Goss v . MAN Roland, et a l . 03-CV-513-SM 03/28/08 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE
Goss International Americas, Inc., Plaintiff
v.
MAN Roland, Inc. and MAN Roland Druckmaschinen AG, Defendants Civil No.03-cv-513-SM Opinion N o . 2008 DNH 061 MAN Roland, Inc. and MAN Roland Druckmaschinen AG, Counterclaim Plaintiffs
Goss International Americas, Inc., Counterclaim Defendant
O R D E R
In document n o . 4 6 4 , counterclaim defendant Heidelberger
Druckmaschinen AG (“Heidelberger”) moves for reimbursement of its
reasonable attorneys’ fees pursuant to Rule 54(d)(2) of the
Federal Rules of Civil Procedure. MAN Roland, Inc. and MAN
Roland Druckmaschinen AG (collectively “MAN Roland”), the
counterclaim plaintiffs, object. For the reasons given,
Heidelberger’s motion for attorneys’ fees is denied. Discussion
A motion for attorneys’ fees must “specify the . . .
statute, rule, or other grounds entitling the movant to the
award.” F E D . R . C I V . P . 54(d)(2)(B)(ii). Here, Heidelberger
bases its request on 35 U . S . C . § 2 8 5 , 28 U . S . C . § 1927, and the
court’s inherent power to impose sanctions for bad-faith and
vexatious litigation. The court considers each theory in turn.
A. 35 U.S.C. § 285
The Patent Act provides that “[t]he court in exceptional
cases may award reasonable attorney fees to the prevailing
party.” 35 U.S.C. § 2 8 5 .
The determination of whether a case is exceptional and, thus, eligible for and warranting 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, a factual determination reviewed for clear error, and ( 2 ) if s o , then determine in its discretion whether an award of attorney fees is justified, a determination that we review for an abuse of discretion. Cybor Corp. v . FAS Techs., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc).
Digeo, Inc. v . Audible, Inc., 505 F.3d 1362, 1366-67 (Fed. Cir.
2007).
Heidelberger argues that as to MAN Roland’s counterclaims,
it is a prevailing party and that this is an exceptional case,
2 given M A N Roland’s alleged bad-faith assertion of frivolous
claims, conduct which amounted to vexatious litigation. M A N
Roland counters that: (1) Heidelberger has not yet fully
prevailed on the sham litigation claim because it ( M A N Roland)
could yet prevail on its claim that the patents-in-suit are
invalid due to obviousness, making litigation to enforce them
sham litigation, thus subjecting Heidelberger to liability, if
not directly, then vicariously, under an alter-ego theory; and
(2) as a matter of law, section 285 pertains only to patent
claims and, therefore, is inapplicable to the counterclaims it
asserted in this case, which are based upon federal antitrust law
and state common law, and a New Hampshire statute.
“Section 285 is implicitly limited to patent cases.” 7
DONALD S . CHISUM, CHISUM ON PATENTS § 20.03[4][c][vi], at 20-508
(2005). Goss v . M A N Roland is a patent case. But, none of the
counterclaims asserted against Heidelberger by M A N Roland were
brought under the Patent Act. Rather, they include two Sherman
Act claims (Counts 4 and 5 ) , one Clayton Act claim (Count 6 ) ,
four common-law claims (Counts 7 , 8 , 1 0 , and 1 1 ) , and a claim
under New Hampshire’s Consumer Protection Act (Count 9 ) . As
Professor Chisum has pointed out:
3 The plaintiff in a patent infringement action may join with it other types of claims, state or federal, such as trade secret liability or unfair competition. In Monolith Portland Midwest Co., the Ninth Circuit held that “If an action combines patent and nonpatent claims, no award of fees pursuant to section 285 can be allowed for litigating the nonpatent issues.”
CHISUM, supra, at 20-513 (citing Monolith Portland Midwest C o . v .
Kaiser Alum. & Chem. Corp., 407 F.2d 2 8 8 , 297 (9th Cir. 1969));
see also Stickle v . Heublein, Inc., 716 F.2d 1550, 1564 (Fed.
