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awarding approximately $14 million in attorney's fees and noting that the prevailing party would "certainly be fairly entitled to an enhancement" of an additional $3 million
Summary of this case from ProCaps S.A. v. Patheon Inc.Opinion
03 CIV. 8253 (DLC), 04 CIV. 1966 (DLC).
March 21, 2007
For Plaintiffs: Anthony J. Viola, Andre K. Cizmarik, Edwards Angell Palmer Dodge LLP, New York, NY.
David G. Conlin, Barbara L. Moore, Kathleen B. Carr, Adam P. Samansky, Edwards Angell Palmer Dodge LLP, Boston, MA.
For Defendants Mylan Laboratories, Inc., Mylan Pharmaceuticals, Inc., and UDL Laboratories, Inc.: Martin B. Pavane, Edward V. Di Lello, Cohen Pontani Lieberman Pavane LLP, New York, NY.
For Defendants Alphapharm Pty. Ltd. and Genpharm, Inc.: Edgar H. Haug, Kevin Murphy, Jeffrey A. Hovden, Frommer Lawrence Haug LLP, New York, NY.
OPINION ORDER
This Opinion addresses the size of the fee award which will be made in favor of plaintiff and patentee Takeda Pharmaceutical Company, Ltd. and its affiliate Takeda Pharmaceuticals North America, Inc. (collectively, "Takeda") against two generic drug companies: Mylan Laboratories, Inc., Mylan Pharmaceuticals, Inc., and UDL Laboratories, Inc. (collectively, "Mylan"); and Alphapharm Pty. Ltd. and Genpharm, Inc. (collectively, "Alphapharm"). Due to the defendants' exceptional misconduct and bad faith, Takeda is awarded $11,400,000 from Mylan and $5,400,000 from Alphapharm with interest accruing from September 20, 2006 at a rate of 5.02%.
BACKGROUND
On March 10, 2006, judgment following a non-jury trial was entered in favor of Takeda and against Mylan and Alphapharm. The two generic drug companies had challenged Takeda's U.S. Patent No. 4,687,777 ("`777 Patent"), which protects the invention of the chemical compound known as pioglitazone, which is used in the treatment of diabetes. Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., 417 F. Supp. 2d 341 (S.D.N.Y. 2006) ("Trial Opinion"). As reflected in the Trial Opinion and in the decision awarding attorney fees to Takeda for exceptional misconduct by Alphapharm and Mylan, see Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., 459 F. Supp. 2d 227 (S.D.N.Y. 2006) ("Sanctions Opinion"), Alphapharm and Mylan each filed baseless Paragraph IV certifications under the Hatch-Waxman Act and engaged in litigation misconduct. Id. at 231. Alphapharm's certification, which asserted invalidity due to obviousness, "was deeply flawed and Alphapharm revised its theory again and again in a futile effort to state a prima facie case of obviousness." Id. Mylan abandoned its Paragraph IV theory of invalidity and at the close of discovery substituted an inequitable conduct claim. Id. at 249. This claim was "fatally flawed for many separate reasons."Id. at 248. Familiarity with the Trial and Sanctions Opinions is assumed.
After the issuance of the Sanctions Opinion, the parties litigated the amount of the award. On November 20, 2006, Takeda moved for an award of fees of $14,052,873, with $9,633,149 due from Mylan and $4,419,724 due from Alphapharm. It sought an enhancement of this award to reflect the particularly egregious misconduct in this case and due to the fact that the New York City market rates of intellectual property litigators are 37 to 44% higher than those charged by plaintiff's counsel. Takeda calculated that it was owed $1,661,938.70 in disbursements (of which $1,107,959.13 is allocated to Mylan and $553,979.57 to Alphapharm), and an additional award of $1,003,443.25 to cover its expert disbursements, which it contends should be awarded through this Court's inherent power as an additional appropriate sanction given the nature of the misconduct in this litigation. Takeda seeks interest from September 20, 2006, the date of the Sanctions Opinion, at a rate of 5.02%, which it derives from 28 U.S.C. § 1961.
Takeda argues that the minimal award should be approximately $12.3 million. To arrive at this figure, it applied its hourly rates as of January 2005, the midpoint in the litigation, to the total hours subject to the award. The requested figure of over $14 million is derived from the application of the 2006 hourly rates of the plaintiff's law firm to all of the work on which this request is made.
Takeda also presents another set of figures. It asserts that, based on its current rates, it is entitled to $9,429,025 from Mylan and $4,356,011 from Alphapharm.
Takeda has identified tasks that it completed which related solely to Mylan or Alphapharm and those which related to both defendants. Takeda proposes that two-thirds of the joint time be allocated to Mylan and one-third to Alphapharm. It proposes this division because Mylan acted as lead defense counsel with respect to discovery of the obviousness claims, and then added considerably to the complexity of the case with its untimely assertion of an inequitable conduct claim. This allocation is consistent with the complexity of the issues litigated at the trial, where the Court allocated the trial time between the defendants in the same way.
Mylan will enjoy a six-month exclusivity period if the `777 Patent is invalidated. Trial Opinion, 417 F. Supp. 2d at 365.
Mylan contends that Takeda is entitled to no more than $2 million in fees and expenses from Mylan, given the many problems that it asserts infect Takeda's billing records. Alternatively, it calculates the joint fees as approximately $7.3 million, which should be reduced to approximately $4.2 million and divided evenly between Mylan and Alphapharm. As for the fees attributable to Mylan alone, Mylan calculates those to be nearly $4.7 million, which should be reduced by 25% to yield approximately $3.5 million and further reduced by $1 million to reflect errors. It calculates that together these joint and Mylan-specific fees amount to an award against Mylan of just over $4.6 million.
