Summary
In Elk Corp. of Dallas v. GAF Bldg. Materials, 2000 U.S. Dist. LEXIS 2658, *6 (N.D. Tex. Mar. 7, 2000), the district court denied an award of fees, finding the case not exceptional, in part, because the plaintiff patentee disclosed other material prior art during the prosecution of the patent-in-suit.
Summary of this case from McKesson Information Solutions, Inc. v. Bridge Medical, Inc.Opinion
Civ. No. 3:94-CV-0249-P.
March 7, 2000.
MEMORANDUM OPINION AND ORDER
Having concluded a lengthy patent trial, the Court now turns to defendant GAF's almost-as-lengthy Motion for Award of Fees and Costs Pursuant to 35 U.S.C. § 285, filed October 19, 1999. Plaintiff Elk responded on November 29, 1999 with an opposition brief, and GAF filed its reply on January 18, 2000.
For the following reasons, GAF's Motion for Award of Fees and Costs is DENIED. Given such an outcome, Elk's Motion for Leave to File Sur-Reply, filed January 27, 2000, is DENIED AS MOOT.
I. INTRODUCTION
By the present motion, GAF seeks to recover over $5,000,000 in attorneys' fees and costs incurred during a bitterly-contested patent dispute. The primary issue of the February 1997 trial on GAF's equitable defenses was the patent pertaining to Elk's High Definition Shingle (the "`144 Patent"), and GAF's admitted copying of Elk's design to enhance its own shingle product line. Despite GAF's admission, this Court ruled that the `144 Patent was unenforceable because Elk engaged in inequitable conduct when it failed to make certain disclosures to the United States Patent and Trademark Office ("PTO"). The Court also found, however, that GAF's deceptive disclosure fraud, inventor fraud, belated discovery fraud and ownership fraud claims were without merit.
Following the exhaustion of all appeals, GAF now asks the Court to declare Elk's litigation conduct (or, more accurately, misconduct) to be "exceptional," so as to permit them to recover attorneys' fees and expenses pursuant to 35 U.S.C. § 285.
II. LEGAL STANDARD
GAF's Motion for Award of Fees and Costs relies upon 35 U.S.C. § 285, which provides that a court may award reasonable attorney's fees, costs and prejudgment interest on the award to the prevailing party in an "exceptional" patent case.
Pursuant to the statute and prevailing case law, determining whether such fees may be awarded requires a two-step analysis. First, the Court must decide whether the facts and circumstances of the case are such that it appropriately may be declared "exceptional." See Motorola, Inc. v. Interdigital Tech. Corp., 121 F.3d 1461, 1468 (Fed. Cir. 1997). It is uncontested that GAF must establish the "exceptional" nature of the `144 Patent litigation by clear and convincing evidence. Cambridge Products, Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050 (Fed. Cir. 1992). Second, if the case is deemed exceptional, the Court may award fees in its discretion. See Motorola, 121 F.3d at 1468; Reactive Metals Alloys Corp. v. ESM Inc., 769 F.2d 1578, 1582 (Fed. Cir. 1982).
III. ANALYSIS
The first step in our inquiry is to decide whether this litigation has been "exceptional," keeping in mind that GAF's burden on this point is clear and convincing evidence. Motorola, 121 F.3d at 1468; Cambridge Products, 962 F.2d at 1050. GAF argues, in a nutshell, that Elk's persistent misconduct in (A) obtaining and then (B) enforcing the `144 Patent makes this an exceptional case pursuant to 35 U.S.C. § 285. The Court considers each argument in turn.
A. Elk's Inequitable Conduct Before The PTO
According to GAF, it is entitled to fees based upon the Court's finding that Elk knowingly withheld material prior art from the PTO when applying for the `144 Patent, an action which constituted inequitable conduct. See GAF Moving Br. at 7-8; October 10, 1997 Order at 19-20. Typifying the hyperbole strewn throughout its briefing, GAF claims that "[a]t each stage [of the PTO process], Elk chose non-disclosure and outright deceit over candor." GAF Moving Br. at 8. Standing alone, argues GAF, such inequitable conduct warrants a finding that this case is exceptional.
The Court disagrees. As an initial matter, a finding of inequitable conduct does not, by itself, mandate an "exceptional" classification or otherwise automatically result in a fee award. See, e.g., Gardco Mfg., Inc. v. Herst Lighting Co., 820 F.2d 1209, 1215 (Fed. Cir. 1987) (affirming district court's finding of absence of exceptional circumstances and denial of fees, despite presence of inequitable conduct); A.B. Dick Co. v. Burroughs Corp., 798 F.2d 1392, 1400 (Fed. Cir. 1986) (affirming denial of fees where inequitable conduct took place, but patentee had prevailed on validity and infringement arguments).
Furthermore, as memorialized in this Court's October 10 Order, whether Elk engaged in inequitable conduct itself was "a close question." See October 10, 1997 Order at 19. While one could speculate as to why Elk failed to provide the PTO with the relevant art, the fact remains that the inequitable conduct was neither as obvious nor as egregious as GAF asserts.