Cir. 1983) (citing Monolith, 407 F.2d at 299) (vacating award of
attorneys’ fees under section 285 to the extent that award
reimbursed plaintiff for successful prosecution of breach of
warranty claim brought in conjunction with patent infringement
claim); Petersen Mfg. C o . v . Cent. Purchasing, Inc., 740 F.2d
1541, 1551 (Fed. Cir. 1984) (vacating award of attorneys’ fees
under section 285 to the extent that award reimbursed defendant
for successful defense of unfair competition claim brought in
conjunction with patent claim).
Petersen might seem to close the door on Heidelberger’s
request for attorneys’ fees because, although Heidelberger
prevailed against M A N Roland, it was not called upon to defend
against any claims under the Patent Act. But, the concept of
“patent claims,” for purposes of section 285, extends somewhat
beyond strict patent infringement claims or requests for
4 declaratory judgment of non-infringement. As the Federal Circuit
has explained:
Attorney fees under section 285 may be awarded for time incurred in the litigation of legitimate patent claims. See Machinery Corp. of Am. v . Gullfiber A B , 774 F.2d 4 6 7 , 475 (Fed. Cir. 1985). A claim arises under the patent laws if the right to relief “will be defeated by one construction, or sustained by the opposite construction of [the patent] laws.” Christianson v . Colt Indus. Operating Corp., 486 U.S. 800, 807-08 (1988) (citation omitted). Thus, in deciding the applicability of § 285 fees, we look to the rights at issue and whether they properly invoke the patent laws. See Chemical Eng’g Corp. v . Marlo, Inc., 754 F.2d 3 3 1 , 333-34 (Fed. Cir. 1984). It matters not whether those rights arise in a patent suit or in an action to enforce an agreement settling that litigation.
Interspiro USA, Inc. v . Figgie Int’l Inc., 18 F.3d 9 2 7 , 933 (Fed.
Cir. 1994) (parallel citations omitted). In Interspiro, the
Federal Circuit held that it was appropriate to award attorneys’
fees under section 285 in what was, substantially, a breach of
contract action, because the contract the defendant breached was
an agreement settling a patent infringement case, and resolution
of the breach of contract action “turn[ed] on whether the E-Z Flo
[a device manufactured by the defendant] infringe[d] the ’145
patent, a matter unquestionably governed by patent law.” 18 F.3d
at 933.
5 And in Beckman Instruments, Inc. v . LKB Produckter A B , the
Federal Circuit affirmed the trial court’s determination that the
case before it was exceptional, for purposes of section 285,
based upon the defendant’s repeated violation of a permanent
injunction and its vexatious litigation strategy which included,
among other things, bringing and then dropping an antitrust
counterclaim. 892 F.2d 1547, 1551-52 (Fed. Cir. 1989). In
support of that ruling, the court explained:
LKB also contends that it was improper for the district court to consider a non-patent claim, namely the antitrust counterclaim, in a recovery under 35 U.S.C. § 285. However, in an action having both patent and non-patent claims, recovery may be had under § 285 for the non-patent claims if the issues involved therewith are intertwined with the patent issues. See Stickle v . Heublein, 716 F.2d at 1564. Since LKB’s antitrust claim was based on alleged inequitable conduct in the PTO, this is certainly the case in the present litigation.
Beckman, 892 F.2d at 1552 n.2 (parallel citation omitted). Given
that MAN Roland’s antitrust claims were based on alleged
inequitable conduct in the PTO, and subsequent litigation brought
to enforce patents that were allegedly invalid or unenforceable,
and given the court’s previous determination that the state law
claims in Counts 7-11 are all based upon the same conduct alleged
in Count 5 (see document n o . 4 1 0 , at 2 ) , the court has little
difficulty concluding that MAN Roland’s counterclaims are
6 sufficiently “intertwined” with the patent claims in this case
that Heidelberger’s request for section 285 attorneys’ fees may
not be rejected on grounds that it did not incur those fees
defending against a patent claim.
MAN Roland’s second argument, that Heidelberger is not a
prevailing party, is similarly unavailing. MAN Roland asserts
that Heidelberger’s motion for attorneys’ fees is premature
because the court has not yet ruled on the portion of its
counterclaim that alleges Heidelberger engaged in sham
litigation.1 Specifically, MAN Roland asserts that the court’s
prior dispositional orders only pertained to its counterclaim to
the extent MAN Roland alleged sham litigation on the basis of
Walker Process fraud and inequitable conduct. What remains, says
MAN Roland, is a sham litigation claim based on an allegation
that the patents-in-suit are invalid for obviousness, and that
Heidelberger knew or should have known that the patents were
invalid for obviousness when it brought suit. A review of the
record reveals that MAN Roland’s assertions are without merit.
