IP Law Daily, PATENT—D. Minn.: St. Jude awarded attorney fees for “vexatious” litigation tactics but is not a “prevailing party” under Patent Act, (Aug 30, 2022)

By Robert Margolis, J.D.

“Prevailing party” determination can only be made after the litigation has ended, even where party has prevailed on most claims.

The Federal District Court in St. Paul has awarded St. Jude Medical S.C., Inc. $49,120 in reasonable attorney fees and $8,747.13 in reasonable costs under 28 U.S.C. § 1927, finding that counsel for Niazi Licensing Corp. engaged in “vexatious” litigation conduct. St. Jude had sought more than $700,000 in fees and costs, but the court found that it could not isolate time spent because of the sanctionable conduct from other time spent in the litigation (Niazi Licensing Corp. v. St. Jude Medical S.C., Inc., August 26, 2022, Wright, W.).

District court proceedings. Niazi owns U.S. Patent No. 6,638,268 (“the ’268 Patent”), which pertains to a catheter system inserted into the coronary sinus of the heart for treatment of coronary heart failure.

Niazi sued St. Jude for patent infringement, alleging that accused combinations of St. Jude’s products directly infringed the ’268 Patent claims, and that St. Jude indirectly induced infringement of the ’268 Patent claims. After the district court issued its claim construction order in October 2019, the parties cross-moved for summary judgment. Finding that Niazi failed to present evidence as to two essential elements of its claim, the district court granted St. Jude’s summary judgment motion for non-infringement and denied NLC’s summary judgment motion. Niazi appealed, and while the appeal was pending, St. Jude moved for attorney fees and costs, arguing that Niazi knew or should have known that its claim lacked merit. The district court granted St. Jude’s motion in part, rejecting sanctions under Federal Rule of Civil Procedure 11, but finding that Niazi used bad faith litigation tactics to prolong the litigation after October 2019 and used improper tactics in support of its litigation position. This conduct was “exceptional” under 35 U.S.C. § 285, entitling St. Jude to reasonable attorney fees and costs incurred after October 2019, the district court held. The court ordered the parties to file supplemental briefs as to the reasonable amount of attorney fees and costs to be awarded.

Appellate decision. After the parties filed their briefs on the attorney fee issue, the United States Court of Appeals for the Federal Circuit issued its decision on the appeal, affirming in part and reversing in part the district court’s decision and remanding for further proceedings. It reversed certain aspects of the district court’s claim construction order and the determination that several claims in the ’268 Patent are invalid as indefinite, though it affirmed summary judgment for St. Jude on the no-infringement filing on one of the claims of the ’268 Patent. In light of that decision, Niazi moved to vacate the fees order.

Rule 60(b) motion. The district court first addressed Niazi’s motion to vacate the fees order under Federal Rule of Civil Procedure 60(b)(5), on the grounds that the fees order was “based on an earlier judgment that has been reversed or vacated.” Niazi argued that to the extent the predicate for the fees order was the district court deeming St. Jude the “prevailing party” under 35 U.S.C. § 285 that could not survive the Appellate Court’s decision. The court agreed. Designating a party as “prevailing” presumes that the case has reached a final judgment. Here, the Appellate Court affirmed for St. Jude on one claim of the ’268 Patent, but remanded for further proceedings on other claims. Because the litigation was continuing, no prevailing party could be determined.

That did not end the inquiry on the motion to vacate the fees order, however. The district court also granted St. Jude attorney fees and costs under 28 U.S.C. § 1927 for vexatious multiplication of the proceedings. That statute does not limit the award to a “prevailing party.” The district court noted that the appellate decision did not disturb its findings that Niazi’s counsel (1) relied on evidence not disclosed in discovery, (2) repeatedly disregarded court deadlines set in scheduling orders, (3) violated orders striking improper evidence, and (4) advanced unreasonable and meritless arguments. This conduct supported the fees order, and the court thus denied the motion to vacate.

Reasonable fees. The district court’s task was to distinguish those fees and costs incurred by reason of the vexatious litigation tactics that violated § 1927 from fees and costs that would otherwise have been incurred in the normal course of litigation. St. Jude sought $505,479.05 in attorney fees. To determine reasonableness, the court used the lodestar method.

First the court found the hourly rates for St. Jude’s counsel to be reasonable, two partners at hourly rates of $495 and $525, and paralegal and associates at $245 to $350 per hour. Then it engaged in the more difficult task of determining which of the 1,334.2 hours of work performed after October 2019 resulted from vexatious conduct by Niazi’s attorneys. The court was able to isolate attorney time responding to Niazi’s violation of court orders—scheduling, evidentiary—and identified $49,120 in attorney fees attributable to that conduct.

More difficult to isolate was time spent responding to unreasonable and meritless arguments, since that time was intertwined with time spent responding to arguments that were not sanctionable. The court noted that on the one hand, St. Jude argued that as to the one claim remaining after October 2019, Niazi was making arguments so weak and meritless that Niazi should have just abandoned its case. On the other, St. Jude was arguing that defending a single, meritless claim warranted more than 1,300 hours of attorney time. Thus, to the extent St. Jude’s counsel overstaffed the case and/or was inefficient, that would not be attorney fees “reasonably incurred” as required under the statute. Given vague descriptions in time records and block billing, the court was unable to isolate the time that was reasonable and that which unattributable to vexatious conduct. Thus, the court limited the award to the $49,120 attributable to Niazi’s violation of orders.

Costs. The court next addressed several categories of costs that St. Jude sought. The court denied $230,510.65 requested for expert witness fees, finding that for the same reasons as describe above, it could not isolate the expert time attributable to sanctionable conduct from that attributable to non-sanctionable conduct. Nothing in the record established the nexus between expert witness fees and the sanctionable conduct, the court found. St. Jude also sought $29,410.51 in “Litigation Costs and Expenses,” from which St. Jude subtracted $12,290.09 in taxable costs already assessed by the clerk of the court (and which necessarily had to be reversed because it was based on St. Jude being the prevailing party). From the reduced total of $17,120.42, the court subtracted certain costs that had already been denied by the court clerk, other fees and costs for which insufficient information was provided, and still others that appeared to be duplicative. The court thus awarded $8,747.13 in taxable costs.

Local counsel. Finding that Niazi’s local counsel did not participate in the vexatious litigation activity that was deemed sanctionable, the court held that local counsel was not liable for the sanction.

The Case is No. 0:17-cv-05096-WMW-BRT.

Attorneys: J.Ashwin Madia (Madia Newville LLC) for Niazi Licensing Corp. Kalpesh Shah (Benesch Friedlander Coplan & Aronoff) for St. Jude Medical S.C., Inc.

Companies: Niazi Licensing Corp.; St. Jude Medical S.C., Inc.

Cases: Patent MinnesotaNews