Mylan does not adequately explain how it arrived at this figure or even an approximation of this figure.
Alphapharm asserts that it owes Takeda between $1.38 and $1.57 million in fees. To arrive at this figure, it subtracts hours to which it objects for one reason or another, subtracts another 30% for what it asserts is excessive billing, and then applies either the hourly rate from a survey of 2004 billing rates or the 2005 rates for plaintiff's law firm.
Following its consideration of the arguments made by Mylan and Alphapharm, Takeda revised its request modestly (and not always downwardly). It now seeks attorney fees of $9,640,636 against Mylan and $4,470,397 against Alphapharm, each to be enhanced by 37 to 44%; disbursements of $1,080,504 against Mylan and $553,980 against Alphapharm; expert fees of $668,962 against Mylan and $334,481 against Alphapharm; and interest at a rate of 5.02 from September 20, 2006, the date of the decision awarding fees.
DISCUSSION
The award of attorney fees in patent infringement litigation is authorized by 35 U.S.C. § 285 ("Section 285"), which provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." In determining "reasonable" attorney fees, a court may use what is known as a hybrid lodestar approach. This approach begins with the calculation of the "lodestar" amount, an initial estimate of reasonable attorney fees calculated by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate for attorneys and paralegals. City of Burlington v. Dague, 505 U.S. 557, 559 (1992); Blanchard v. Bergeron, 489 U.S. 87, 94 (1989). While there is a "strong presumption" that the lodestar is reasonable, City of Burlington, 505 U.S. at 562 (citation omitted), district courts may "adjust [the] lodestar calculation by other factors." Blanchard, 489 U.S. at 94. "[T]he most critical factor" in determining the reasonableness of a fee award "is the degree of success obtained." Farrar v. Hobby, 506 U.S. 103, 114 (1992) (citation omitted). Consideration may also be given to the experience, reputation and ability of the attorneys as well as to the difficulty of the issues presented and the amount at stake in the litigation. Hensley v. Eckerhart, 461 U.S. 424, 429-30 n. 3 (1983) (citing the twelve factors listed in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974)). A request for attorney fees "should not result in a second litigation," although the district court should provide a "concise but clear explanation of its reasons for the fee award." Hensley, 461 U.S. at 437.
To aid a court's calculation of the lodestar, the prevailing party must provide contemporaneous time records, affidavits, and other materials to support its application for the amount of reasonable hours expended. McDonald v. Pension Plan of the NYSA-ILA Pension Trust Fund, 450 F.3d 91, 96 (2d Cir. 2006); see also PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565, 1570 (Fed. Cir. 1988) ("insufficient documentation may warrant a reduction in the fees"). A reasonable hourly rate for attorney fees is a rate that is "in line with those [rates] prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation." Blum v. Stenson, 465 U.S. 886, 896 n. 11 (1984). The community that a district court should consider to determine the lodestar figure "is normally the district in which the court sits." Reiter v. MTA New York City Transit Auth., 457 F.3d 224, 232 (2d Cir. 2006) (citation omitted); see also New York State Assoc. for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1140 (2d Cir. 1983). In determining a reasonable rate, a court may refer to American Intellectual Property Law Association ("AIPLA") surveys. See Mathis v. Spears, 357 F.2d 749, 755 (Fed. Cir. 1988).
Alphapharm contends that Federal Circuit law — not Second Circuit law — applies to the determination of reasonable attorney fees under Section 285 and cites for support Special Devices, Inc. v. OEA, Inc., 269 F.3d 1340, 1343 (Fed. Cir. 2001) ("[T]he awarding of attorney fees pursuant to 35 U.S.C. § 285 is an issue unique to patent law therefore [is] subject to Federal Circuit law."). See also Serio-US Indus., Inc. v. Plastic Recovery Techs. Corp., 459 F.3d 1311, 1321 (Fed. Cir. 2006) ("This court applies Federal Circuit law to the issue of attorney fees in patent infringement cases."). Neither Special Devices norSerio-US Indus. considered the method for calculating the amount of an attorney fee award. In any event, Alphapharm has not pointed to any inconsistency between Federal and Second Circuit law in the standards that are applied to calculate attorney fees. The Federal and Second Circuits both emphasize that the calculation of a reasonable attorney fee may begin with the lodestar figure and relies upon the district court's exercise of discretion to increase or decrease that figure in light of other factors. See View Eng'g, Inc. v. Robotic Vision Sys., Inc., 208 F.3d 981, 988 (Fed. Cir. 2000) (upholding district court's reduction of lodestar after consideration of relevant factors to reach final sanction award);Orchano v. Advanced Recovery, Inc., 107 F.3d 94, 98 (2d Cir. 1997) (citing Hensley, 461 U.S. at 434) (district court may adjust lodestar upward or downward after due consideration of other factors, including the "degree of success obtained").
Takeda aptly points out that Alphapharm's counsel has taken a contrary position on its website, which opines that "[t]he law of the regional circuit is applied to determine a reasonable attorney's fee award."
Special Devices considered the issue of whether an unquantified award of attorney fees is immediately appealable. Special Devices, 269 F.3d at 1343. Serio-US Indus. concerned whether the district court adequately supported its determination that the case was "exceptional" and merited an award of attorney fees.Serio-US Indus., 459 F.3d at 1322.
