No. 99-CV-4644 (RR)
December 19, 2001
REPORT AND RECOMMENDATION
By order dated November 8, 1999, the Honorable Reena Raggi referred the above-captioned matter to the undersigned Magistrate Judge to conduct an inquest and prepare a report and recommendation on Plaintiff's damages, costs, and fees in view of the entry of default judgment against Defendant T-2000. For the reasons stated herein, I respectfully recommend that a default judgment be entered in the amount of $60,000 and that Plaintiff be granted prejudgment interest, a permanent injunction, and attorneys fees, which are to be assessed upon the filing of contemporaneous time records by Plaintiff.
This action was original commenced by Rates Technology, Inc. ("Plaintiff") against Redfish Telemetrix, Inc. ("Defendant Redfish") for patent infringement arising under 35 U.S.C. § 271 and 281 through 285. (Complaint ¶ 3). Plaintiff accused Defendant Redfish of producing, advertising, and marketing a patented device ("Rateseeker") in violation of three patents owned by Plaintiff (Id. ¶ 12, Ex. 4). Prior to the issuance of the patent to Defendant Redfish for Rateseeker, Plaintiff had received three patents ("Plaintiff's Patents") for a device and method used to determine the cost of telephone calls in order to send the calls along the least costly route, as well as a method and system for updating calling rate databases. (Id. Ex. 1-3). Plaintiff alleged that Defendant Redfish failed to disclose the existence of Plaintiff's Patents when it applied for a patent for the Rateseeker device, which also provides a method and system for updating a call rating database. (Id. ¶ 14). Plaintiff claimed that Defendant Redfish's Rateseeker patent was invalid because the device was not novel, and that Defendant Redfish's actions resulted in damages of not less than $5 million based on lost profits and/or reasonable royalties. (Id.; Id. ¶ C). Plaintiff also requested treble damages, prejudgment interest, an injunction, and attorneys fees and costs. (Id. ¶¶ C-F).
All references to Plaintiff's Complaint for Patent Infringement and Demand for Jury Trial, dated August 10, 1999, are herein referred to as "Complaint."
The patents, Numbers 4888822, dated December 19, 1989, 5425085, dated June 13, 1995, and 5519769, dated May 21, 1996, were issued to Gerald J. Weinberger, Roger C. Lee, and Stanley F. Miller.
The patent, Number 5881139, dated March 9, 1999, was issued to Gregory Romines, an officer of Redfish Telemetrix, Inc.
Plaintiff and Defendant Redfish engaged in a first round of settlement discussions from approximately January 1999 to August 1999. (Am. Complaint ¶ 31). Plaintiff alleges that at some point during the settlement discussions Defendant Redfish and/or Gregory Romines ("Romines"), an officer of Defendant Redfish, transferred or assigned the rights to the Rateseeker patent to T-2000 ("Defendant T-2000"), or otherwise licensed to Defendant T-2000 to use the patent for insufficient and/or inadequate consideration. (Id. ¶¶ 26-28). Plaintiff alleged that Defendant Redfish effected the transaction in order to avoid any liability for its patent infringement, and that Defendant T-2000 was aware of the fraudulent nature of the transaction. (Id. ¶¶ 27, 28). Defendants Redfish, Christopher Miner ("Miner"), president of Defendant Redfish, and Romines admitted to granting a limited right to Defendant T-2000 to sell the Rateseeker device, but denied that the transaction was fraudulent or was intended to avoid liability for any infringement claims made by Plaintiff (Answer ¶¶ 22, 27-28).
All references to the Plaintiff's First Amended Complaint for Patent Infringement, Declaratory Relief, Fraudulent Conveyance, and Fraud and Deceit; and Demand for Jury Trial, dated September 28, 1999, are herein referred to as "Am. Complaint."
All references to the Defendants Redfish, Miner, and Romines' Answer to Complaint; and Cross-Complaint, dated November 22, 1999, are herein referred to as "Answer."
