The opinion of the court was delivered by: Magistrate Judge Young B. Kim
MEMORANDUM OPINION and ORDER
Before the court is the issue of whether defendant, Trading Technologies International, Inc. ("TT"), is entitled to $375,106.75 in attorney fees and costs [244, 294]. In this patent litigation, the court sanctioned the plaintiff, Rosenthal Collins Group, LLC ("RCG"), for attempting to mislead the court and the defendant when it represented that it had discovered prior art that invalidated the patents-in-suit. RCG now argues that TT spent too much money exposing its misconduct and that TT is entitled to no more than $3,750. For the following reasons, TT is entitled to recover $289,234.39 in fees and costs:
On July 15, 2005, RCG filed this lawsuit against TT seeking a declaratory judgment that: (1) TT's patents for computer software used in electronic futures trading ("the '132 patent" and "the '304 patent") are invalid; and (2) RCG had not infringed either of TT's patents. TT filed counterclaims and alleged that RCG had infringed the patents-in-suit. TT brought similar patent infringement claims against other entities in five other lawsuits filed in the Northern District of Illinois. The court consolidated all of these cases for purposes of discovery and claim construction; the lead case in the series is Trading Tech., Int'l, Inc. v. eSpeed, Inc., No. 04-CV-5312 ("the eSpeed litigation"). RCG and the defendants in these other actions engaged in discovery focused on finding evidence of prior art to show that TT's patents are invalid.
On January 23, 2006, TT filed a claim construction brief asserting that RCG's products infringe on multiple claims of the '132 and '304 patents. (R. 42.) Three months later, on April 26, 2006, RCG moved for summary judgment asserting that the '132 and '304 patents are invalid because the Wit Capital digital stock market ("Wit DSM") is prior art that disclosed each element of the claims of TT's patents. (R. 62.) RCG's motion hinged largely on the declaration of Walter Buist ("Buist"), the creator of Wit DSM. TT poured over the technical materials provided by RCG and deposed Buist and his son Christopher Buist (together "the Buists") to investigate the validity of RCG's prior art assertion. The deposition of the Buists then triggered what has become a three-year fee battle.
On August 10, 2006, TT moved for sanctions on the basis that RCG fabricated the Wit DSM prior art in order to invalidate TT's patents. (R. 90.) TT accused RCG and its counsel of directing Buist to materially alter the evidence by changing certain codes in its software programming to make it appear that before TT obtained its '132 and '304 patents the Wit DSM included the single-action-order entry capability TT's patents describe. In order to uncover this alleged fraud, TT asserted that its expert had to analyze millions of lines of code looking for 12 lines of altered code. TT sought, inter alia, default judgment and an award of attorney fees and costs against RCG as relief.
On March 14, 2007, the court denied TT's motion for sanctions to the extent that TT sought default judgment. (R. 142.) The court held that default judgment was not warranted because TT failed to show, by clear and convincing evidence, that "Buist or RCG's counsel willfully and intentionally fabricated evidence to deceive this court or the judicial system." (Id. at 10-11.) But the court agreed with TT that RCG's motion for summary judgment was "misleading," "disingenuous," and "prematurely filed." (Id. at 9-10.) The court reasoned that RCG's summary judgment motion was at best premature because RCG should have known that without corroborating evidence, Buist's bare testimony was insufficient to meet its burden of proof. (Id. at 10.) The court also described RCG's conduct as "somewhat disingenuous" because RCG neglected to inform the court that Buist had made modifications to the Wit DSM's source code. (Id. at 11.) The court found RCG's conduct sanctionable and struck Buist's summary judgment declaration, denied RCG's motion for summary judgment without prejudice, and ordered RCG to "pay the costs for TT's software programming consultant and costs and attorneys' fee associated with [the sanctions motion]." (Id. at 12.)
Seven months later, on October 29, 2007, RCG moved to vacate the sanctions order arguing that its conduct did not meet the standard for sanctions and that TT's request for $300,000 in fees and costs was unreasonable and punitive. (R. 183.) On July 17, 2008, the court denied RCG's motion and reemphasized that, "had RCG been forthcoming, TT would not have been required to hire the consultant, depose [the Buists], or spend time drafting a motion for sanctions." (R. 225 at 4.) In denying RCG's motion, the court authorized TT to recover fees and cost related to three different categories: (1) TT's programming consultant; (2) TT's deposition of the Buists; and (3) TT's prosecution of the sanctions motions. (Id.) Because of the amount in controversy, more than $300,000, the court ordered the parties to comply with Local Rule 54.3 and then to brief the issue of reasonableness. (Id.)
TT filed its opening memorandum on October 15, 2008, in support of its fees and costs. (R. 244.) The following year, on February 6, 2009, the assigned district judge referred the matter of reasonableness of the fees and costs to this court and noted his skepticism that $300,000 could be at stake "for a single discovery dispute." (R. 262, 267.) This court ordered RCG to file a response to TT's memorandum by April 8, 2009, and TT to file its reply by April 29, 2009. (R. 269.) This court then held a hearing on the issue of reasonableness on May 20, 2009, and heard oral arguments. (R. 292, 301.)
TT is entitled to recover $289,234.39 as reasonable fees and costs it incurred as a result of RCG's misconduct. On March 14, 2007, the court granted TT's motion for sanctions under Federal Rule of Civil Procedure 37(b)(2) and the inherent powers of the court to manage its cases in a fair and expeditious manner. (R. 142.) Pursuant to Rule 37(b)(2)(C), "the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure...."
See also Bryant v. Gardner, 587 F. Supp. 2d 951, 968 (N.D. Ill. 2008). In this case, the court ordered RCG to pay the necessary expenses TT incurred as a result of RCG's misconduct.
As an initial matter, the court notes that the contentiousness and obvious mutual mistrust that the parties demonstrated during the underlying sanctions proceedings have leached into the current briefs regarding the reasonableness of TT's fees and costs stemming from the sanctionable conduct. Most notably, RCG has taken the position that TT should not be awarded any fees or costs despite Judge Moran's sanctions order because it characterizes TT's fee petition as "bloated," "exorbitant," and "itself subject to sanctions." (R. 275 at 1.) RCG accuses TT of greediness, and urges this court to punish TT by denying the fee petition in its entirety. This court wholly disagrees with RCG's characterization of TT's fee petition, and for the reasons described below, finds that the bulk of the requested fees and costs are reasonable.For TT's part, it argues that RCG has waived any challenge to the reasonableness TT's expenses because, it says, RCG refused to comply in good faith with Local Rule 54's mandate that the parties attempt to reach an agreement regarding fees and costs. But RCG raised a number of objections to TT's claimed fees before TT filed the fee petition, and even though those arguments are largely meritless, this court does not consider them waived.
The remaining questions before the court are how much did TT spend because of RCG's misconduct and how much of that expenditure is reasonable? According to the July 17, 2008 order, TT is entitled to recover attorney fees and costs related to three categories:
(1) retention of a program consultant; (2) deposition of the Buists; and (3) litigation of the sanctions motion. (R. 225.) In order to answer the remaining questions, this court reviewed the supporting documents TT submitted and examined each page and each line item. If the court could not determine whether a line-item fee or cost was attributable to RCG's ...