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East Coast Sheet M Fabricating Corp. v. Autodesk, Inc.

United States District Court, D. New Hampshire

July 30, 2015

East Coast Sheet M Fabricating Corp., d/b/a EastCoast CAD/CAM
Autodesk, Inc. Opinion No. 2015 DNH 150


LANDYA McCAFFERTY, District Judge.

East Coast Sheet M Fabricating Corp. ("EastCoast") sued Autodesk, Inc. ("Autodesk") for patent infringement and also asserted several claims under state law, which it dropped before judgment was rendered on them. In an order dated January 15, 2015, the court: (1) granted summary judgment to Autodesk on its defense that the patents in suit were invalid, due to the unpatentability of EastCoast's subject matter; (2) ruled in Autodesk's favor on its defense that the accused products did not infringe the patents in suit; and (3) denied as moot Autodesk's motion for judgment as a matter of law that EastCoast could not prove damages in the form of lost profits. In an order dated March 3, 2015, the court amended its previous order to specify that it was dismissing, as moot, Autodesk's three counterclaims for declaratory judgment, including a request for a declaratory judgment that the patents in suit were unenforceable due to EastCoast's inequitable conduct before the U.S. Patent and Trademark Office ("PTO"). Before the court is Autodesk's motion for attorney's fees and related nontaxable expenses. EastCoast objects. It also suggests, in the alternative, that the court could defer ruling on attorney's fees until its appeal has run its course. The court declines to defer its consideration of the motion before it.[1] Rather, for the reasons that follow, the court denies Autodesk's motion for attorney's fees.

I. The Legal Standard

"Although parties to civil litigation typically bear the burden of paying their own counsel, see Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975), statutes and contractual provisions sometimes alter that burden." Cent. Pension Fund of the Int'l Union of Operating Eng'rs & Participating Emp'rs v. Ray Haluch Gravel Co., 745 F.3d 1, 3 (1st Cir. 2014) (parallel citations omitted). The Patent Act includes a provision that can shift the burden of paying for counsel. See 35 U.S.C. § 285. In addition, federal courts have the inherent power to award attorney's fees as a sanction. See Charbono v. Sumski (In re Charbono), ___ F.3d ___, ___, 2015 WL 3653610, at *2 (1st Cir. June 15, 2015). The Federal Rules of Civil Procedure ("Federal Rules") also empower courts to sanction parties by awarding attorney's fees. See Fed.R.Civ.P. 11(c)(4). Having identified three basic sources of authority for the assessment of attorney's fees, the court describes in more detail the legal standards associated with each.

A. The Patent Act

The Patent Act provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. "[A]n exceptional' case is 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). Under the second branch of the § 285 analysis, unreasonable litigation generally refers to litigation misconduct, which "includes 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.'" Id. (quoting Brooks Furn. Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378 (Fed. Cir. 2005), overruled on other grounds by Octane Fitness, 134 S.Ct. 1749).

A party must prove its entitlement to fees under § 285 by a preponderance of the evidence. See Octane Fitness, 134 S.Ct. at 1758. "District courts may determine whether a case is exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances." Id. at 1756. Given that focus on the totality of the circumstances, "a case should be viewed more as an inclusive whole' rather than as a piecemeal process when analyzing fee-shifting under § 285." Therasense, Inc. v. Becton, Dickinson & Co. (Therasense II), 745 F.3d 513, 516 (Fed. Cir. 2014) (citing Comm'r, INS v. Jean, 496 U.S. 154, 161-62 (1990)).

B. Inherent Power

Notwithstanding "the venerable American Rule, ' which provides that litigants shall ordinarily pay their own lawyers, " In re Charbono, 2015 WL 3653610, at *4 (citations omitted), courts may, in the exercise of their inherent power, "award [attorney's] fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.'" RTR Techs., Inc. v. Helming, 707 F.3d 84, 94 (1st Cir. 2013) (quoting Alyeska Pipeline, 421 U.S. at 258-59). A party requesting an award of attorney's fees pursuant to the court's inherent power must make its showing of bad faith by clear and convincing evidence. See Dubois v. U.S. Dep't of Agric., No. CIV.A. 95-50-B, 1998 WL 34007445, at *2 (D.N.H. July 17, 1998) (citing Dow Chem. Pac. Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 344 (2d Cir. 1986); Autorama Corp. v. Stewart, 802 F.2d 1284, 1288 (10th Cir. 1986)). "District courts are well-advised to use their inherent power cautiously and to grant attorneys' fees sparingly under that power." RTR Technologies, 707 F.3d at 94 (citing Chambers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991); Estate of Hevia v. Portrio Corp., 602 F.3d 34, 46 (1st Cir. 2010)). Indeed, an award of attorney's fees under the court's inherent power is "reserved for egregious circumstances, " Mullane v. Chambers, 333 F.3d 322, 338 (1st Cir. 2003) (quoting Whitney Bros. Co. v. Sprafkin, 60 F.3d 8, 13 (1st Cir. 1995)), and "compelling situations, " Dubois v. U.S. Dep't of Agric., 270 F.3d 77, 80 (1st Cir. 2001).