The Federal Circuit has emphasized that a reasonable attorney fee is "a determination that lies primarily within the discretion of the district court," which may "consider all the relevant circumstances in a particular case." Junker v. Eddings, 396 F.3d 1359, 1365-66 (Fed. Cir. 2005).
[T]rial judges enjoy discretion to award attorney fees for good reason. After presiding over the preparation and trial of the case, the trial judge can best weigh the relevant considerations, such as the closeness of the case, the tactics of counsel, the flagrant or good faith character of the parties' conduct, and any other factors contributing to imposition of punitive sanctions or to fair allocation of the burdens of the litigation.Perricone, M.D. v Medicis Pharm. Corp., 432 F.3d 1368, 1380-81 (Fed. Cir. 2005) (citation omitted); see also Hensley, 461 U.S. at 437 (district court's exercise of discretion to determine fee award is warranted by its superior understanding of the litigation and the "desirability of avoiding frequent appellate review of what essentially are factual matters."). Thus, the
district court's inherent equitable power and informed discretion remain available in determining the level of exceptionality rising out of the offender's particular conduct, and in then determining, in light of that conduct, the compensatory quantum of the award, including the amount of attorney fees, what if any expenses shall be included, and the rate of prejudgment interest, if any, on the award.Mathis, 857 F.2d at 754.
A. Takeda is Entitled to a Substantial Fee Award.
Takeda seeks to recover at a minimum approximately $14 million in attorney fees through this application. This sum is entirely reasonable and amply supported by the records it has submitted with its request. This Court has supervised this litigation from its inception and is intimately familiar with the work done by all counsel, the challenges presented in defending against the defendants' shifting attacks on the `777 Patent, the intensity with which these two lawsuits were fought, and the complexity of the evidentiary and scientific problems posed by the litigation.
A lodestar calculation by Takeda in the vicinity of approximately $20 million would not have been surprising. The defense of an extraordinarily profitable pharmaceutical was at stake here, a drug that had contributed to a revolution in the treatment of a serious and widespread disease. The work done by Takeda's counsel was uniformly excellent. Its written submissions were reliable; it made factual statements that were rooted in the record; and it presented legal arguments that reflected a thorough understanding of the relevant law and were well researched. In the many pretrial conferences held during the course of discovery and in preparation for the trial, its counsel was always well-prepared, courteous and knowledgeable. Managing discovery in this litigation, which included an enormous production of decades-old Japanese documents, was extraordinarily demanding. Takeda's lawyers responded effectively and swiftly to a stream of attacks on the patent, attacks which kept shifting right up to the time of trial summations. These attacks drew from different scientific disciplines; some were based on the molecular structure of the compounds Takeda investigated; others focused more on the scientific method Takeda employed in its selection of pioglitazone for development.
The quality of Takeda's trial presentation is particularly notable. Complex scientific materials were presented in an entirely accessible manner. Volumes of documents were organized and synthesized. The briefs, affidavits constituting witnesses' direct testimony, and proposed findings included citations that provided quick access to the trial record. None of this could have happened without a dedicated effort by a well-coordinated team. In sum, Takeda was well represented in this litigation and this Court was greatly assisted by the fine work done by Takeda's counsel.
Mylan and Alphapharm contend that the fee request is unreasonable. They assert that attorney fees have been awarded in only two Abbreviated New Drug Application ("ANDA") cases, and that in neither did the award exceed $2 million. See Yamanouchi Pharm. Co., Ltd. v. Danbury Pharmacal, Inc., 51 F. Supp. 2d 302, 309 (S.D.N.Y. 1999) (granting $1,635,440 in attorney fees); Eli Lilly Co. v. Zenith Goldline Pharm., Inc., 264 F. Supp. 2d 753, 784 (S.D.N.Y. 2003) (granting $1,523,580.85 in attorney fees). Reviewing all awards in patent cases under Section 285 since 2000, Mylan asserts that no fee award has exceeded $5.2 million. Alphapharm located two awards far surpassing that amount. The court in Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., No. 95 Civ. 8833 (RPP), 2002 WL 1733681, at *16 (S.D.N.Y. July 26, 2002), after intensive litigation over the validity of a pharmaceutical patent, awarded almost $27 million in attorney fees and disbursements under Section 285 and, over defendants' objection, also awarded sanctions of almost $6 million for expert fees and pre-judgment interest. Over a decade ago in Exxon Chem. Patents, Inc. v. Lubrizol Corp., No. H-89-3203, 1993 WL 268680, at *5-6 (S.D. Tex. Feb. 17, 1993), the court awarded attorney fees of almost $18 million and costs of over $235,000 pursuant to Section 285 following a jury trial.
The defendants also objected to the payment of computer research fees. Bristol-Myers, 2002 WL 1733681, at *14.
It is unnecessary to examine the awards made in other cases. This Court is well familiar with the record in this case, the quality of work performed here, the degree of success achieved by Takeda, and the general cost of complex litigation in New York City. An award of attorney fees of approximately $14 million is entirely justified, and for the reasons described below, even a significantly larger award than the lodestar amount would be justified.
B. Size of Staff
None of the specific attacks which the defendants have made on the size of the fee request here has merit. Mylan contends that Takeda's counsel overstaffed the case and spent too much money to defend a single patent. Mylan asserts that this reflects a lack of judgment. In a similar vein, Alphapharm complains that Takeda is seeking reimbursement for the work of 72 separate persons.
