a court that intends to award fees under § 285 must make a finding that a party took "egregious action... such that fees must be awarded... to prevent a gross injustice." Visto, 2007 WL 160924 at *2.

To decide "whether a case is exceptional and, thus,... warrant[s] an award of attorney fees under § 285 is a two-step process in which the district court must (1) determine whether there is clear and convincing evidence that a case is exceptional... and (2) if so,... determine in its discretion whether an award of attorney fees is justified." Digeo, Inc. v. Audible, Inc., 505 F.3d 1362, 1366-67 (Fed. Cir. 2007). On appeal, the court's finding on the first question is reviewed for clear error while its finding on the second is reviewed for abuse of discretion. Id. Although a court may not award attorneys' fees absent a finding that a case is exceptional, it may decline to award fees in an exceptional case in its discretion. See Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1370 (Fed. Cir. 1999) ("[I]f the case is found to be exceptional, the district court must then determine whether attorney fees should be awarded").

As noted, the court previously concluded that this case was "exceptional" within the meaning of § 285 and that awarding FVC fees was justified.*fn23 The final step is a calculation of the amount of attorneys' fees FVC is entitled to recover. See, e.g., Nikko Materials USA, Inc. v. R.E. Service Co., Inc., No. C 03-2549 SBA, 2006 WL 118438, *6 (N.D. Cal. Jan. 13, 2006) (procedure for awarding fees consists of determining "(1) whether there is clear and convincing evidence that the case is exceptional; (2) if so, whether an award of attorney fees is warranted; and (3) whether the attorney fees sought are reasonable in amount" (citing Interspiro USA, Inc. V. Figgie Int'l Inc., 18 F.3d 927, 933 (Fed. Cir. 1994); Machinery Corp. of America v. Gullfiber AB, 774 F.2d 467, 470 (Fed. Cir. 1985)).

B. Calculation of the Amount of Attorneys' Fees

Once a party has established that it is entitled to an award of attorneys' fees, "[i]t remains for the district court to determine what fee is 'reasonable.'" Hensley v. Eckerhart, 461 U.S. 424, 433 (1983) (quoting Nadeau v. Helgemoe, 581 F. 2d 275, 278-79 (1st Cir. 1978)). "The Federal Circuit has emphasized that a reasonable attorney fee is 'a determination that lies primarily within the discretion of the district court,' which may 'consider all the relevant circumstances in a particular case.'" Takeda Chemical Industries, Ltd. v. Mylan Laboratories, Inc., Nos. 03 CIV. 8253(DLC), 04 CIV.1966(DLC), 2007 WL 840368, *3 (S.D.N.Y. Mar. 21, 2007) (quoting Junker v. Eddings, 396 F.3d 1359, 1365-66 (Fed. Cir. 2005)).

"The lodestar method is the proper method to use under 35 U.S.C. § 285 and is presumed to be the reasonable fee." Comark Communications, Inc. v. Harris Corp., No. CIV. A. 95-2123, 1998 WL 150946 (E.D. Pa. Mar. 30, 1998) (citation omitted), aff'd, 156 F.3d 1182 (Fed. Cir. 1998). "Under this approach, the Court first determines a lodestar figure by multiplying the number of hours reasonably spent on the litigation by a reasonable hourly rate." ICU Medical, Inc. v. Alaris Medical Systems, Inc., No. SA CV 04-00689 MRP (VBKx), 2007 WL 6137002, *1 (C.D. Cal. June 28, 2007), aff'd, 558 F.3d 1368, 1380 (Fed. Cir. 2009) ("We affirm the district court's award of attorney fees. The district court applied the appropriate legal standard and articulated several bases in support of the award, none of which ICU has shown to be clearly erroneous"); Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, ...


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