United States: Sometimes It Pays Less When You Argue More

Perfect Surgical Techniques, Inc. v. Olympus America, Inc. et al., Case No. 12-5967 (Judge Hamilton)

Not every hour spent on successful motion practice is treated equally (or at all) in determining appropriate Rule 37 sanctions, according to Judge Hamilton's March 14, 2014 Order awarding partial attorney fees. Even though Judge Hamilton seems to agree that patent litigation is a specialized practice that may justify higher rates, she nevertheless awarded Defendants in this case 25% of their claimed fees after successful efforts to strike infringement contentions.

Defendants moved to strike as insufficient Perfect Surgical's first amended Patent Local Rule 3-1 infringement contentions, which were based largely on user manuals. The Court ordered Plaintiff to supplement its contentions after "evaluat[ing] up close each of the accused devices." But Perfect Surgical purchased only one of four accused products, and Defendants again moved to strike the supplemented contentions.

The Court granted Defendants' second motion to strike on all three untested products, without further leave to amend. Judge Hamilton also granted on "narrow grounds" the motion to strike as to contentions regarding the accused product Perfect Surgical had actually purchased and inspected. However, Judge Hamilton permitted Perfect Surgical leave to further supplement in order to specify the accused structure allegedly covered by the asserted means plus function claims. The Court therefore refused to entirely dismiss the infringement claim as to the patent-at-issue.

Defendants moved for sanctions under both Rule 37(a) and (b), asking the Court for $133,390.40 in fees and costs associated with bringing the two motions to strike and the instant motion.

Rule 37(a) – First and Second Motions to Strike

Judge Hamilton rejected the application of Rule 37(a) as to both motions to strike, finding that they were not among the enumerated list of "Specific Motions" to which the rule applies.

Rule 37(b) – First Motion to Strike

Judge Hamilton similarly refused to grant any sanctions under Rule 37(b) on the first motion to strike. She reasoned that, while the scheduling order required Perfect Surgical to serve sufficient infringement contentions, Perfect Surgical did not fail to serve any contentions at all. She further noted that "reasonable people could differ" as to the sufficiency of what Perfect Surgical served.

Rule 37(b) – Second Motion to Strike

Using the same rationale, the Court rejected the "sufficiency" grounds for sanctions as applied to Defendants' second motion to strike. But the Court found that Perfect Surgical violated the Court's Order to inspect all products before serving supplemental contentions, thus implicating Rule 37(b).

Notwithstanding the violation, Judge Hamilton found 169.8 hours spent and the requested $73,314.40 in fees for the second motion to be unreasonable, noting that Defendants attempted to "fast-track a merits consideration of plaintiff's infringement allegations" when they should instead have just filed a "straightforward motion to strike, simply explaining the court's instructions ... pointing out plaintiff's failure to comply ... and requesting that the infringement contentions be stricken as a result."

Without any evidence of record to establish the particular allocation of time Defendants spent on the "improper merits-based arguments," the Court summarily concluded that "any expenditure of time above 30 hours could not be attributable to work needed to advance the narrow round upon which the court has granted relief." The Court then multiplied 30 hours by the "$460 average hourly rate applicable to associates in the San Francisco metropolitan area" to arrive at a fees award of $13,800. The Court also awarded about two thousand dollars in requested expenses associated with the second motion to strike.

Notably, while Defendants' motion for fees established billing rates as high as $548, the Court found that "specialized [intellectual property] experience" was not needed for the second motion to strike, and therefore refused to give weight to the fact that "intellectual property attorneys are frequently awarded fees based on higher billing rates."

As for Defendants' fees and expenses for filing their motion for sanctions, the Court used the evidence of record to estimate that Defendants would incur a total of $10,000 when all is said and done. However, Judge Hamilton awarded only 25% of this amount, noting that Defendants were successful on only one of two motions to strike, and with respect to the second motion to strike, only on one of two grounds for relief, i.e., Rule 37(b).

Some things to consider when bringing or facing a motion for attorney fees: (1) providing the Court with sufficient detail to enable apportionment of time (and corresponding fees) to different litigation activities; (2) leaving out weaker arguments to avoid reduction in the fees award if they are unsuccessful; and (3) arguing for the application of lower (or higher) billing rates depending on the "specialized" nature of the arguments at issue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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