Alphapharm makes precisely the opposite point. It contends that the amount of the fee request is excessive because Takeda's sales exceed $2 billion a year, in effect arguing that Takeda can afford the expense of litigation.
While it is true that over the course of this roughly three-year litigation Takeda's counsel used many professionals, an examination of the distribution of the work reflects a well-organized team effort. Two partners devoted approximately three thousand hours each to this effort, with two other partners working just over 1,000 hours on the matter. Two counsel worked on the matter: one for just over 1,000 hours and one for less than 500 hours. Three associates each worked over 3,000 hours; three others worked less than 2,000 hours apiece; and eight others worked less than 1,000 hours apiece. Only one contract attorney worked more than two thousand hours, while two others each worked over 1,000 hours, and fourteen worked more than 200 hours. Thus, the bulk of the work was appropriately concentrated in the hands of a team of professionals with different levels of experience and expertise. An examination of the billing records does not reflect overstaffing.
The discussion in the text ignores the hours billed by a professional when those hours amounted to less than 200 hours over the course of the case. Two partners and one counsel worked less than 100 hours; many associates worked less than 200 hours. This pattern is consistent with what would be expected in major litigation: personnel are pulled in to help with a discrete task or when the demands of meeting a particular deadline require it.
One of the partners acted as the senior partner on the matter; two others divided the bulk of the trial work between them.
Mylan asserts that too many professionals attended the same meetings or court appearances, and that Takeda should not be reimbursed for the duplicative use of personnel. Alphapharm makes the same point, citing attendance at three meetings in particular. This argument is without merit. It would be impossible to run litigation of this magnitude without multiple attorneys attending some of the same meetings and court appearances. The defendants have not succeeded in pointing to any abuse in this regard by Takeda's counsel.
To the extent that Mylan questions the number of Takeda professionals who attended the trial, that objection can also be swiftly rejected. Takeda had no more professionals attending the trial than did the defendants. In addition, because the Court took direct testimony by affidavit and was thoroughly familiar with that testimony, the trial exhibits, and the parties' arguments before the trial began, and because the trial days were devoted exclusively to the cross-examination and redirect examination of witnesses and summations, the trial was conducted in a relatively brief time-frame when measured against the complexity of the evidentiary and legal issues. The careful preparation and efficient presentation by trial counsel permitted the trial to move ahead apace, without unnecessary delay. There was no overstaffing at trial.
C. Survey Comparisons
Relying on an AIPLA survey (the "Survey"), Alphapharm contends that Takeda's request is too high since the average total cost for patent infringement litigation in New York City is just over $6 million. The Survey, which was conducted in 2005, received thirty-five responses from attorneys practicing in the New York City CMSA. They reported that in the typical patent infringement litigation with no unusual complications in which over $25 million was at stake, the average cost of the litigation in 2004 was just over $6 million, with one-quarter of the cases exceeding $8 million.
It is not clear how much of the area that surrounds New York City was included in what the Survey labels as the New York City CMSA.
Takeda attacks the reliability of the Survey, noting among other things that too few respondents provided information to make its results reliable. See Yurman Designs, Inc. v. PAJ, Inc., 125 F. Supp. 2d 54, 57 (S.D.N.Y. 2000) (rejecting AIPLA survey of hourly rates for a New York City intellectual property attorney because fewer than ten percent of attorneys surveyed responded to the inquiry). It is unnecessary to resolve the parties' dispute as to the reliability of the Survey since the Survey's results actually confirm the reasonableness of the Takeda fee request.
The Survey does not indicate its return rate, but does note that usable questionnaires were received from 1,558 individuals. Only 299 of that number answered the question at issue here, andonly 35 of the 299 came from the "NYC CMSA".
Although only one patent was at stake here, the profitability of the patent for Takeda, and the incentive that those profit figures provided to the defendants, meant that the litigation over the validity of the `777 Patent was enormously important to all parties. Moreover, because Mylan altered course in mid-stream, abandoning its theory of obviousness and opting instead to pursue a theory of inequitable conduct, the litigation was equivalent to two atypical and massive patent cases. Compared to "average" litigation with something over $25 million at stake, this case was unusual litigation, with billions of dollars at stake. Incurring costs that triple or quadruple the cost of the "average" case reflected in the Survey would be entirely unsurprising.
Mylan itself has estimated that an ANDA filer would anticipate spending between $5 and $12 million to litigate a single ANDA case. It is interesting that neither Mylan nor Alphapharm has offered evidence of their own attorney fees in this litigation as a point of comparison with Takeda's fee request.
D. Mylan's Experts
Mylan has reserved the bulk of its attack on the fee request for the opinions offered by two purported experts. Takeda has moved to strike the declarations from James H. Wallace, Jr. ("Wallace") and John J. Marquess ("Marquess").
Marquess, the President of Legal Cost Control, Inc., identifies himself as a fee auditor. With just nine days of work, he contends that he conducted a meaningful audit of millions of dollars in billings by Takeda's counsel. Notably, Mylan did not request Marquess to provide any opinions regarding "the substantive nature or quality" of the professional services. Instead, Marquess represents that he reviewed "each" billing line item and considered it in light of "reasonable billing practices within the legal and professional community," or what he terms "generally accepted legal and professional billing practices."
