Beckman Instruments, Inc. v. LKB Produkter AB

• Decision Date: 12 July 1988
• Docket Number: Civ. A. No. R-85-3133.
• Citation: 703 F. Supp. 408
• Parties: BECKMAN INSTRUMENTS, INC., Plaintiff, v. LKB PRODUKTER AB, et al., Defendants.
• Court: U.S. District Court — District of Maryland

703 F. Supp. 408

BECKMAN INSTRUMENTS, INC., Plaintiff, v. LKB PRODUKTER AB, et al., Defendants.

Civ. A. No. R-85-3133.

United States District Court, D. Maryland.

July 12, 1988.

G. Stewart Webb, Jr., Venable, Baetjer and Howard, Baltimore, Md., Donald R. Dunner, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., William H. May, Beckman Instruments, Inc., Fullerton, Cal., for plaintiff.

Philip L. Cohan, Piper & Marbury, Washington, D.C., for defendants.

MEMORANDUM AND ORDER

RAMSEY, District Judge.

Before the Court are plaintiff Beckman Instruments, Inc.'s (Beckman's) motions for prejudgment interest, for attorney's fees, and for treble damages. The motions have been fully briefed and responded to and the Court now rules pursuant to Local Rule 6(G) (D.Md.1987). For the reasons stated below, the Court will award prejudgment interest of $111,559.00 and attorney's fees and litigation expenses of $1,969,664.44, but will deny the request for treble damages.

This patent infringement case was tried before a jury, the trial lasting from July 9 to July 26, 1987. On July 31, 1987, the jury returned a verdict that claims 4 and 7 of U.S. Patent No. 4,029,401 (the "401" patent) were valid and infringed and that claims 3, 5, and 6 were not valid and were not infringed. The jury awarded plaintiff damages of $1,028,000.00. Following the jury verdict, the post-trial motions now before the Court were filed, briefed and argued.

Plaintiff seeks prejudgment interest pursuant to 35 U.S.C. § 284. Under that statute, a Court "shall award the claimant damages adequate to compensate for the infringement," and the United States Supreme Court has said that "the underlying purpose of the provision strongly suggests that prejudgment interest should ordinarily be awarded where necessary to afford the plaintiff full compensation for the infringement." General Motors Corp. v. Devex Corp., 461 U.S. 648, 653-54, 103 S.Ct. 2058, 2061-62, 76 L.Ed.2d 211 (1983). And the rate of prejudgment interest and whether it should be compounded or uncompounded is left to the sound discretion of the trial court. Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 969 (Fed.Cir.1986). But in exercising its discretion, a court "must be guided by the purpose of prejudgment interest, which is `to ensure that the patent owner is placed in as good a position as he would have been had the infringer entered into a reasonable royalty agreement.'" Bio-Rad Laboratories, 807 F.2d at 969 (quoting Devex, 461 U.S. at 655, 103 S.Ct. at 2062).

There is substantial justification for an award of prejudgment interest in this case. A jury found LKB guilty of infringement. Moreover, as will be discussed at greater length below, this Court is of the opinion that defendants pursued a deliberate strategy of engaging in frivolous and vexatious litigation in defending the suit brought against them. Under these circumstances an award of prejudgment interest is warranted in order to make plaintiff whole again.

Plaintiff has presented argument that provides a reasonable basis for its requested amount. In an exhibit attached to its motion, it shows what its net after tax profit would have been, based on the jury's award as a reasonable royalty rate, for the years 1982-87.¹ Then, using commercial paper rates for 1982, 1983, and 1987, and Eurodollar time deposit rates for 1984, 1985, and 1986, its actual business practice for those years, with interest compounded annually, it shows it would have earned $111,559.00 for those years. The Court finds this procedure credible and one that yields a commercially reasonable outcome. Therefore prejudgment interest will be awarded in the amount of $111,559.00.

Beckman also requests attorney's fees. Under 35 U.S.C. § 285, a court "in exceptional cases may award reasonable attorney fees to the prevailing party." The Court finds this to be such an exceptional case for two reasons: 1) defendants' litigation strategy can only be viewed as vexatious; 2) defendants have deliberately and repeatedly violated the injunction this Court issued on October 1, 1987.

