Civil Action No. 00-10836-GAO.
October 5, 2004
AWARD OF ATTORNEYS' FEES AND COSTS
I have previously ruled that the defendants (collectively "Creo") are entitled to recover reasonable attorneys' fees and reasonably necessary expenditures attributable to the issue on which they prevailed at trial — i.e. Agfa's inequitable conduct before the United States Patent and Trademark Office ("USPTO"), with the admonition that this will not necessarily include fees and costs attributable to the case as a whole. See Findings of Fact, Conclusions of Law, and Order for Judgment, at 49 (Docket No. 216). Creo has submitted an application for fees and costs totaling $4,292,302.59. Agfa opposes the application and submits that an award of fees and costs should not exceed $758,120. After Agfa filed its opposition, Creo notified the Court by letter that it would agree to reduce its fee request to $4,140,461.09.
I have taken into account a number of factors in calculating what I believe is an appropriate award in this case, including the degree of difficulty presented by the inequitable conduct issue, the degree of success obtained by Creo, the number of attorneys and paralegals who worked on this matter, the number of hours of professional time devoted to the matter, the billing rates charged, the type and amount of costs incurred including any duplicate, unnecessary or undocumented expenditures, expert fees, summary judgment related fees, and the specific legal issues to which the fees and costs pertain. Bearing in mind the challenge of proving inequitable conduct by clear and convincing evidence and the high stakes involved in this dispute between two large competitors in the field of prepress technology, it comes as no surprise that the amount of fees and costs incurred by Creo in this litigation was significant. Nevertheless, reasonable reductions in the amounts claimed are warranted for the following reasons.
I. Attorneys' Fees
The "lodestar" approach is the appropriate starting point for an attorneys' fee award under 35 U.S.C. § 285. Codex Corp. v. Milgo Elec. Corp., 717 F.2d 622, 631-32 (1st Cir. 1983). The "lodestar" is the product of the number of hours reasonably expended and the reasonable hourly rate for such services. Id.
Before the lodestar calculation can be performed, it is first appropriate to consider whether the work of all the lawyers and others who worked on the case should be recognized. Creo initially sought recovery of fees for thirty-six attorneys and paralegals who worked on this matter. By letter to the Court dated September 24, 2004, Creo agreed to forego its request for fees for twenty-two attorneys and paralegals who billed fewer than 100 hours to this case (a total of $140,049.50). I accept this reduction and further exclude from the calculation the time billed by attorney James B. Lampert (who billed just a few hours over the 100-hour cutoff accepted by Creo) and paralegal Janna Groarke (who billed 102.2 hours). I make these exclusions not to denigrate the work of those excluded, but rather to focus on the core group whose work can be accepted as reasonable and necessary. Therefore, I will allow recovery of fees for work done by attorneys James Quarles, William DiSalvatore, Victor Souto, Brent Mitchell, S. Calvin Walden, Daniel Esrick, and Amy Nash, and paralegals Colin Forbes, Min Kyung Kim, Kate Mullane, Eva Richardson, and Jorge Sastoque (the "Allowable Creo Team"). The fees charged and the number of hours billed to this matter by these individuals represent approximately ninety-three percent of the total fees and hours of all of the attorneys and paralegals listed on pages four and five of the defendants' Memorandum of Law in Support of Their Application for Fees and Costs ("Creo Br."). I make additional adjustments to the allowable recovery based on how much of the Allowable Creo Team's time was focused on the inequitable conduct issue.
Given the difficulty of proving, by clear and convincing evidence, inequitable conduct in the prosecution of the six Agfa patents based on three separate theories during a fifteen day trial, the number of hours billed by the Allowable Creo Team do not appear unreasonable and I will recognize the time recorded as devoted to that effort.
I will not, however, recognize the "market" billing rates applied by the law firm to these hours. As I noted in Invessys, Inc. v. McGraw-Hill Cos., Civ. A. 01-12048-GAO, 2003 WL 21696545, at *3 (D. Mass. May 27, 2003), "the question here is not what the lawyers' services are worth to a willing buyer; rather, the question is what rate is it reasonable to impose upon an unwilling party under a fee-shifting statute." Agfa has complained that the rates are in many instances substantially higher than the median hourly billing rates disclosed by the American Intellectual Property Law Association ("AIPLA") surveys on billing rates in the Boston area. I find the criticism persuasive, and I further conclude that the AIPLA median rates are a satisfactory way of setting the worth of lawyers' services for the purpose of making an award under a fee-shifting statute.