A few examples from his report suggest the quality of his work. His procedures include "unblocking" entries in which a single time charge lists multiple activities. To unblock the entry, he divides the time through a pro-rata allocation to each activity without making any distinction based on the complexity of the activity or how the time was or would likely have been spent on a single task. As another example, he questions the general practice among law firms of using contract attorneys and contends that a law firm may not properly charge its client a "mark up" on the cost of employing such attorneys.
Mylan has not shown that Marquess' opinion qualifies as admissible expert evidence. Marquess has no experience in patent law or complex litigation. He has no familiarity with the substance of the Takeda litigation, and made no effort to become familiar with it. His work purports to apply generally accepted billing practices, but Mylan has failed to show that there is any such standard, or that Marquess has followed any recognized standard in preparing his evaluation of the Takeda fee request. Thus, the Marquess report is rejected to the extent it is offered as an expert opinion. See In re Worldwide Direct, Inc., 316 B.R. 637, 642-43 (D. Del. 2004) (rejecting Marquess, whose opinion was offered under the name of his firm, as an expert fee auditor).
Remarkably, Marquess did not report that the court inWorldwide had rejected him as an expert. Although he and Mylan try to excuse the omission, their failure to disclose theWorldwide court's rejection of his opinion as admissible expert evidence was a breach of their duties to the court.
Even if the Marquess opinion were admissible as an expert opinion, it is singularly unhelpful. Because of his lack of experience in complex litigation much less patent litigation, his opinion about the reasonableness of the fee request here is entitled to essentially no weight. Moreover, his method of reviewing the time charges is deeply flawed. For instance, he has identified no reasonable standard that would suggest it is appropriate to apportion time equally among several tasks performed during a block of time without consideration of the nature of the tasks. He criticizes the use of contract attorneys without any analysis of the types of tasks they performed in this case and whether their use in fact resulted in efficiencies for Takeda. In complex litigation, contract attorneys are routinely used by well-established law firms who supervise their work. Mylan has failed to show that it was inappropriate for Takeda's counsel either to use contract professionals in this case or to use them to the extent that it did.
It is interesting to note that Mylan has not proffered that it was able to litigate this case without the use of contract professionals.
Mylan asks that Marquess' opinion at least be accepted as summary evidence. To the extent that summary figures from the Marquess report are also contained in Mylan's brief, they have been considered in connection with Mylan's arguments on this application.
Wallace, the second proffered expert, is a partner at Wiley Rein Fielding LLP. He represents that he has "handled" patent litigation, including ANDA trials for Mylan during the last eleven years. After reviewing the Sanctions Opinion and Takeda's briefs and affidavits in support of its November 2006 fee application, he opines that Takeda's request is "grossly excessive." As a point of comparison, he describes the fees his law firm incurred in two patent cases: a 2005 case in which he represented Mylan, including at a nine-day trial; and a 2001 through 2003 case litigating a non-pharmaceutical patent. His other point of comparison is his survey of ANDA and non-ANDA cases since 2000.
Wallace has charged Mylan $595 per hour, which he describes as his "normal rate." This disclosure of Wallace's "normal" fee is additional evidence that Alphapharm's objections to the hourly rates charged by Takeda's lawyers is utterly baseless. Wallace has provided surprisingly little information about himself or his firm, but it does not appear that he is based in New York City. It appears that he bases his practice in Washington, D.C.; he is not admitted to practice in either the Southern or Eastern District of New York, and although he is admitted to practice before many Courts of Appeals, he is not admitted to practice before the Court of Appeals for the Second Circuit.
Mylan's attacks on the adequacy of the Takeda submission in support of the fee request stand in stark contrast to the positions it took in the 2005 case in which it was represented by Wallace. In that case, Mylan submitted billing records which indicated only the monthly charge for "professional fees" without any detail from which to determine which attorneys had worked on the matter, their hourly rate, their hours or the tasks they performed.
Wallace's opinion is inadmissible since he has failed to conduct an adequate investigation of this litigation so that he could render a helpful opinion. See Brooks v. Outboard Marine Corp., 234 F.3d 89, 92 (2d Cir. 2000). He did not examine the Trial Opinion, the time records submitted by Takeda that describe in detail the work its attorneys performed on this matter, or otherwise do the work which would have given him a reasonable basis to evaluate the fee request and compare it to the cost of any other litigation with which he is familiar.
Even if it were admissible, Wallace's opinion would be entitled to no weight given the inadequacy of his investigation of the Takeda matter. Moreover, his points of comparison show that his opinion is utterly unreliable. In the 2005 litigation which he handled for Mylan, Wallace pointed out to that court that a generic company challenging a patent in ANDA litigation would ordinarily incur "far less" in attorney fees than the patentee. Despite the existence of this obvious and relevant point of reference, Wallace pointedly does not offer Mylan's attorney fees in the Takeda matter as a point of comparison. Moreover, his "survey" of Section 285 fee awards omits reference to the award of over $32.6 million in Bristol-Myers in 2002. Sadly, it would appear that Wallace has let his relationship with Mylan interfere with his obligation to provide an opinion based on careful and considered analysis.
Since Mylan did not give notice of its intent to rely on expert testimony, Takeda has been deprived of an opportunity to take discovery of the experts. Since neither expert has provided opinion testimony that is helpful to the Court, it is unnecessary to delay a ruling on Takeda's application to give it an opportunity to take such discovery.