1 More accurately, MAN Roland asserts that Heidelberger’s subsidiary, Heidelberg Web Systems, Inc. (“HWS”) engaged in sham litigation against MAN Roland, and that Heidelberger is liable to MAN Roland as HWS’s alter ego. Because the court can resolve the underlying issues regarding the claim, the precise party against whom the claim is brought is of no moment.
7 In its amended answer, affirmative defenses, and
counterclaims (document n o . 2 3 ) , in the context of Count 7 (a
claim for violation of the common law of abuse of process), MAN
Roland alleged that Heidelberger’s
use of the PTO and judicial processes is improper because Counterclaim-Defendants know the patents in suit are invalid and/or unenforceable, thus the use of such processes is baseless.
(Am. Answer ¶ 119.) More specifically, and in the context of the
sham litigation claim asserted in Count 5 , MAN Roland alleged
that Heidelberger
knew and/or should have known that the patents in issue were invalid and/or unenforceable in view of prior art, failures to comply with the requirements of 35 U.S.C. § 112, double patenting, and inequitable conduct, and were not infringed by [MAN Roland].
(Id. ¶ 93.) MAN Roland described, with specificity, the bases
upon which it asserted that Heidelberger knew or should have
known that the patents it sought to enforce were invalid. Absent
from that list, however, is any allegation that Heidelberger knew
or should have known that the patents were obvious.
In prior rulings, the court noted the limited scope of the
sham litigation counterclaim and MAN Roland’s apparent lack of
interest in litigating i t . In its June 2 , 2006, order (document
8 n o . 4 1 0 ) , the court noted that MAN Roland “may be letting its
sham litigation claim fade away,” and that the claim was “hanging
by the proverbial thread.” The court declined to grant summary
judgment at the time, however, because Heidelberger’s argument
consisted of one unpersuasive paragraph, and because the record
remained substantially undeveloped.
In a subsequent order, dated March 1 2 , 2007 (document n o .
4 6 3 ) , the court observed that although sham litigation claims may
be based on any objectively baseless action, in this case “MAN
Roland has limited its sham litigation claim to allegations of
inequitable conduct in the prosecution of the ’587 patent, a
premise to which MAN Roland does not object.” The court further
noted that its grant of summary judgment on MAN Roland’s sham
litigation claim “resolves all claims against Heidelberger.”
Despite those clear statements, and the court’s conclusion
that Heidelberger was no longer a party, MAN Roland never sought
to correct the record or more clearly articulate some basis for
its sham litigation claim, nor did it move the court to
reconsider its ruling.2 Indeed, MAN Roland’s litigation posture
2 MAN Roland did move to reconsider the June 2 , 2006, order, but its arguments were unrelated to the sham litigation claim.
9 suggests that its renewed interest in pursuing the already-
resolved sham litigation claim is a function of its failure to
prevail on the claims asserted against Heidelberger. The
difficulty MAN Roland faces is that it is too late. It did not
oppose summary judgment on the grounds of “obviousness as sham
litigation” and summary judgment was granted to Heidelberger. It
cannot prevail against Heidelberger at this point under any
theory.
Parenthetically, the court has been unable to identify, and
MAN Roland has failed to provide, any legal support for the
proposition that obviousness can provide a basis upon which to
assert a sham litigation claim in a case where a patent issued.
To prevail on a claim for sham litigation, the antitrust
plaintiff must prove, inter alia, that the challenged lawsuit is
objectively baseless. See Prof’l Real Estate Investors v .
Columbia Pictures Indus., Inc., 508 U.S. 4 9 , 60-61 (1993)
(quoting E . R.R. Presidents Conf. v . Noerr Motor Freight, Inc.,
365 U.S. 1 2 7 , 144 (1961)) (emphasis added in P R E ) . A patent
infringement suit is objectively baseless when the infringement
plaintiff knows either that the patent is invalid or is not
infringed. See C.R. Bard, Inc. v . M3 Sys., Inc., 157 F.3d 1340,
1368 (Fed. Cir. 1998). Thus, to prevail on such a claim, MAN
10 Roland would need to show that Heidelberger knew, at the time it
attempted to enforce the patents in suit, that they were invalid
because the subject matter claimed in the patents was obvious.