In Invessys I also made the following observation, pertinent here as well, about the false precision of a "line-item" approach to setting a fee award:
Invessys, 2003 WL 21696545, at *2.
I conclude that a reasonable fee is something less than the total billed. How much less? There is no single method of determining that. One way would be to pretend to precision and comb page-by-page through the time records, sorting each entry into `allow' and `disallow' columns. That would be worth the time and effort if the result could be intelligently defended, but the truth is that any such sorting would be based mostly on guesswork. The result would not be a calculation, but an estimate. Better then to save the time and effort and make an intelligent estimate in the first instance.
Instead of trying to adjust the individual rates of particular lawyers with reference to the median, I will rather assume that all the hours recognized as reasonably expended were expended by a hypothetical lawyer billing at the median rate for intellectual property practitioners in Boston, as disclosed by the AIPLA surveys. The data supplied furnish rates both for partners and associates, so a separate calculation can be made for each status. (It will be seen that it turns out in this case that the consequence is that the rates applicable to the partners in the Allowable Creo Team are generally brought down to the AIPLA survey median, while in some cases the associates' rates are brought up to the median.)
A. Instigation of Suit Through End of Fact Discovery (July 2000-October 2002)
Consistent with my prior Order for Judgment, recovery for amounts billed from institution of the action through the close of fact discovery (July 2000 through October 2002) is limited to the issue of inequitable conduct. Creo calculates the amount billed (prior to any reductions) for work specifically relating to the inequitable conduct issue to be $672,726.20, which is approximately fortyone percent of the total amount billed for July 2000 through October 2002. See Creo Br. at 12-13.
Senior partners Quarles and DiSalvatore, and junior partners Souto, Mitchell, and Walden (beginning in May 2001) billed a total of 2,425.7 hours between July 2000 and October 2002. Walden Decl., Ex. A. Multiplying this number of hours by the AIPLA 2001 median for partners in Boston of $385 per hour yields a total of $933,894.50. Associates Nash, Esrick, and Walden (through April 2001) billed a total of 1,809 hours between July 2000 and October 2002. Id. Multiplying this number of hours by the AIPLA 2001 median of $238 yields a total of $430,542. The Allowable Creo Team paralegals billed a total of 710.9 hours between July 2000 and October 2002 at an average actual rate (no AIPLA data for paralegals was submitted) of about $100, for a total of $71,090. The sum of these amounts is $1,435,526.50. I allow forty-one percent of this as attributable to the inequitable conduct issue, for a total of $588,566 (rounded to the nearest whole dollar).
B. Motion for Summary Judgment and Bifurcation (November 2002-July 2003)
Creo's summary judgment motion was reasonable at the time it was made. Although Creo did not prevail on the motion, it was certainly not "hopeless" and destined for failure, as Agfa suggests. See Eli Lilly and Co. v. Zenith Goldline Pharms., Inc., 264 F. Supp.2d 753, 773 (S.D. Ind. 2003). In fact, the motion crystallized the inequitable conduct issue in a way that persuaded me to sever that issue for separate trial. The recovery of fees associated with bringing the motion is appropriate.
Senior partners Quarles and DiSalvatore, and junior partners Souto, Mitchell, and Walden billed a total of 742.5 hours between November 2002 and July 2003. Walden Decl., Ex. A. Multiplying this number of hours by the AIPLA 2003 median for partners in Boston of $400 per hour yields a total of $297,000. Associates Nash and Esrick billed a total of 12.8 hours between November 2002 and July 2003. Id. Multiplying this number of hours by the AIPLA 2003 median for associates in Boston of $310 yields a total of $3,968. The Allowable Creo Team paralegals billed a total of 465.9 hours between November 2002 and July 2003 at an average actual billing rate of about $100, for a total of $46,590. The sum of these amounts is $347,558, which I allow.