E. Allocation Between Mylan and Alphapharm
Mylan challenges the allocation of fees and costs proposed by Takeda. In preparation for this fee request, Takeda's counsel reviewed all of its contemporaneous time entries to allocate the time among work performed directly on issues presented by Mylan, by Alphapharm or by both defendants. As explained above, it has allocated two-thirds of the joint time to Mylan. Mylan contends that it was inappropriate for Takeda's counsel to rely on an after-the-fact allocation of tasks to separate those performed because of the litigation with Mylan from those associated with the Alphapharm litigation. Takeda's procedures for reviewing its contemporaneously entered billing records to make an appropriate allocation between Alphapharm and Mylan were perfectly reasonable and acceptable.
As the first ANDA filer, Alphapharm was entitled to enter the market six months in advance of any generic drug competitor. See Trial Opinion, 417 F. Supp. 2d at 365. Alphapharm lost that advantage to Mylan by January 2004, when the Food and Drug Administration found that Alphapharm was unable to make a bioequivalent to the patented drug. Id. n. 27. Plaintiff's counsel originally recorded all of their time defending the `777 Patent under a single matter assigned to Mylan. In December 2005, it created separate matter numbers for Mylan and Alphapharm.
Mylan proposes that the "joint" time be evenly divided between the parties or disallowed, but has little or no reasoned response to Takeda's argument that it should pay for two-thirds of the joint time. Takeda's suggestion for the unequal division of the cost of the joint work is adopted. Mylan added very significantly to the expense, burden and complexity of the litigation. It is only fair to Alphapharm to require Mylan to bear more than half of the expense associated with the "joint" tasks. If the positions Mylan took during the litigation had been meritorious, this analysis might be different. As explained in the Trial and Sanctions Opinions, however, Mylan's litigation strategies were adopted in bad faith.
F. Contemporaneity and Block Billing
To support its fee request, Takeda submitted over 500 pages of spreadsheets containing over 8,000 contemporaneous time entries. The entries list a timekeeper, the hours spent, and a narrative description of the task performed.
The defendants' assertion that Takeda's counsel has not produced contemporaneous time records is flat wrong.
Mylan argues that some of the time entries represent improper "block" billing. Alphapharm asserts that 158 billing records reflect work of more than 15 hours in a single day. When these entries are examined with an understanding of the billing practices used by Takeda's law firm, there is nothing misleading or inappropriate about them. The defendants' attacks are rejected.
Finally, Alphapharm asserts that the bills are not sufficiently detailed to support a review for reasonableness. It is wrong. In the Court's experience, the records its counsel maintained reflect the standard practices of major law firms, in particular in the level of detail they record. In the current business environment for the legal profession, law firms must be prepared to respond to clients' detailed inquiries about their bills. The records that support this fee request would provide ample scope for a detailed review by the client, and more than adequate scope for review by the court that has overseen the litigation.
G. Clerical Work and Miscellaneous Matters
Alphapharm and Mylan complain that Takeda used attorneys to perform purely clerical tasks. While it is important that attorneys delegate tasks that can be performed by less highly compensated personnel, it is unrealistic to expect that all of the work that might be described as "clerical," for example preparing and organizing materials for discovery and trial, can be delegated. In a complex case, such work requires a coordinated effort by a team of professionals that includes attorneys and paralegals. For example, no competent trial lawyer will allow exhibits to be prepared and organized for witnesses and the Court without the attorneys who will be responsible for presenting the evidence in the courtroom directly supervising that effort. Alphapharm, whose own attorneys have sought reimbursement in other patent litigation for virtually identical work, has not shown that Takeda's fee request is unreasonable in this regard.
Alphapharm also contends that work by library and administrative personnel is purely clerical and cannot be recovered. Takeda has shown that these individuals have billed time to this litigation when they were conducting research or other tasks specific to this case. The time is properly compensable.
The Court has reviewed each of the defendants' arguments about other specific items in the Takeda fee request. Each of them is rejected whether or not specifically addressed in this Opinion. In some instances, Takeda has made adjustments. In others, the defendants' complaints rely on a misrepresentation of the documentation. In others, the complaints are not well-founded for entirely separate reasons. The objections related to the amount of time spent conducting legal research on the issue of personal jurisdiction, on the preparation of and response to discovery requests, and on editing two privilege logs, are specifically denied. Finally, Alphapharm and Mylan contend that the time spent preparing an animation for use at trial can only be recouped as a cost pursuant to 28 U.S.C. § 1920, and not as attorney fees. When attorneys, as opposed to outside vendors, work on such a project, their time is properly recoverable pursuant to Section 285.
The logs were over 200 pages long and contained close to 4,000 entries.
Alphapharm's own counsel has sought to recover its fees for similar work in other litigation.
H. Hourly Rates
As already noted, the community in which the litigation is conducted provides the baseline for determining a reasonable hourly rate for attorney fees, and a court may draw upon "its knowledge of the relevant market when determining the reasonable hourly rate." McDonald, 450 F.3d at 96-97. Moreover, a district court should use "current rather than historic hourly rates,"Reiter, 457 F.3d at 232 (citation omitted), in setting the hourly rate for the lodestar calculation.
Takeda has calculated a lodestar figure using its September 2006 rates for its law firm's professionals, rather than their hourly rates at the time they performed the work. It has also calculated a lodestar based on the rates that existed as of January 2005, roughly the midpoint of the litigation, as an alternative, more conservative measure. Takeda contends, however, that the award should be enhanced in either case because its counsel's fees were lower than the prevailing rates of intellectual property litigators in New York City.
