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LIQUID DYNAMICS CORPORATION v. VAUGHAN COMPANY

May 12, 2005.

LIQUID DYNAMICS CORPORATION, Plaintiff,
v.
VAUGHAN COMPANY, INC., Defendant.



The opinion of the court was delivered by: SUZANNE CONLON, District Judge

MEMORANDUM OPINION & ORDER

Liquid Dynamics Corporation ("Liquid Dynamics") sued Vaughan Company, Inc. ("Vaughan") for infringement of U.S. Patent No. 5,458,414 ("the '414 patent") pursuant to 35 U.S.C. § 271 et seq. On October 25, 2004, Liquid Dynamics received a $1,183,722.00 jury verdict in its favor on willful infringement and invalidity claims, and on November 12, 2004, the court granted Liquid Dynamics' motion for judgment as a matter of law on Vaughan's inequitable conduct counterclaim. Liquid Dynamics was awarded prejudgment and post-judgment interest and injunctive relief on February 22, 2005; Liquid Dynamics was also awarded $52,148.22 in costs. Dkt. No. 263. On March 22, 2005, Liquid Dynamics was awarded enhanced damages pursuant to 35 U.S.C. § 284 in the amount of $2,367,444. Liquid Dynamics Corp. v. Vaughan Co., Inc., No. 01 C 6934, 2005 U.S. Dist. LEXIS 6162, *4-7 (N.D. Ill. Mar. 22, 2005). Liquid Dynamics now seeks $1,615,455 in attorney's fees, $69,427 in expert fees and $143,120 in costs pursuant to 35 U.S.C. § 285 and 28 U.S.C. § 1927. DISCUSSION

I. Timeliness

  Vaughan contends Liquid Dynamics' motion for attorney's fees is untimely under Local Rule 54, which requires the motion be filed no later than 90 days after judgment. Judgment was entered on the inequitable conduct counterclaim on November 15, 2004. Liquid Dynamics filed its original attorney's fees motion on February 10, 2005 — within the 90 day limit. The motion for fees was complete, but Liquid Dynamics requested leave to supplement the motion to include fees incurred in bringing the motion. Because the filing, on its face, indicated Liquid Dynamics sought leave to file additional materials, the court struck the motion without prejudice on February 15th. Liquid Dynamics filed a renewed motion for attorney's fees — and withdrew its request to supplement with additional fees — the next day. While the renewed motion was filed after the 90 day deadline, the original timely filing and the renewed filing request an identical amount in fees and costs. Vaughan has therefore not been prejudiced. Vaughan received timely service of the motion. Because the original motion included the parties' Local Rule 54.3 joint statement, Vaughan was on notice of the bases for Liquid Dynamics' motion in January 2005. Accordingly, the motion is timely.*fn1

  II. Attorney's Fees

  A. Exceptional Case

  "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. The requirements for awarding attorney's fees under § 285 are: "(1) the case must be exceptional; (2) the district court may exercise its discretion; (3) the fees must be reasonable; and (4) the fees may be awarded only to the prevailing party." Machinery Corp. of America v. Gullfiber AB, 774 F.2d 467, 470 (Fed. Cir. 1985). Liquid Dynamics is clearly the prevailing party. Accordingly, the court must determine whether the case is exceptional, whether to exercise discretion in awarding fees, and whether the requested fees are reasonable.

  As the prevailing party, Liquid Dynamics bears the burden of proving the exceptional nature of the case by clear and convincing evidence. See e.g., Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547, 1551 (Fed. Cir. 1989). A willful infringement finding is sufficient to support an attorney's fee award. The court must explain the failure to award attorney's fees in the face of a willfulness determination. See e.g., Applied Med. Res. Corp. v. United States Surgical Corp., 967 F. Supp. 861 (E.D. Va. 1997), citing Avia Group Int'l v. L.A. Gear California, Inc., 853 F.2d 1557, 1566 (Fed. Cir. 1988). However, neither a willfulness determination nor an enhanced damages award compel attorney's fees. See id. The attorney's fee award remains a matter of discretion. Id.