The record reveals, however, that, to the contrary,
Heidelberger had reason to believe the patents in suit were not
obvious, if for no other reason than that the patents were issued
in the first instance. See Structural Rubber Prods. C o . v . Park
Rubber Co., 749 F.2d 7 0 7 , 714 (Fed. Cir. 1984) (explaining that
the statutory presumption of patent validity carries with i t ,
inter alia, a presumption of nonobviousness); see also 35 U.S.C.
§ 103. Heidelberger’s reliance on the statutory presumption of
validity might be undermined if it were shown that Heidelberger
improperly obtained the patents in suit, but such facts would
more properly support a sham litigation claim based on Walker
Process fraud or inequitable conduct. Both theories of sham
litigation have been raised in this case, and both were
previously resolved in Heidelberger’s favor.
Because Heidelberger is a prevailing plaintiff, and MAN
Roland’s counterclaims did, for purposes of awarding attorneys’
fees under section 285, arise under the patent laws, the court
turns to the merits of Heidelberger’s request.
11 Heidelberger argues that this is an exceptional case
because: (1) MAN Roland’s counterclaims were baseless; (2) MAN
Roland attempted to bring additional categories of fraudulent
conduct into the case that were not alleged in its counterclaim;
(3) MAN Roland abandoned several other grounds of alleged
fraudulent conduct that were pleaded in its counterclaim; and (4)
MAN Roland filed a motion for summary judgment on the same
inequitable conduct grounds that were rejected in the order
granting partial summary judgment to Heidelberger on the motion
for summary judgment it presented in document n o . 140. 3 For its
part, MAN Roland argues only that, as a matter of law, section
285 attorneys’ fees are not available to prevailing antitrust
defendants. That i s , MAN Roland offers little with respect to
whether this is an “exceptional case” warranting an award of
fees.
At the outset, the court notes that the decisional law
provides little direct guidance with respect to determining
whether this is an exceptional case. Professor Chisum discusses
3 MAN Roland did not submit that summary judgment motion after the court had granted summary judgment to Heidelberger on the issues contained therein; the summary judgment motions were, for all practical purposes, simultaneous. Thus, filing that motion does not lend support to an argument that MAN Roland continued the litigation in bad faith.
12 awards to prevailing patent owners, noting that “‘exceptional
cases’ are usually those of willful or deliberate infringement by
the infringer or bad faith continuation of the litigation.” 7
CHISUM, supra, § 20.03[4][c][ii]. On the other hand, “[i]n the
case of awards to prevailing accused infringers, ‘exceptional
cases’ are usually those of bad faith litigation or those
involving fraud or inequitable conduct by the patentee in
procuring the patent from the Patent and Trademark Office.” Id.
§ 20.03[4][c][iii]. Heidelberger, of course, is neither a
prevailing patent owner nor a prevailing accused infringer.
Moreover, neither Heidelberger nor the court has found any
decision in which a prevailing counterclaim defendant in a patent
case has been awarded fees under section 285. 4
One might argue that Heidelberger could be understood to
occupy the same position as a patent holder preemptively sued by
a potential infringer for a determination of patent invalidity –
making Heidelberger analogous to a prevailing patent owner, who
typically would be entitled to fees, if at all, from a willful
4 In PPG Industries, Inc. v . Celanese Polymer Specialties Co., however, the trial court declined to grant section 285 attorneys’ fees to a prevailing antitrust counterclaimant in a patent case, reasoning that 15 U.S.C. § 15 allows attorneys’ fees for prevailing antitrust claimants. 658 F. Supp. 555, 559 (W.D. Ky. 1987), rev’d on other grounds, 840 F.3d 1565 (Fed. Cir. 1988)).
13 infringer or an infringer who continued litigation in bad faith.
But a better approach would be to deem this an exceptional case
i f , when MAN Roland brought the counterclaims, it knew or should
have known that: (1) the patents-in-suit were valid and
enforceable (i.e., not procured as a result of fraud on the
patent office); or (2) that Heidelberger played no role in
seeking to enforce the patents-in-suit.