C. Rule 11 Power

The Federal Rules "impose[ ] a duty on attorneys to certify that they have conducted a reasonable inquiry and have determined that any papers filed with the court are well grounded in fact, legally tenable, and not interposed for any improper purpose." Enos v. Union Stone, Inc., 732 F.3d 45, 50 (1st Cir. 2013) (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393 (1990)). "Rule 11 permits a court to impose sanctions on a party or lawyer for advocating a frivolous position, pursuing an unfounded claim, or filing a lawsuit for some improper purpose." CQ Int'l Co. v. Rochem Int'l, Inc., USA, 659 F.3d 53, 60 (1st Cir. 2011) (citing Fed.R.Civ.P. 11(b)). Those sanctions may include attorney's fees. See Fed.R.Civ.P. 11(c)(4).

II. Discussion

Autodesk bases its request for attorney's fees on 35 U.S.C. § 285, and also asks the court to invoke both its inherent power and its Rule 11 power to sanction EastCoast by imposing a fee award. It does so in the following way:

Autodesk's motion is based on 35 U.S.C. § 285 and Octane Fitness, as well as on East Coast's sanctionable Rule 11 conduct and/or the Court's "inherent powers" as a sanction for East Coast's bad faith conduct, as explained above. Any portion claimed that is available based on more than one of those grounds is sought based on all those grounds under which it is available. Any portion unavailable on any one or more of the stated grounds is requested to the full extent available under any other of the stated grounds.

Def.'s Br. (doc. no. 197-1) 14 (citations omitted). While Autodesk invokes § 285, Rule 11, and the court's inherent powers, it relies nearly exclusively upon § 285 cases in its memorandum of law. Moreover, given the Supreme Court's observation that a party's misconduct can be exceptional for the purposes of § 285 without rising to the level of being independently sanctionable, see Octane Fitness, 134 S.Ct. at 1757, it seems clear that a party that is not entitled to attorney fees under § 285 would, necessarily, not be entitled to an award of fees under Rule 11 or pursuant to the court's inherent power. Accordingly, the court will analyze Autodesk's request for fees under the legal principles applicable to § 285.

There is another reason for disregarding Autodesk's invocation of Rule 11. In an order dated September 9, 2014, the court denied Autodesk's Rule 11 motion but did so "without prejudice to Autodesk moving for sanctions if and when it receives a favorable disposition of EastCoast's infringement action." Order (doc. no. 107) 3-4. The court's order invited Autodesk to submit another Rule 11 motion, but did not waive or alter any of the procedural rules governing the litigation of such motions. One of those rules is that "[a] Rule 11 motion must be made separately from any other motion, ' Fed.R.Civ.P. 11(c)(2), and not simply... as an additional prayer for relief contained in another motion.'" Lamboy-Ortiz v. Ortiz-Velez, 630 F.3d 228, 244 (1st Cir. 2010) (quoting Fed.R.Civ.P. 11(c)(2) advisory committee's note). Because Autodesk has not filed a separate Rule 11 motion, the court may not award attorney's fees to Autodesk as a Rule 11 sanction against EastCoast. See Lamboy-Ortiz, 630 F.3d at 244-45; see also Irwin Indus. Tool Co. v. Bibow Indus., Inc., Civ. Action No. 11-30023-DPW, 2014 WL 1323744, at *1 (D. Mass. Mar. 31, 2014). That said, conduct that would constitute a violation of Rule 11 may qualify as litigation misconduct for the purposes of § 285. See Octane Fitness, 134 S.Ct. at 1756.

In the discussion that follows, the court considers the two branches of the § 285 analysis identified by the Supreme Court in Octane Fitness, i.e., the strength of EastCoast's litigating position, and the manner in which it has litigated this case. See 134 S.Ct. at 1756. The court begins with the manner in which EastCoast has ...

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