  Liquid Dynamics contends this case is exceptional because of the willful infringement verdict, Vaughan's intentional copying of the '414 patent and because Vaughan had no good faith belief of non-infringement. Vaughan's contentions regarding the absence of evidence of copying and its reasonable belief of non-infringement must be rejected. The court addressed and rejected those arguments in its enhanced damages ruling and determined: (1) the evidence supports a finding that Vaughan deliberately copied Liquid Dynamics' patented design; and (2) the jury's rejection of Vaughan's good faith defense was supported by sufficient evidence. See Liquid Dynamics Corp. v. Vaughan Co., Inc., No. 01 C 6934, 2005 U.S. Dist. LEXIS 6162, *4-7 (N.D. Ill. Mar. 22, 2005). In light of the willfulness verdict, the evidence of intentional copying and the lack of evidence to support a good faith defense, the exceptional nature of the case has been established by clear and convincing evidence.

  Liquid Dynamics further contends the court should exercise its discretion to award fees because Vaughan engaged in litigation misconduct. To the extent Liquid Dynamics points to a Vaughan witness' deposition testimony, the insufficiency of Vaughan's discovery production, Vaughan's post-trial motions and Vaughan's examination of witnesses at trial, the arguments are disregarded. Nevertheless, the court agrees Vaughan's behavior as a litigant was inappropriate. Vaughan's misconduct is detailed in the ruling that enhanced damages are justified. See Liquid Dynamics, 2005 U.S. Dist. LEXIS 6162 at *7-11. Vaughan's pattern of irresponsible litigation behavior proliferated the litigation, caused unreasonable expense and wasted judicial resources.*fn2 Accordingly, the court exercises its discretion to award attorney's fees.

  B. Reasonableness of Fees

  "The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S. Ct. 1933 (1983). After the initial calculation, "there remain other considerations that may lead the district court to adjust the fee upward or downward." Id. at 434. Other considerations may include proper documentation of hours worked, overstaffing, redundant work, excessive hours, and the ultimate result of the litigation." Id. at 433-34. Liquid Dynamics calculates its attorney's fees as:
Attorney/Biller Avg. Rate Hours Total
Steven C. Schroer $467.68 388.60 $181,739.00 Mark W. Hetzler $336.85 2090.07 $704,048.70 Jon A. Birmingham $207.93 1957.25 $406,973.75 Other Partners $322.44 268.35 $86,526.25 Other Associates and Law Clerks $130.59 716.58 $93,578.60 Paralegals and Other Support $101.95 1398.57 $142,589.00 Total: $1,615,455.30

  Vaughan argues the requested $1,615,455.30 must be reduced by $691,799.80: (1) $236,167.60 for fees charged by non-lawyers; (2) $253,632.20 for inadequate billing descriptions; and (3) $202,000 for excessive staffing of litigators.

  1. Reasonableness of Hourly Rates

  Liquid Dynamics bears the burden of proving that "the requested rates are in line with those prevailing in the community for similar services of lawyers of reasonably comparable skill and reputation." View Eng., Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 987 (Fed. Cir. 2000) (citations omitted). Accordingly, Liquid Dynamics compares its attorneys' average rates with the surveyed rates for Chicago intellectual property attorneys reflected in the American Intellectual Property Association ("AIPLA") 2003 survey. The AIPLA survey has been used by other courts in determining the reasonableness of hourly rates. See e.g., View, 208 F.3d at 987; Mathis v. Spears, 857 F.2d 749, 755-56 (Fed. Cir. 1988); Howes v. Medical Components, Inc., 761 F. Supp. 1193, 1196-97 (E.D. Pa. 1990). Liquid Dynamics' three principal attorneys were Steven C. Schroer, Mark W. Hetzler and Jon A. Birmingham. All attorneys practice at the Fitch, Even, Tabin & Flannery law firm. Schroer and Hetzler are firm partners. A comparison of the attorneys' average rates with the AIPLA study reflects: Attorney Experience Rate Range Average AIPLA AIPLA (2001-2004) Rate Survey Survey (median) (75th percentile) Schroer 30-34 years $415-475 $467.68 $370 $450 Hetzler 10-14 years $300-360 $336.85 $300 $350 Birmingham #5 years $185-235 $207.93 $196 $230 Vaughan does not seriously contest the reasonableness of the attorneys' rates. Indeed, Hetzler's average rate of $336.85 is comparable to Vaughan attorney Robert Carlson's $359.29 rate. Birmingham's $207.93 average rate is comparable to Vaughan attorney Mark Walters' $230.16 rate. Schroer's average rate is higher than the Vaughan's attorneys' rates, and slightly higher than the AIPLA 75th percentile range, but it is not unreasonable. The AIPLA survey was based on results through May 26, 2003. It is reasonable to infer that litigation fees have increased since the survey's completion. Liquid Dynamics' hourly rates are reasonable.