Following the transfer, Plaintiff amended its complaint to include Defendants T-2000, Miner, and Romines. (Am. Complaint ¶¶ 3-5). The Amended Complaint requested trebled damages in the sum of $15 million from Defendants Redfish and Miner based on lost profits and/or a reasonable royalty. In addition, Plaintiff requested $5 million, plus punitive and exemplary damages in an amount not less than $10 million from Defendants Redfish and Miner for fraud and deceit, a ruling that the Rateseeker patent was invalid, the setting aside of the conveyance of Rateseeker patent to Defendant T-2000, an injunction preventing Defendants Redfish and T-2000 from further patent infringement, and attorneys fees and costs. (Id. ¶¶ A-K).
In the Amended Complaint, Plaintiff asserted that the fraudulent transfer occurred between Defendants Redfish, Romines, and T-2000, (Am. Complaint ¶ 26), but only sought damages for fraud and deceit against Defendants Redfish and Miner, (Id. ¶ G), presumably for engaging in settlement discussions in bad faith. (Id. ¶¶ 31-34).
A. Defendants Redfish, Miner, and Romines.
On November 22, 1999, Defendants Redfish, Miner, and Romines submitted an Answer and Cross-Complaint denying all allegations of wrongdoing and requested that Plaintiff's Patents be declared invalid. Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N.Y. Nov. 26, 1999). Plaintiff's responsive pleading requested dismissal of the cross-complaint of Defendant/Counterclaimants, and reiterated its claims for damages totaling $30 million, its requests for the invalidation of the Rateseeker patent, and injunctive relief. Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N.Y. Dec. 17, 1999).
On January 4, 2001, Defendant Redfish filed a notice of bankruptcy.Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N.Y. Jan. 4, 2001). On June 26, 2001, following settlement of Plaintiff's claim for $20,000, Plaintiff and Defendants Redfish, Miner, and Romines filed a stipulation of dismissal of claims with prejudice and without cost to either party. (Sup. Dec. ¶ 9); Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N.Y. June 26, 2001). On August 28, 2001, the case was closed.
All references to Plaintiff's Supplemental Declaration Re Statement of Damages in Support of Default Judgment against Defendant T-2000, dated November 18, 2001, are herein referred to as "Sup. Dec."
B. Defendant T-2000.
On November 8, 1999, a default judgment was entered against Defendant T-2000. Rates Technology Inc. v. Redfish Telemetrix. Inc., 99-CV-4644 (RR) (E.D.N.Y. Nov. 8, 1999). On September 13, 2000, Plaintiff was granted a fourth extension of time to serve Defendant T-2000 with a written submission of damages by November 30, 2000. Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N.Y. September 26, 2000). As the Court's records did not disclose a filing of a computation of damages by Plaintiff, and the submissions received presented an insufficient basis for this Court to make a determination of the total amount of damages suffered by Plaintiff or the amount of damages assignable to Defendant T-2000, I issued an Order dated November 2, 2001, directing Plaintiff to file additional submissions regarding damages. Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N.Y. November 6, 2001). In response to that Order, James B. Hicks, co-counsel for Plaintiff, filed a Supplemental Declaration Re Statement of Damages in Support of Default Judgment against Defendant T-2000. Rates Technology Inc. v. Redfish Telemetrix, Inc., 99-CV-4644 (RR) (E.D.N Y November 26, 2001).
I. Default Judgment.
A defendant's default is deemed an admission of all well-pleaded allegations in the complaint pertaining to liability. Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Reality Corp., 973 F.2d 155, 158 (2d Cir.), cert. denied, 506 U.S. 1080, 113 S.Ct. 1049, 122 L.Ed.2d 357 (1993); Oy Saimaa Lines Logistics Ltd. v. Mozaica-New York, Inc., 193 F.R.D. 87 (E.D.N.Y. 2000). However, damages must still be proven and the burden is on the applicant to establish his or her entitlement to recovery. See Greyhound, 973 F.2d at 158. While "the court must ensure that there is a basis for the damages specified in a default judgment, it may, but need not, make the determination through a hearing." Fustok v. Conticommodity Servs., Inc., 122 F.R.D. 151, 156 (S.D.N.Y. 1988), aff'd, 873 F.2d 38 (2d Cir. 1989). In this case, because Defendant T-2000 did not answer, the determination of damages must be based solely on Plaintiff's submissions.