MAN Roland’s counterclaims, while ultimately unsuccessful,
were not baseless. They rested upon two general categories of
alleged inequitable conduct before the PTO – failure to disclose
pertinent information, and improper disclosure of other
information. Each of those claims had a factual basis. And,
with regard to the claims concerning failure to disclose certain
materials, disposition turned not on MAN Roland’s failure to
produce evidence that Heidelberger did not disclose the items in
question — a fact Heidelberger conceded in several instances.
Rather, Heidelberger prevailed only after the court proceeded to
the issue of the materiality of those items. S o , while
Heidelberger prevailed, the claims themselves were not without a
factual or legal foundation. S o , they were neither baseless nor
frivolous. Second, as noted in the order denying the motion for
summary judgment presented in document n o . 139, there is at least
14 some evidence suggesting that Goss’s predecessor in interest,
HWS, might have been an alter ego of Heidelberger, such that
Heidelberger might have been held liable for HWS’s pre-litigation
attempts to enforce the patents-in-suit. (Document n o . 4 1 0 , at
5).
In sum, the court finds that this is not an exceptional
case, as that term is used in section 285. Certainly, the case
is complicated, and has been vigorously litigated by all parties
down to the last detail, and no doubt at great expense. But,
then again, the stakes appear to be comparatively high for all
concerned. Because Heidelberger has not established by clear and
convincing evidence that this is an exceptional case, its motion
for attorneys’ fees under 35 U.S.C. § 285 is denied.
B. 28 U.S.C. § 1927
Heidelberger has also moved for attorneys’ fees under 28
U.S.C. § 1927. That statute provides as follows:
Any attorney or other person admitted to conduct cases in any court of the United States or any territory who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.
15 Heidelberger’s memorandum of law includes no separate discussion
of its claim to entitlement to attorneys’ fees under section
1927. MAN Roland, in turn, argues that the conduct attributed to
it by Heidelberger does not rise to the level of the conduct in
Books Are Fun, Ltd. v . Rosebrough, 239 F.R.D. 532 (S.D. Iowa
2007), a case in which the court declined to impose sanctions
under section 1927.
The proceedings in this case have been extensive, the
pleadings and exhibits voluminous (somehow, even that word seems
not up to the task), the issues raised complex, and the argument
sophisticated and energetic. But all parties have contributed
fully to those circumstances. Counsel to MAN Roland have proven
no less civil, professional, or capable than any other counsel.
Accordingly, the request for sanctions against MAN Roland in the
form of attorneys’ fees under section 1927 is denied. C f . Sony
Elecs., Inc. v . Soundview Techs., Inc., 389 F. Supp. 2d 443, 447
(D. Conn. 2005) (granting attorneys’ fees under section 1927
against party that “persisted in its claim of a viable antitrust
theory even after the Court granted summary judgment to [other
similarly situated] parties on non-infringement, at which point
it should have been obvious that its antitrust claim was
frivolous”).
16 C. The Court’s Inherent Authority
Finally, Heidelberger asks the court to exercise its
inherent authority to award attorneys’ fees. For all the reasons
given above, the court declines to do s o .
Conclusion
For the reasons given, Heidelberger’s motion for attorneys’
fees (document n o . 464) is denied.
SO ORDERED.
s/even J. McAuliffe 'S hief Judge
March 2 8 , 2008
cc: John F. Sweeney Tony V . Pezzano Seth J. Atlas, Esq. Russell Beck, Esq. Sidney R. Bresnick, Esq. Bruce W . Felmly, Esq. Irvin D. Gordon, Esq. Richard S . Gresalfi, Esq. Mark A . Hannemann, Esq. Alfred H. Hemingway, Jr., Esq. Teodor J. Holmberg, Esq. Shari R. Lahlou, Esq. Hugh T . Lee, Esq. Michael J. Lennon, Esq. Richard D. Margiano, Esq. Steven F. Meyer, Esq. Martin B . Pavane, Esq. Georg C . Reitboeck, Esq. Jonathan M . Shirley, Esq.
17 Michael J. Songer, Esq. T . Cy Walker, Esq. Daniel E . Will, Esq.