  2. Number of Litigators and Charges by Non-Lawyers

  Vaughan complains Liquid Dynamics excessively used an army of litigators, secretaries, paralegals and law clerks in the litigation, resulting in an outrageous fee request that is $600,000 more than the jury's damages award. Preliminarily, the fact that the fee request exceeds the jury's verdict is not atypical in a patent case, and Vaughan provides no support to suggest otherwise. Nor does Vaughan support its argument that Liquid Dynamics inappropriately staffed the case. "Beyond the principle of reasonableness, parties need not justify their billing practices nor their use of time and resources in litigation." Vardon Golf Co., Inc. v. Karsten Mfg. Corp., No. 99 C 2785, 2003 U.S. Dist. LEXIS 5072, at *14 (N.D. Ill. Mar. 31, 2003). Many individuals worked on Liquid Dynamics' behalf. However, the billing records reflect Schroer, Hetzler and Birmingham handled the majority of the work. Vaughan does not dispute that each party's litigation team consisted primarily of two partners, one associate and three paralegals. Vaughan contends Liquid Dynamics' expenditures exceeded Vaughan's by more than 36%. However, Vaughan fails to show that the difference in expenditures is unreasonable. See id. at *7 (prevailing party received almost all of its requested 8966.65 hours even where non-prevailing party spent 3153.82 hours). Accordingly, Vaughan's objections to Liquid Dynamics' staffing of the case are rejected.

  Vaughan also objects to Liquid Dynamics' request for fees charged by non-lawyers. Attorney's fees under § 285 include expenditures the prevailing party incurs in preparation for and performance of legal services related to the suit. See e.g., Central Soya Co., Inc. v. Geo. A. Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983). Fees under § 285 may include time charged by non-legal personnel and paralegal personnel. See id., citing Codex Corp. v. Milgo Electronic Corp., 541 F. Supp. 1198, 1201 (D. Mass. 1982). However, secretarial tasks are generally considered overhead costs that are unrecoverable as attorney's fees. See e.g., Roe v. Chicago, 586 F. Supp. 513, 516 (N.D. Ill. 1984); see also, Burnley v. City of San Antonio, No. SA-02-CA-0489 NN, 2004 U.S. Dist. LEXIS 21565, *11-13 (W.D. Tex. Sept. 15, 2004). Liquid Dynamics seeks $5197.50 for secretarial overtime; its billing invoices reflect charges for secretarial "document supervision." These fees are inappropriate. The fees request is reduced by $5197.50.

  3. Adequacy of Billing Descriptions

  Liquid Dynamics attaches copies of billing invoices to support its motion. Mot. at Ex. 29. Vaughan contends many of the invoice entries lack sufficient description to enable a determination as to whether the expenditure was reasonably incurred. Vaughan also contends Liquid Dynamics has not submitted copies of checks demonstrating that all billed fees were actually paid. "Although the amount the client paid the attorney is one factor for the court to consider in determining a reasonable fee, it does not establish an absolute ceiling." Junker v. Eddings, 396 F.3d 1359, 1365 (Fed. Cir. 2005). The submission of checks that Liquid Dynamics paid to its attorneys is not essential.

  However, Liquid Dynamics heavily redacted its billing invoices. As a result, many descriptions prevent the court from evaluating the reasonableness of some purported costs. See e.g., Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S. Ct. 1933 (1983) (where documentation is inadequate district court may reduce the award); Vardon, 2003 U.S. Dist. LEXIS 5072, at *17 (not awarding fees for vaguely described "pretrial preparation and strategy.") "[A]ttorneys are required to submit reasonably specific information to support the award of attorney's fees"); see also Junker, 396 F.3d at 1366 (evidence required to determine a reasonable attorney fee includes detailed billing records). Indeed, some requested fees do not even have a description. Further, some entries appear unreasonably duplicative. The following challenged entries fail to meet "a fee applicant's heavy obligation to present well-documented claims," see Role Models America, Inc. v. Brownlee, 353 F.3d 962, 971 (D.C. Cir. 2004), and are not awarded:
Date Attorney Hours Cost Description
 
