United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY UNITED STATES DISTRICT JUDGE
Court found in favor of plaintiff GemShares LLC as to
liability on its claim for breach of contract against
defendant Arthur Lipton. The claim involved GemShares'
operating agreement, which barred its investors, including
Lipton, from competing with the company. Lipton later formed
Secured Worldwide LLC (SWW), which applied for a patent on a
product that arguably was based on GemShares'
separate federal lawsuit involving SWW and another one of its
investors, Cormac Kinney, a court concluded that Lipton had
fraudulently represented that SWW had permission to use
GemShares' intellectual property. In the present case,
the Court concluded that under the doctrine of issue
preclusion, the findings in the SWW-Kinney lawsuit precluded
Lipton and SWW from disputing the allegation that Lipton had
breached the non-compete agreement. GemShares LLC v.
Lipton, No. 17 C 6221, 2019 WL 330470, at *5 (N.D. Ill.
Jan. 25, 2019).
later ruling, the Court ruled that this entitled GemShares to
summary judgment on its breach of contract claim against
Lipton. GemShares LLC v. Lipton, No. 17 C 6221, 2019
WL 587392, at *2 (N.D. Ill. Feb. 13, 2019). The Court
thereafter denied Lipton's motion for reconsideration.
Order of Mar. 18, 2019 (dkt. no. 206). More recently, the
Court issued a permanent injunction barring Lipton and SWW
from violating the non-compete agreement and also ordered the
assignment to GemShares of Lipton's interest in a
particular SWW patent application. GemShares LLC v.
Lipton, No. 17 C 6221, 2019 WL 3287838, at *4-6 (N.D.
Ill. July 2, 2019). In that ruling, the Court left open the
question of GemShares' entitlement to attorney's fees
under a fee-shifting provision in the operating agreement,
because GemShares had asserted other claims that had not yet
has now filed a motion seeking attorney's fees under the
operating agreement and 35 U.S.C. § 285 as well as a
further injunction directing the assignment to GemShares of
any rights that GemShares may retain in the SWW patent
application and any other intellectual property within the
scope of the non-compete agreement. GemShares represents that
once the Court enters a fee award and injunctive relief, it
will dismiss its remaining claims, thus concluding the
litigation before this Court except for efforts at
collection. Pl.'s Mem. in Support of Pl.'s Mot. for
Enforcement of Fee Shifting Provision (hereafter Pl.'s
Opening Mem.). at 1.
has separately moved under Federal Rule of Civil Procedure 64
for an order permitting it to take collection-related
discovery and freeze Lipton's assets in anticipation of a
Court addresses both motions in this decision.
Attorney's fees and expenses
fee request under the operating agreement is directed at
Lipton, the other contracting party. Its fee request under
section 285 is directed at SWW. See Pl.'s Reply
Mem. (dkt. no. 323) at 8. GemShares asks to recover fees of
$1, 471, 703.65 and expenses of $59, 638.46, for a total of
$1, 531, 342.11. In support, it has provided the invoices it
received from its attorneys and a summary that breaks down
the requested fees by task.
Court begins with the request for fees against SWW under 35
U.S.C. § 285. Section 285 does not automatically award
fees to the prevailing party (or to a prevailing patent
holder) in a suit under the patent laws. Rather, the statute
permits a court to award reasonable attorney's fees to
the prevailing party only "in exceptional cases."
An exception case is "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., 572 U.S. 545, 554 (2014).
"[T]here is no precise rule or formula for making these
determinations"; a court considers the totality of the
however, makes no attempt to show in its motion how its case
against SWW meets the statutory requirement of an
"exceptional case." It does not address the point
at all. Perhaps there is a viable argument in favor of
GemShares' implicit contention that the case is
exceptional, but making that argument was GemShares' job,
not the Court's job. GemShares has forfeited its request
for fees under section 285 by failing to address the point.
contrast, there is no question that GemShares is entitled to
attorney's fees against Lipton in some amount under the
GemShares operating agreement's fee-shifting provision.
Section 14.04 of the operating agreement states as follows:
14.04 Prevailing Party's Attorneys' Fees and
Costs. Except as may be otherwise expressly provided
herein and then only in such limited instances and
circumstances as is so otherwise provided, any party who or
which shall substantially prevail in any litigation brought
to enforce any of the obligations of this agreement or
otherwise brought in connection with any dispute regarding
this agreement shall be entitled to the payment of reasonable
attorneys' fees, court costs, and related legal expenses
upon written demand served upon the non-prevailing party or
parties. Such non-prevailing parties ...