In fact, Elk submitted material prior art with the patent application that was related to its claimed invention. As noted in the October 10 Order, Elk could have believed that laminated shingle art was before the PTO because Elk used the term "laminated shingle" in the title of its Patent Application. Also, Elk disclosed prior art that referenced the use of color striations by disclosing Ritter and Noone. Although the Court ultimately concluded that Elk did not disclose the most material prior art, Elk was reasonably entitled to rely on the arguments it advanced at trial. Finally, it is beyond dispute that Elk had a substantial claim to press, and GAF admittedly copied Elk's design.
Requiring each party to bear its own costs of litigation under these circumstances would not be "grossly unjust." Certainly, GAF has not offered clear and convincing evidence that Elk's inequitable conduct, standing alone, rises to the "exceptional" level under 35 U.S.C. § 285.
B. Elk's "Litigation Offenses"
GAF next argues that a fee award is justified because Elk's conduct in enforcing the `144 Patent was exceptionally offensive. According to GAF, Elk's litigation offenses fall into three broad categories: (1) discovery misconduct calculated to conceal crucial evidence; (2) vexatious conduct intended to increase GAF's expenses; and (3) lack of candor with this Court. See GAF Moving Br. at 2. While the Court will not indulge each and every alleged example of litigation misconduct cited in the briefing, GAF's principal allegations are addressed in turn.
1. Concealment of evidence
According to GAF, the most significant misconduct by Elk involved its efforts to withhold as privileged the critical evidence of its wrongdoing — those prior art documents which, once revealed, formed the basis of the Court's inequitable conduct finding. Up until the time that these documents were produced. Elk asserted various privileges in an attempt to prevent their disclosure. GAF argues that this case therefore is rendered exceptional by Elk's dogged attempt to prevent disclosure of the prior art documents with its "groundless" privilege claims.
In response, Elk points out that its privilege claims pertained to documents written for Elk by its attorneys in connection with their rendering of legal advice. GAF, having failed to recite this critical fact, merely states that the documents were "not even arguably privileged," and that Magistrate Judge Tolle subsequently ordered their production. See GAF Moving Br. at 11. After reviewing the arguments as well as the relevant portions of Judge Tolle's hearing transcript, the Court disagrees with GAF that Elk's claims merit an "exceptional" finding. Indeed, the Elk documents were arguably privileged and, although the crime/fraud exception was invoked by Judge Tolle, such attempts were at least of colorable merit. In short, this Court does not believe that Elk's conduct in this regard qualifies the litigation as exceptional.
The Court has considered GAF's remaining arguments with respect to Elk's alleged concealment of evidence, and, for reasons similar to those set out above, finds them to be largely exaggerated. In any event, GAF has not offered dear and convincing evidence that Elk wrongfully concealed evidence so as to justify a fee award pursuant to 35 U.S.C. § 285.
2. Vexatious conduct
The next prong of GAF's attack is that Elk engaged in a variety of vexatious discovery practices and needlessly escalated GAF's legal fees. In support of these arguments. GAF claims that Elk (i) "viciously attacked" GAF counsel for allegedly withholding or destroying documents, (ii) refused to cooperate with GAF's routine discovery requests, and (iii) filed unnecessary or premature motions. See GAF Moving Br. at 17-20. Boiled down to its essence, Elk's response, predictably, is to point the finger at GAF for creating the hostile environment which necessitated such aggressive litigation tactics. See Elk Br. at 20-27.
It should be noted from the outset that the Court has extensive knowledge of the case and first-hand experience with the trial tactics of each side. This was a hard-fought and, at times, bitter litigation, and each party bears a heavy dose of responsibility for the downward spiral that resulted, Indeed, on an all-too-common basis, both parties engaged in behavior that exceeded the normal bounds of aggressive advocacy. After reviewing GAF's specific arguments and relevant portions of the record, the Court cannot say that Elk's conduct was any more or less vexatious than was GAF's, or that Elk's conduct was ever unilateral so as to justify a fee award for GAF. Given such circumstances, the Court declines to reward GAF for an environment it did so much to create. See Motorola, Inc., 121 F.3d at 1468 (observing that trial courts enjoy "considerable leeway to deny fees in light of [the prevailing party's] own litigation misconduct, even where the case is exceptional); see also Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1575 (Fed. Cir. 1996) ("It is the judicial duty to refuse to condone behavior that exceeds reasonable litigation tactics").
3. Lack of candor
Finally, GAF asserts that a fee award is justified given "the complete lack of candor of Elk, its witnesses and its counsel." GAF Moving Br. at 21. The conduct underlying this claim is essentially that already addressed above — that is, withholding documents, making certain privilege claims and falsely accusing GAF of destroying documents — and warrants no further analysis. For the reasons set out above, the Court finds that GAF fails to carry its burden with respect to Elk's lack of candor, and that this case is not exceptional.
IV. CONCLUSION
Given the legal conduct undertaken by both Elk and GAF throughout the course of this litigation, it is this Court's opinion that neither party can hold its head high. However, it is clear that GAF, which prevailed (and then only just prevailed) at trial, has failed to prove its entitlement to fee and cost recovery under 35 U.S.C. § 285. Even if this case were exceptional — which it is not — no fee recovery would be justified given the factors discussed above.
The Court has considered GAF's remaining arguments, and finds them to be without merit. Accordingly, GAF's Motion for Award of Fees and Costs is DENIED, and Elk's Motion for Leave to File Sur-Reply is DENIED AS MOOT.
So Ordered.
Signed this 7th day of March, 2000.