8/17/01 TPM 2.25 $675.00 Reviewed ____ and conference with attorney Hetzler regarding ____ litigation
9/25/01 MWH 2.50 $750.00 Review legal research _________

 9/28/01 MWH 4.00 $1200.00 Review legal research _________

 9/25/01 SCS .50 $207.50 Confs __________________________ 9/28/01 SCS .50 $207.50 T/confs ________________________

 10/10/01 TPM .30 $90.00 Reviewed Vaughan _______________

 10/25/01 SCS .25 $103.75 Telephone conference ___________

 1/21/02 MWH 5.00 $1500.00 Prepare outline ________________

 
1/30/02 MWH 7.50 $2250.00 Preparation ______ letter to opposing counsel re outstanding discovery issues
1/30/02 JB 5.50 $1017.50 Discuss case with MWH; prepare ____; prepare ____; prepare ____; telephone conference with Mark Crump
 
1/31/02 MWH 7.50 $2250.00 Preparation ______; conference with J. Birmingham and potential expert
2/12/02 NTP 1.00 $110.00 Research _______________________

 2/14/02 TPM .30 $90.00 Attention to discovery issues

 2/16/02 JB 5.00 $925.00 Prepare ________________________

 2/18/02 NV 2.67 $200.25 Assemble materials _____________

 2/20/02 NTP 6.00 $660.00 Research _______________________

 3/06/02 NTP 3.50 $385.00 Prepare ________________________

 
3/09/02 JB 3.00 $600.00 Prepare ______; prepare ______; discuss matter with MWH; prepare ________________________________
3/11/02 JB 6.00 $1200.00 Prepare ______; prepare ______ telephone conference with Lueptow; discuss matter with MWH
 
3/13/02 MJR 3.75 $375.00 Attend ___________ documents Vaughan produced
4/03/02 MJR 3.00 $300.00 Research _______________________

 4/03/02 NTP 1.75 $192.50 Research _______________________

 4/04/02 JB 5.50 $1100.00 Prepare motion.

 
4/10/02 MJR 3.50 $350.00 Research _______________________ 4/10/02 NTP .50 $55.00 Meet and begin research _______________________________
5/03/02 JM 3.00 $300.00 Working on several small projects for JAB
 5/15/02 KP 5.00 $600.00 Research ______________

 5/19/02 JB 5.75 $1150.00 Prepare _______________

 5/20/02 KP 6.00 $720.00 Research ______________

 5/21/02 JM 3.00 $300.00 Attend to several projects for JAB

 5/21/02 KP 3.00 $360.00 Research ______________

 5/22/02 JM 2.00 $200.00 Attend to several projects for JAB

 5/29/02 JAC 2.00 $240.00 Legal research _____________

 5/30/02 JAC 1.00 $120.00 Continued legal research

 
5/31/02 JM 1.00 $100.00 Various projects, refile folders ___________________________________
5/29/02 SG 4.00 $400.00 Case research _____________________

 5/30/02 SG 3.50 $420.00 Case research _____________________

 6/05/02 KP .50 $60.00 Research __________________________

 6/05/02 JAC .75 $90.00 Legal research ____________________

 6/06/02 KP 4.50 $540.00 Research __________________________

 6/06/02 JAC 2.75 $330.00 Continue research _________________

 6/06/02 JAC .50 $60.00 Legal research ____________________

 6/07/02 KP 4.00 $480.00 Research __________________________

 6/10/02 SG 5.00 $600.00 Research case law _________________

 6/10/02 JAC 3.00 $360.00 Legal research ____________________

 6/12/02 KP 3.00 $360.00 Research __________________________

 6/13/02 SG 2.00 $240.00 Research __________________________

 6/14/02 JJH .25 $100.00 Review of materials _______________

 6/14/02 BJL 2.50 $250.00 Research __________________________ 6/19/02 SG .75 $90.00 Research __________________________

 6/19/02 JAC 1.50 $180.00 Legal research ____________________

 6/19/02 JAC .75 $90.00 Legal research ...


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