C. Pre-Trial, Trial and Post-Trial (August 2003-April 2004)
The non-jury trial was directed exclusively to the inequitable conduct issue. Applying the same methodology as above, the total allowable recovery for this period is $1,255,070 (2,656.3 partner hours at $400 per hour, plus 1,925.5 paralegal hours at $100 per hour).
D. Preparation of Fee Application
I will allow recovery of attorneys' fees for preparation of the fee application in the amount of $42,150 (91.6 partner hours at $400 per hour, plus 55.1 paralegal hours at $100 per hour).
E. Creo's Voluntary Reduction
Lastly, I reduce the total fee award by $11,792 pursuant to the letter from Creo's counsel dated September 24, 2004 assenting to this specific reduction.
Creo also seeks reimbursement for expense disbursements of $644,391.97 (excluding expert fees). Agfa objects on the ground that the costs are not properly documented, making it impossible to determine whether the costs are duplicative or reasonably related to the inequitable conduct issue. I agree with Agfa that Creo's broad summarization of the costs in categorical terms makes it difficult to determine what is reasonable under the circumstances. I therefore separate the costs into the three major stages of the litigation, as in Part I above, and examine expert witness fees separately.
A. Instigation of Suit Through End of Fact Discovery (July 2000-October 2002)
As noted above, Creo's data indicate that forty-one percent of the total fees billed for the period July 2000 through October 2002 were specifically attributable to the inequitable conduct issue. See Creo Br. at 12-13. I find that a recovery of costs commensurate with this percentage for this time period is also appropriate. Therefore, I will allow forty-one percent of the claimed legal research, fax, photocopying, court-related, and travel costs (excluding "other" costs) for July 2000 through October 2002. Based on the spreadsheets attached as Exhibit B to the Walden Declaration, I calculate this amount to be $72,263.
B. Motion for Summary Judgment and Bifurcation (November 2002-July 2003) and Pre-Trial, Trial and Post-Trial (August 2003-April 2004)
As noted above, the Allowable Creo Team's fees account for ninety-three percent of the total fees and hours of all of the attorneys and paralegals who worked on this matter. I therefore find it reasonable to allow ninety-three percent of the legal research, fax, photocopying, court-related, and travel costs (excluding "other" costs) for the summary judgment, pre-trial, trial, and post-trial periods (November 2002 through April 2004). Based on the spreadsheets attached as Exhibit B to the Walden Declaration, I calculate this amount to be $251,866.
As far as the "other" costs are concerned, I will allow three-quarters of the expenses paid to TrialGraphix, as the animations, boards, video deposition clips, and other visual aids were helpful during trial. I found the video deposition clips to be particularly helpful in gauging the credibility of witnesses, notably patent agents Julie Krolikowski and Ed Kelley. However, a review of the invoices from TrialGraphix leads me to conclude that a one-quarter reduction is appropriate, so I allow $174,260. The remaining disbursements in the "other" category are not sufficiently explained and therefore not awarded.
C. Expert Witness Fees
Although I have found that Agfa's inequitable conduct before the USPTO justifies an award of attorneys' fees under 35 U.S.C. § 285, that section does not explicitly authorize an award of expert fees. I find no fraud on the court or abuse of the judicial process on Agfa's part warranting such an award under the court's inherent sanctioning power. See Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 378-79 (Fed. Cir. 1994) (citing West Virginia Univ. Hosp., Inc. v. Casey, 499 U.S. 83, 95 (1991)). Accordingly, Creo is entitled to expert fees only in accordance with 28 U.S.C. §§ 1821 and 1920 for the fourteen days Brian Eastman attended trial and the one day Martin Adelman attended trial, but recovery for InteCap, Inc. is not allowed. At $278 per day, plus mileage for Eastman's two identified round-trips between Eastham, Massachusetts and Boston, this amount is $4,288.
For all the foregoing reasons, it is therefore ORDERED that the plaintiff pay to the defendants the sum of $2,724,229, consisting of attorneys' fees in the sum of $2,221,552 and costs (including expert fees) in the sum of $502,677.