Two sets of rates illustrate Takeda's point. The 2006 rates for the partners who worked on this matter ranged from $375 to $600, with an average of $498. Those rates for associates ranged from $175 to $385, with an average of $278. The average rates for the partners who worked on Takeda's litigation were over 20% lower than the effective rates of intellectual property litigators in New York City in 2004 and 2005, as reported by the PricewaterhouseCoopers LLP 2005 and 2006 Billing Rate Associate Salary Surveys ("PWC Surveys"). The spread was larger for the associates working on Takeda's litigation. See also Yurman, 125 F. Supp. 2d at 55, 58 (finding $520 hourly rate for a New York City copyright and trademark litigation partner to be reasonable in 1999).
Alphapharm contends that the 2006 rates for the partners who worked on the Takeda matter are higher that the average billing rate for intellectual property partners in New York City, as reflected in the AIPLA survey for 2004. It admits that the rates for associates who worked on the Takeda matter are lower than those in the survey, but contends that it is significant that Takeda did not submit affidavits for the associates reporting on their level of experience and skill. These and similar arguments are unconvincing. Alphapharm does not deny that the PWC Surveys are far more reliable than the AIPLA survey since they contain more detailed information that is specific to New York City and the timeframe for our litigation.
Alphapharm urges that the 2005 and not the 2006 billing rates should be used in any event since most of the litigation occurred in 2005, and the rates of plaintiff's law firm were affected by its merger in November 2005 with another law firm. The 2006 rates are more appropriate. There is no requirement that a court apply historic rates, and the 2006 rates are entirely reasonable when judged against the relevant community standard.
I. Enhancement
Mylan opposes any enhancement to Takeda's lodestar recovery. It asserts that the lodestar figure is recognized under the law as reasonable, and that an enhancement is only warranted when there is either excessive delay in payment or public policy support for it.
Takeda would certainly be fairly entitled to an enhancement of about $3 million, with $2 million charged to Mylan and $1 million charged to Alphapharm. It would reflect Takeda's degree of success, which was complete on each and every one of the many points in contention, and the defendants' outrageous litigation conduct, which amply justifies sanctions beyond the out-of-pocket cost of this litigation to Takeda.
What is truly exceptional here is the cascade of attacks each defendant made on the `777 Patent. If the defendants had simply pursued the theories presented in their Paragraph IV certifications, the cost of litigation would have been far lower and a simple award of the lodestar calculation may have been warranted. They did not rest there, though. In each instance the Section 355 Statement was so lacking in merit that it was entirely abandoned by the time of trial. The parties increased the cost and burden of this litigation enormously through their shifting theories of attack, none of which was meritorious or adopted in good faith. None of the theories reflected a careful analysis of the relevant documents and the application of sound science to that analysis. Alphapharm's extensive list of asserted and then abandoned obviousness theories is summarized in the Sanctions Opinion. Sanctions Opinion, 459 F. Supp. 2d at 240-41. Mylan resisted discovery on the theory of obviousness contained in its Section 355 Statement, and then after the close of discovery sought to substitute another frivolous theory of obviousness. It also asserted an inequitable misconduct claim that was thoroughly discredited at trial. Id. at 246-50.
The award of attorney fees to Takeda without an enhancement already compensates it, of course, for the extra expense incurred in responding to this litany of meritless theories and the associated misconduct. More would be entirely appropriate, however, to reflect the extensiveness of the misconduct here, in particular its repetitive nature. A wildly successful pharmaceutical patent will of course draw attacks. There is a strong public interest, as acknowledged by the statutory scheme, in challenging patents that keep the price of patented pharmaceuticals high. There should be no incentive, however, for litigation that is prolonged and complicated by a series of attacks undertaken without a good faith basis and without a sound basis in science. Science, medical research, and the court system demand better. Because Takeda's expert fees are also being awarded, however, an enhancement to the lodestar amount will not be separately entered.
J. Expenses
Takeda has requested over $1.6 million in reimbursable expenses under 35 U.S.C. § 285. Alphapharm contends that Takeda cannot recover expenses beyond those identified in 28 U.S.C. §§ 1821 and 1920. The bill of costs submitted here amounts to $229,568.81, all of which is for items not included in the Section 285 request.
28 U.S.C. § 1821 provides for witness fees. It states in pertinent part
(a)(1) Except as otherwise provided by law, a witness in attendance at any court of the United States, or before a United States Magistrate Judge, or before any person authorized to take his deposition pursuant to any rule or order of a court of the United States, shall be paid the fees and allowances provided by this section. . . .
(b) A witness shall be paid an attendance fee of $40 per day for each day's attendance. A witness shall also be paid the attendance fee for the time necessarily occupied in going to and returning from the place of attendance at the beginning and end of such attendance or at any time during such attendance.28 U.S.C. § 1920 enumerates costs associated with litigation.
Taxation of costs A judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and copies of papers necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.
A bill of costs shall be filed in the case and, upon allowance, included in the judgment or decree.
Alphapharm's statement of the law is incorrect. The Federal Circuit has interpreted the term "attorney fees" under Section 285 "to include those sums that the prevailing party incurs in the preparation for and performance of legal services related to the suit." Mathis, 857 F.2d at 757 (citation omitted). As an exception to the American Rule that each party bears its own attorney fees and expenses, Section 285 was expressly added by Congress to provide attorney fees and expenses in "exceptional cases." This provision is intended
to discourage conduct which fell within the scope of "exceptional," by requiring the party acting exceptionally to bear the expenses of the opposing party. It would be inconsistent with the intent of § 285 to limit the prevailing party to something less.Central Soya Co., Inc. v. Geo. A. Hormel Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983) (citation omitted). With this understanding, the Federal Circuit has upheld district courts' discretionary grant of expenses to prevailing parties under Section 285 beyond expenses enumerated in Sections 1821 and 1920.Id. (upholding district court's discretionary grant of expenses under Section 285); Mathis, 857 F.2d at 758 (finding that "it would be inconsistent with the intent of Section 285 to limit prevailing-party Hydro to something less than the fees and expenses to which it was subjected by Mathis in this `very exceptional' case of `gross injustice'" and that " 28 U.S.C. §§ 1920 and 1821 are not here applicable.").