Defendants' approach to this case has been to conduct vexatious litigation. Defendants have pursued baseless claims that required extensive allocations of time and resources during the conduct of this litigation. Soon after plaintiff brought suit, for example, defendants filed a counterclaim that alleged an antitrust violation. Defendants subsequently demanded extensive discovery but failed to unearth any evidence in support of their assertions. Finally, defendants dismissed the claim themselves shortly before the case was to go to trial. Similarly, defendants vigorously pursued a claim that Beckman committed inequitable conduct in obtaining its '401 patent. Extensive litigation over the specifics of the claim then followed, along with intense and protracted discovery. When the issue came up for decision, having been severed from the infringement claim that was tried before a jury, following an evidentiary hearing held August 27, 1987, this Court found no basis whatsoever for the charge of inequitable conduct. Similarly, one defendant sought dismissal for lack of personal jurisdiction. This claim, too, initiated extensive litigation and protracted discovery. Finally, the defendant abandoned the defense. These frivolous claims with their attendant pleading requirements and protracted discovery needs, along with other dilatory tactics, greatly expanded the time and expertise this case required.

Besides baseless litigation, defendants have deliberately and repeatedly violated the injunction this Court issued on October 1, 1987. The injunction expressly provided:

Defendants are further ordered, within 30 days of the effective date of this order, to deliver to counsel for plaintiff for destruction all electronic circuits, printed circuit boards, or integrated circuits which contain the hardware and/or programs necessary for operation of the auto window feature and which are in the defendants' possession, custody, or control within the United States, including but not restricted to any such items in the possession of salesmen or other representatives or agents, whether employed by or independent of defendants.

Defendants, however, exported their auto window chips to Finland on October 6, 1987. Defendants argue that the injunction "was most reasonably understood as providing for destruction of chips as a sanction in the event that defendants had not removed them from the United States by October 30, 1987." The interpretation defendants put forth strains credibility and contradicts the plain language of the injunction. It cannot be characterized as other than defendants thumbing their noses at this Court.

This Court's injunction also provided that defendants were enjoined from "advertising, promoting or mentioning ... the auto window or moving window feature, or colorable variations thereof." And the order stated that "making, using, or selling," all of which were enjoined, included "the use, development, manufacture, testing, production, advertising, promotion, offering for sale, display, distribution, and sale of any and all of the products enjoined." Despite this, ten demonstrator machines that defendants had in use after the effective date of the injunction contained the infringing devices.

In short, defendants have deliberately and repeatedly violated this Court's injunction. Such wilful misconduct would reasonably support citing defendants for contempt. At a minimum it provides additional justification for finding this an "exceptional case" within the meaning of 35 U.S. C. § 285. The Court finds, therefore, that an award of attorney's fees is warranted.

It still remains to determine the amount of the award. Beckman requests the following attorney's fees and litigation expenses:

                  Fees Billed           $1,658,300.82
                  Fees Withheld             75,178.75
                  Category 1 Expenses      166,907.30
                  Category 2 Expenses      144,456.32
                  Category 3 Expenses      351,716.00
                  Category 3 Expenses       57,690.10
                                        _____________
                  TOTAL                 $2,454,249.29
                

In opposition, defendants argue 1) that Beckman has not adequately documented the basis for its claimed expenses; and 2) that attorney's fees should be awarded only for time spent on frivolous and vexatious issues, not for the costs of the entire suit. Neither objection has merit. Beckman has provided a 28 page memorandum and several hundred pages of exhibits in justification for its expenses. It is not credible to argue, as defendants assert, that the documentation provided is not adequate. Similarly, there is no support for defendants' claim that only expenses for costs incurred on frivolous issues can be recovered. The statute provides that the "court in exceptional cases may award reasonable fees to the prevailing party." 35 U.S.C. § 285. Neither the statute nor the caselaw supports defendants' limitation.

Plaintiff's attorney's fees request includes amounts paid to attorneys and other employees of the Washington, D.C., firm of Finnegan, Henderson, Farabow, Garrett & Dunner, including partners, associates, law clerks, litigation clerks, and other employees; as well as fees paid to the firm of Venable, Baetjer & Howard for providing local counsel. The rates varied, being adjusted each year, but ranged up to $250.00 per hour for senior partners, $175.00 per hour for junior partners, $165.00 per hour for senior associates, $105.00 per hour for junior associates, $60.00 per hour for law clerks, $40.00 per hour for litigation clerks, and $10.00 to $60.00 per hour for other employees. The Court finds these fees reasonable, especially since the firm is one that specializes in patent work, an area requiring great expertise; and further, the hours billed are reasonable given the complexity of the litigation and the favorable outcome obtained for Beckman. The Court will award the...