II. Patent Infringement Claims.
A. Damages Under 35 U.S.C. § 284.
1. Primary Damages.
The statutory instruction for awarding damages for patent infringement is that the award must be "adequate to compensate for the infringement but in no event less than reasonable royalty for use of the invention." 35 U.S.C. § 284. The patent owner bears the burden of proving the amount of damages. Oiness v. Walgreen Co., 88 F.3d 1025, 1029 (Fed. Cir. 1996); BIC Leisure Prods., Inc. v. Windsurfing Int'l, Inc., 1 F.3d 1214, 1217 (Fed. Cir. 1993). When damages cannot be ascertained with precision because the evidence available from the infringer is inadequate, any doubts must be resolved against the infringer. Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1572 (Fed. Cir. 1996) (when defendant failed to retain production records during litigation period, district court drew strong adverse inference that records would have been unfavorable to defendant); Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1065 (Fed. Cir. 1983). "[W]hile the damages may not be determined by mere speculation or guess, it will be enough if the evidence show[s] the extent of the damages as a matter of just and reasonable inference, although the result be only approximate." Lam, 718 F.2d at 1065 (quoting Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 563 (1931)).
a. Lost Profits.
Lost profits are the preferred method of assessing damages for patent infringement under 35 U.S.C. § 284. See Del Mar Avonics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1326 (Fed. Cir. 1987). In order to show lost profits, the patent holder must establish the sales and profits lost as a result of the infringement. Pentech Int'l, Inc. v. Hayduchok, 931 F. Supp. 1167, 1173 (S.D.N.Y. 1996), citing Rite-Hite Corp. v. Kelly Co., 56 F.3d 1538, 1545 (Fed. Cir. 1995), cert. denied, 516 U.S. 867, 116 S.Ct. 184, 133 L.E.2d 122 (1995). The Federal Circuit has adopted a four-part test by which the patent holder may establish lost profits, which requires the patent holder to show: (1) that a demand for the patented product existed; (2) that there is an absence of acceptable non-infringing substitutes; (3) that the patentee possessed the manufacturing and marketing capability to exploit the demand; and finally, (4) the amount of lost profits due to the infringing activity or the amount of profit the patentee would have made. Fonar Corp. v. General Electric Co., 107 F.3d 1543, 1553 (Fed. Cir. 1997), citing Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978);Pentech, 931 F. Supp. at 1173; see Sensonics, 81 F.3d at 1572. Once the patent holder has made that showing, a court may reasonably infer that the lost profits claimed were indeed caused by the infringing activity.Rite-Hite, 56 F.3d at 1545. The burden then shifts to the infringer to show that this inference is not reasonable for some or all of the lost profits. Id.
b. Reasonable Royalty.
If the patent holder is unable to show lost profits, as is the case here, the minimum statutory recovery is the amount of reasonable royalty due to the patent holder by the infringer. 35 U.S.C. § 284; Pentech, 931 F. Supp. at 1173; Rite-Hite, 56 F.3d at 1544, citing Del Mar Avonics, 836 F.2d at 1326. However, where the patent holder presents little or no satisfactory evidence upon which the court could determine a reasonable royalty, the court may choose to not grant any royalty. For example, in Devex Corp. v. General Motors Corp., 667 F.2d 347, 363 (3d. Cir. 1982), aff'd on other grounds, 461 U.S. 648, 103 S.Ct. 2058, 76 L.E.2d 211 (1983), the Third Circuit did not award any royalty for a portion of the patent infringement where the patentee's proposed standard for that portion "was vitiated by the facts, and there was insufficient evidence of the record upon which the fact finder could rely in formulating an alternative." Id. The court stated that while 35 U.S.C. § 284 requires the award of a reasonable royalty, "to argue that this requirement exists even in the absence of any evidence from which a court may derive the reasonable royalty goes beyond the possible meaning of the statute." Id. at 363. See Pentech, 931 F. Supp. at 1173 (where patentee failed to prove the total amount of incremental profit that it should have made absent the infringing activity, and the court could not otherwise determine the amount of patentee's lost profits, patentee's request for lost profits was reduced accordingly); see also Lindemann Maschinenfabrick Gmbh v. American Hoist Derrick Co, 895 F.2d 1403, 1407 (Fed. Cir. 1990) (patentee who puts on little or no satisfactory evidence of a reasonable royalty could not successfully appeal a district court's award of damages on the grounds that the award was not "reasonable" and in contravention of 35 U.S.C. § 284),citing Rail Road Dynamics Inc. v. A. Stucki Co., 727 F.2d 1506, 1519 (Fed. Cir. 1984) ("One who fails to submit evidence in support of the position cannot be heard on appeal to complain the trial court failed to find facts upholding that position"), cert. denied. 469 U.S. 871, 105 S.Ct. 220, 83 L.Ed.2d 150 (1984).
c. Damages Award.
Following settlement with Defendant Redfish, Plaintiff requested that the court grant Plaintiff a default judgment for the amount of $14,980,000 against Defendant T-2000 ($15 million minus the $20,000 obtained in the settlement agreement with Defendant Redfish). (Sup. Dec.). Plaintiff asserted that its attempts to provide any statement of damages have been continually delayed by Defendants Redfish, Miner, Romines, and T-2000's refusal to provide any discovery. (Id. ¶¶ 4, 5). Specifically, Plaintiff asserts that Defendant T-2000's failure to appear in this matter has impeded its ability to obtain discovery against the defaulting defendant.
Although, for the reasons explained above, any doubt as to the amount of damages is to be resolved against Defendant T-2000, despite repeated opportunities, Plaintiff has failed to set forth any proof of damages beyond a generalized statement that it has suffered damages in the amount of $15 million. (Id. ¶¶ 7, 8): Although constrained by a lack of discovery in this litigation, certainly Plaintiff could have presented evidence accessible to it through other means, such as its own records of past profits or royalties generated from other clients or businesses by the three patents in question. Plaintiff chose not to do so, and therefore damages cannot be based on lost profits.
Turning to the statutory floor of reasonable royalty; while Plaintiff's failure to present any basis for determining damages could also result in no award on this basis, I do not wish to reward Defendant T-2000 for disregarding its duty to answer. Therefore, I would find that damages based on a reasonable royalty are in order. See Microsoft Corp. v. Wen DC 2000, 2001 WL 1456654 (N.D.Ca. 2001) (after granting default judgment, court awarded more than just nominal damages to plaintiff on the premise that damage awards in copyright infringement cases must make infringement unprofitable). Plaintiff settled the original litigation with Defendants Redfish, Miner, and Romines for $20,000. This figure presumably took into consideration Defendant Redfish's notice of bankruptcy and the lower costs and fees associated with settlement versus litigation. Based on the above, I would find that Plaintiff's damages should be based on reasonable royalty in the amount of $20,000, which is to be trebled, as discussed below.
2. Enhanced Damages Under 35 U.S.C. § 284.
Under 35 U.S.C. § 284, damages for patent infringement may be increased "up to three times the amount found or assessed" upon a showing of deliberate or willful infringement. American Safety Table Co. v. Schreiber, 415 F.2d 373, 378 (2d Cir. 1969), cert. denied. Schreiber v. American Safety Table Co., 396 U.S. 1038, 90 S.Ct. 683, 24 L.Ed.2d 682 (1970); Stryker Corp. v. Intermedics Orthopedics. Inc., 891 F. Supp. 751, 814 (E.D.N.Y. 1995), aff'd, 96 F.3d 1409 (Fed. Cir. 1996). The Federal Circuit has set forth a two-step process for determining whether enhanced damages should be awarded upon a finding of infringement. Jurgens v. CBK. Ltd., 80 F.3d 1566, 1569-1570 (Fed. Cir. 1996).
First, the court is to determine whether the infringer is guilty of conduct that would merit increased damages, such as bad faith actions or willful infringement showing culpability. Id. at 1570. Relevant factors used in determining cope ability may include: (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, once he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer's behavior as a party to the litigation; (4) the infringer's size and financial condition; (5) the closeness of the case; (6) the duration of the infringer's misconduct; (7) remedial action by the infringer; (8) the infringer's motivation for harm; and (9) whether the infringer attempted to conceal its misconduct. Read Corp. v. Portec, Inc., 970 F.2d 816, 826-827 (Fed. Cir. 1992), abrog'd on other grounds by Markman v. Westview Instruments, Inc., 52 F.3d 967, 975 (Fed. Cir. 1995) (en banc); Pentech, 931 F. Supp. at 1178; Stryker, 891 F. Supp. at 834.
The court was careful to point out that the term "bad faith" has a specific meaning in the context of assigning increased damages under 35 U.S.C. § 284, stating "`bad faith' properly refers to an infringer's failure to meet his affirmative duty to use due care in avoiding infringement of another's patent rights," and not merely misconduct in the prosecution of or litigation over a patent. Id. at 1570-1571. The court acknowledged, however, that the latter type of bad faith could certainly be used "in determining whether or how much to increase the damage award once sufficient culpability is found." Id. at 1571. However, other decisions issued or affirmed by the Federal Circuit include defendants behavior in litigation as one of the nine factors which may be used in determining culpability, including Styrker, which was affirmed by the Federal Circuit the same year as the Jurgens decision was issued. See Stryker, 96 F.3d 1409. See also Read Corp. v. Portec, Inc., 970 F.2d 816, 826-827 (Fed. Cir. 1992), abrog'd on other grounds byMarkman v. Westview Instruments, Inc., 52 F.3d 967, 975 (Fed. Cir. 1995) (en banc); Pentech, 931 F. Supp. at 1178.
Upon a finding of willful infringement, determining whether to award enhanced damages, and if so, to what extent, are matters within the discretion of the court, and is informed by the totality of the circumstances. See 35 U.S.C. § 284; Jurgens, 80 F.3d at 1570; Read 970 F.2d at 826; State Industries, Inc. v. Mor-Flo Industries, Inc., 948 F.2d 1573, 1576 (Fed. Cir. 1991).
Assuming Plaintiff's submission to the true, Defendant T-2000 engaged in a fraudulent transfer in order to aid Defendant Redfish in its attempts to avoid liability and frustrate Plaintiff's attempts to pursue its infringement claims or enforce any judgment obtained against Defendant Redfish. As this act of collusion was effected following commencement of this litigation by Plaintiff against Defendant Redfish, there is a strong presumption that Defendant T-2000 was aware that Rateseeker patent could potentially be invalid at the time of the transfer. Certainly, Defendant T-2000 received actual notice of Plaintiff's patent rights following receipt of Plaintiff's Amended Complaint, which was served upon October 7, 1999. (See Default Judgment). Once Defendant T-2000 was put on notice, it had an affirmative duty to exercise due care in order to determine whether or not the Rateseeker patent infringed upon Plaintiff's Patents. See Variable Parameter Fixture Development Corp. v. Morpheus Lights Inc., 1994 WL 419830 at 1 (S.D.N.Y 1994), citing Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389 (Fed. Cir. 1983). It is clear that a Defendant T-2000 did not exercise the necessary due care.
Plaintiff's Council, James B. Hicks, additionally claimed that Defendant Redfish's attorney, Lance Brewer, informed him that Defendant Redfish was reluctant to participate in any discovery that would aid in Plaintiff's attempts to obtain a default judgment against Defendant T-2000. (Sup. Dec. ¶ 5). However, as this matter was settled, I do not have to reach a decision on the merits of the claims of patent infringement or bad faith actions by Defendants Redfish, Miner, and Romines.
The Default Judgment was signed by Judge Raggi on November 8, 1999.
Based on Defendant T-2000's collusive actions in accepting the Rateseeker patent from Defendant Redfish and its failure to exercise due care upon actual notice of its potentially infringing activities, it is clear that Defendant T-2000 willfully infringed on Plaintiff's Patents, warranting enhanced damages. In addition, there is also the issue of Defendant T-2000's actions, or lack thereof, in this litigation. Its failure to answer Plaintiff's allegations of fraud and deceit set forth in the Amended Complaint certainly lends itself to a showing of bad faith. See Jurgens, 80 F.3d at 1569-1570 See also Lyons Partnership, L.P. v. AAA Entertainment Inc., 1999 WL 1095608 at 4 (S.D.N.Y., 1999) (in copyright infringement case, defaulting defendant's failure to respond to plaintiff's allegations was relevant consideration in concluding that defendant acted in bad faith). Based on the foregoing, I would award treble damages in the amount of $60,000 to Plaintiff
B. Prejudgment Interest.
Pursuant to 35 U.S.C. § 284, prejudgment interest is ordinarily awarded, absent some justification for withholding such an award. General Motors, 461 U.S. 648, 656-657, 103 S.Ct. 2058, 76 L.E.2d 211 (1983). The actual determination of the interest rate and whether to award simple or compound interest are matters left to the court's discretion. Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540, 1545 (Fed Cir. 1991); Gyromat Corp. v. Champion Spark Plug Co., 735 F.2d 549, 556-57 (Fed. Cir. 1984).
The purpose of prejudgment interest is to adequately compensate the patent owner for the use of its money during the infringing period.Bio-Rad Lab., Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 969 (Fed. Cir. 1986), cert. denied, 482 U.S. 915, 107 S.Ct. 3187, 96 L.Ed.2d 675 (1987). Prejudgment interest may be awarded on lost profits or reasonable royalty. Braintree Laboratories, Inc. v. Nephro-Tech, Inc., 81 F. Supp.2d 1122, 1138 (D.Kan. 2000); see Gyromat. 735 F.2d at 556 (holding that prejudgment interest was properly applied to both lost profits and reasonable royalty portions of damages by lower court). However, the court may only apply it to the primary or actual damage portion of the damages award, and not the increased or punitive portion of the damages award based on finding of willful infringement. Beatrice Foods Co. v. New England Printing Lithographing Co., 923 F.2d 1576, 1580 (Fed. Cir. 1991). Prejudgment interest is awarded from the date of infringement until entry of judgment. Nickson Industries v. Rol Mfg. Co., 847 F.2d 795, 800 (Fed. Cir. 1988).
Although Plaintiff did not specifically request prejudgment interest in its Supplemental Declaration, it did request prejudgment interest from Defendant T-2000 in its Amended Complaint. (Am. Complaint ¶ F). As Defendant T-2000 did not to attempt to make any showing of extraordinary circumstances that would warrant a denial of prejudgment interest, I would award Plaintiff prejudgment interest.
Plaintiff did not specify the particular rate at which it wished to be compensated, thereby leaving the matter to the court's discretion. I would award prejudgment interest at the three-month Treasury Bill interest rate, compounded quarterly on the primary damages award of $20,000. See BIC Leisure Prods. Inc. v. Windsurfing Int'l. Inc., 774 F. Supp. 832, 837 (S.D.N.Y. 1991) (awarding prejudgment interest at the three-month Treasury Bill rate compounded quarterly), aff'd in relevant part, 1 F.3d 1214 (Fed. Cir. 1993); Allen Archery, Inc. v. Browning Manufacturing Co., 898 F.2d 787, 789 (Fed. Cir. 1990) ("[t]he three-month Treasury Bill represents a benchmark as the shortest-term, risk-free investment available to ordinary investors and is a proper basis upon which to compensate [the patentee] for the foregone use of the money"). The interest should be calculated from the date upon which Defendant T-2000 was served the Amended Complaint, and run until the date of entry of final judgment against Defendant T-2000.
Defendant T-2000 was served the Amended Complaint on October 7, 1999.
C. Injunctive Relief
Under 35 U.S.C. § 283, the district court has discretion to grant an injunction to prevent additional patent infringement, "on such terms as the court deems reasonable." According to Federal Circuit, "[i]t is the general rule that an injunction will be issued when infringement has been adjudged, absent a sound reason for denying it," Richardson v. Suzuki Motors Co. Ltd., 868 F.2d 1226, 1247 (Fed. Cir. 1983), although the district court enjoys considerable discretion in determining whether an injunction is necessary under the particular facts of the situation.Odetics, Inc. v. Storage Tech. Corp., 185 F.3d 1259, 1272 (Fed. Cir. 1989). Plaintiff has requested that the court issue an injunction preventing the further use of the Rateseeker device, as it infringed upon Plaintiff's Patents. (Am. Complaint ¶ I. Based on the uncontroverted evidence of patent infringement by Defendant T-2000, I would grant Plaintiff a permanent injunction prohibiting Defendant T-2000 from further infringing on Plaintiff's Patents, unless and until such time that it to enters into an additional voluntary arrangements with Plaintiff to the contrary.
D. Attorney's Fees Under 35 U.S.C. § 285.
1. Propriety of Fee Award.
The court may award reasonable attorney's fees in exceptional patent cases. 35 U.S.C. § 285. Whether a case is "exceptional" is a question of fact, and the determination of whether to award attorney's fees is within the court's discretion. Stryker, 891 F. Supp. at 834. A finding of willfulness is a sufficient basis to find a case exceptional, thereby permitting an award of attorney fees. Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1329 (Fed. Cir. 1987) (affirming award of attorney's fees based on finding of willful infringement); see Variable, 1994 WL 419830 at 8 (where defendant had actual notice of another's patent rights and failed to exercise due care to determine whether his actions constitute infringement, and further engaged in behavior making discovery difficult, court found infringing activity to be willful and awarded attorney's fees). Although Plaintiff did not specifically requested attorney's fees in its Supplemental Declaration, it did make such a request in its Amended Complaint. (Am. Complaint ¶ J). As I have already found Defendant T-2000's behavior to be willful, warranting a treble increase in damages, I would also find this case to be an exceptional one under 35 U.S.C. § 285 and award attorney's fees to Plaintiff.
2. Contemporaneous Records.
In order for reasonableness to be determined, an application for attorney's fees must be accompanied by contemporaneous time records which describe with specificity the work done. Stryker Corp. v. Intermedics Orthopedics, Inc., 898 F. Supp. 116, 121 (E.D.N.Y. 1995) (in patent infringement case, attorney's records must specify the attorney, date, hours expended, and nature of work done in order to recover attorney's fees); New York State Association for Retarded Children. Inc. v. Carey, 711 F.2d 1136, 1147 (2d. Cir 1983) (announcing that accurate and contemporaneous time records are a prerequisite for attorneys fees in the Second Circuit). Plaintiff has not yet submitted contemporaneous time records. Therefore, I would keep open the question of the determination of attorneys fees until such time as the records have been submitted. I would respectfully recommend that the court direct those records to be filed January 21, 2002.
Although Plaintiff did make a generalized request for costs in its Amended Complaint, (Am. Complaint ¶ J), it did not specify any particular costs for which it wished to be reimbursed. Therefore I would recommend that each party bear its own costs. See Crystal Semiconductor Corp. v. Tritech Microelectronics Int'l Inc., 246 F.3d 1336, 1362 (Fed. Cir. 2001) (upon a finding of willful patent infringement, court required each party to bear its own costs); Stryker Corp., 96 F.3d at 1418 (upon a finding of willful patent infringement, court required each party to bear its own costs).
For the reasons set forth above, it is the respectful recommendation of the undersigned that Plaintiff's application for unpaid royalties pursuant to 35 U.S.C. § 284 be granted in the amount of $20,000, and that interest be awarded on this sum in an amount to be computed by the Clerk of the Court applying the standards set forth in Section II.B of this report and recommendation. I further recommend that primary damages be trebled to $60,000, and that a permanent injunction be issued against further use by Defendant T-2000 of the Rateseeker device or patent. In addition, I recommend that attorneys fees be granted upon the filing of contemporaneous time records. Finally, I recommend that costs not be granted to Plaintiff.
Any objections to the recommendations contained herein must be filed with the Honorable Reena Raggi on or before January 14, 2002. 28 U.S.C. § 636; Fed.R.Civ.P. 6, 72. Failure to object will preclude appellate review.