Mylan asserts that the expenses should be allocated equally and the amount reduced dramatically. Both defendants contend that the award of expenses should be denied because Takeda did not provide invoices to document its disbursements. Takeda supported its request for reimbursement of disbursements with a computer printout of the contemporaneous billing entries for the disbursements. This documentation is sufficient.
As far as the individual items which Mylan contends are not reimbursable expenses, its contention is rejected. It has not identified one item that is not a customary and appropriate expense associated with litigating a complex patent case, or indeed, any complex litigation. As Takeda points out, Mylan's counsel has sought reimbursement for these very kinds of expenses in other patent litigation.
K. Expert Fees
Takeda admits that its expert witness fees cannot be awarded under Section 285 as ordinary litigation expenses. See Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 377 (Fed. Cir. 1994). It seeks reimbursement of these fees under this Court's inherent power to impose sanctions for bad faith and vexatious conduct. Chambers v. Nasco, Inc., 501 U.S. 32, 46 (1991). "[I]f in the informed discretion of the court," neither the applicable statute nor the Federal Rules of Civil Procedure sanctioning bad-faith litigation conduct "are up to the task, the court may safely rely on its inherent power." Id. at 50. Specifically, a district court, "in the exercise of its discretion and inherent equity power," may "include an award of reasonable expert witness fees in excess of the $30/day attendance fee specified in 28 U.S.C. § 1821." Mathis, 857 F.2d at 759. See also Amsted, 23 F.3d at 378; Bristol-Myers Squibb, 2002 WL 1733681, at *14.
Takeda's request is granted. For the reasons already described in detail in a prior Opinion, "[t]he evidence of Alphapharm's bad faith is overwhelming." Sanctions Opinion, 459 F. Supp. 2d at 243. Similarly, Mylan engaged in a host of bad faith litigation tactics, which increased the burden of this litigation enormously. These included the presentation of factually indefensible positions from its ANDA filing straight through to its submissions in opposition to the motion for sanctions. Id. at 247-48.
An award of the costs associated with Takeda's employment of experts is particularly warranted in this case. To analyze fairly and correctly the challenges that the defendants made to the `777 Patent, it was necessary for the Court to understand the principles and issues associated with several scientific disciplines. Takeda brought to this task experts of impeccable credentials who spent the time that they needed to master the facts relevant to the challenges to the patent so that they could present the relevant scientific principles and their expert opinions in an accessible and helpful manner. Their testimony was critical to the findings of fact entered in the Trial Opinion.
Takeda's approach to the use of experts stood in stark contrast to that of the defendants. As a general matter, the defendants' experts were far less impressive, had not done their homework regarding the issues at stake in this case, and often ventured from their fields of expertise. The defendants' performance in this regard provides further evidence that they well understood that their attacks on the `777 Patent were groundless and would only succeed if Takeda did not expend the effort and resources necessary to shine a light on the flaws in the defendants' arguments and if the Court did not spend the time necessary to learn the relevant science and understand the evidentiary record created by the trial submissions.
L. Interest
Takeda seeks an award of interest on the attorney fee award from the date the Sanctions Opinion was issued: September 20, 2006. It contends that such an award is appropriate under Section 285, or alternatively as an exercise of the Court's inherent equitable power as a sanction for bad faith conduct.
According to 28 U.S.C. § 1961, "[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court. . . . Such interest shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield." Post-judgment interest is correctly calculated "from the date of the judgment establishing the right to the award." Fox Indus., Inc. v. Structural Preservation Sys., Inc., 922 F.2d 801, 804 (Fed. Cir. 1990). See also Mathis, 857 F.2d at 760 (interpreting 28 U.S.C. § 1961 to find that "[i]nterest on an attorney fee award . . . runs from the date of the judgment establishing the right to the award, not the date of the judgment establishing its quantum.").
Takeda is awarded interest accruing from the date of the Sanctions Opinion, September 20, 2006. Alphapharm's characterization of Takeda's request as a request for prejudgment interest is simply incorrect. Moreover, its reliance on Beatrice Foods Co. v. New England Printing Lithographing Co., 923 F.2d 1576 (Fed. Cir. 1991), is unpersuasive. Beatrice vacated an award of enhanced damages under 35 U.S.C. § 284 and noted that prejudgment interest under that section could be granted in any event only for the primary damage award and not for enhanced damages under Section 284. Id. at 1580. Beatrice did not address post-judgment interest for an award under Section 285. As such, it fails to support Alphapharm's argument that Takeda should not be awarded interest on the fee award granted today from the date of the Sanctions Opinion either under Section 285 or through this Court's inherent power.
CONCLUSION
Takeda is awarded attorney fees, expenses, and expert fees in the amount of $11,400,000 from Mylan and $5,400,000 from Alphapharm, with interest accruing from September 20, 2006 at a rate of 5.02%.
SO ORDERED: