United States District Court, N.D. California, San Jose Division
ORDER RE: TAXATION OF COSTS
(Re: Docket Nos. 706, 710 and 714)
PAUL S. GREWAL, District Judge.
Three motions remain before the court: (1) Defendants' motion for review of the Clerk's taxation of costs and for costs in the amount stated in the second amended bill of costs,  (2) Plaintiffs' motion for review of the Clerk's taxation of costs and for no costs or reduced costs and (3) Plaintiffs' motion to find Plaintiffs as prevailing parties and to tax costs against Defendants. Each of these motions is opposed. The parties appeared for a hearing on these motions. Having reviewed the papers and considered the arguments of counsel, the court holds that each side shall bear its own costs.
Plaintiffs in this action are HTC Corporation, a Taiwan corporation with its principal place of business in Taoyuan, Taiwan, R.O.C., and HTC America, Inc., a Texas corporation with its principal place of business in Bellevue, Washington. Defendants (collectively, "TPL") are Technology Properties Limited and Alliancense, Limited, both California corporations with their principal place of business in Cupertino, California, and Patriot Scientific Corporation, a Delaware corporation with its principal place of business in Carlsbad, California.
HTC filed this action on February 8, 2008, seeking a judicial declaration that four patents owned by TPL - U.S. Patent Nos. 5, 809, 336, 5, 784, 584, 5, 440, 749 and 6, 598, 148 - were invalid and/or not infringed. A few months later, TPL filed actions against HTC in the Eastern District of Texas for infringement of the '336, '584, '749, and '148 patents. TPL then filed additional actions against HTC in the Eastern District of Texas asserting U.S. Patent No. 5, 530, 890. HTC amended its complaint in this court to add claims for declaratory relief with respect to the '890 patent. TPL responded with a counterclaim in this court for infringement of the '336, '749, '148 and '890 patents. After Judge Fogel denied TPL's motion to dismiss, or in the alternative, to transfer venue in the California action, the parallel Texas litigation was dismissed without prejudice. The action in this court then proceeded with five patents-in-suit - the '336, '584, '749, '148 and '890 patents.
The parties next stipulated to the dismissal of all claims based on the '584 patent. The stipulation included a TPL-provided covenant not to sue, which stated that neither TPL nor its successors-in-interest to the '584 patent would assert infringement of the '584 patent against any HTC product made, used, offered for sale, sold or imported into the United States currently or prior to the covenant date. The court accepted the parties' stipulation and, pursuant to Fed.R.Civ.P. 41(a)(2), dismissed all claims based on the '584 patent without prejudice for lack of subject matter jurisdiction. The parties also stipulated to the dismissal of all claims based on the '148 and '749 patents. That stipulation - entered by the court - included a statement that "in the event HTC is sued on the '148 or '749 patents in the future, none of the products at issue in this case will be accused."
In advance of trial, the court granted HTC's motion for partial summary judgment on the '890 patent, precluding a portion of TPL's infringement claims and limiting the potential for money damages. In light of TPL's resulting inability to establish entitlement to damages, the parties stipulated to the dismissal without prejudice of all claims based on the '890 patent and the court entered the parties' stipulation. Upon incorporating the dismissal of the '890 patent claims into the final judgment entered in this action, however, the court declined to characterize the dismissal as a judgment in HTC's favor, stating that broader relief, such as patent invalidation, would have been available to HTC at trial. Consequently, at the time of trial, only the '336 patent remained at issue. The jury found that HTC's products infringed the '336 patent and awarded money damages, leading the court to enter final judgment in TPL's favor.
After trial, TPL filed its bill of costs in the amount of $378, 376.54. This amount was subsequently trimmed to $274, 592.19 in TPL's first amended bill of costs and later further reduced to $227, 566.79 in TPL's second amended bill of costs. HTC filed objections to both the first and second amended bills of costs. After reviewing the filings, the Clerk taxed costs against HTC in the amount of $113, 255.63, disallowing some of TPL's costs as beyond the ambit of Civil L.R. 54-3.
II. LEGAL STANDARDS
Pursuant to Fed.R.Civ.P. 54(d), "unless a federal statute, these rules, or a court order provides otherwise, costs - other than attorney's fees - should be allowed to the prevailing party. The clerk may tax costs on 14 days' notice. On motion served within the next 7 days, the court may review the clerk's action." The Supreme Court has bifurcated the taxation of costs inquiry. First, a party must be deemed a "prevailing party." Second, the court determines whether costs are warranted based on "the amount and nature" of the party's success.
In the context of patent litigation, the first issue - whether a party is deemed the "prevailing party" - is governed by Federal Circuit case law. To "be a prevailing party, one must receive at least some relief on the merits" altering "the legal relationship of the parties." Relief on the merits may take the form of a judgment on the merits or a settlement enforced through a consent decree. Whether or not the parties voluntarily undertake the change in their legal relationship is irrelevant; the critical question is "whether there is a judicially sanctioned change in the legal relationship of the parties." At bottom, there must be "judicial imprimatur on the change."
The second issue - whether costs are warranted - is a discretionary call for the trial court following the law of the regional circuit - here, the Ninth Circuit. "Rule 54(d) creates a presumption for awarding costs to prevailing parties; the losing party must show why costs should not be awarded." "In the event of a mixed judgment, however, it is within the discretion of a district court to require each party to bear its own costs."
A. HTC Prevailed With Respect to the '148 ...