Hitkansut LLC v. United States

• Decision Date: 01 May 2020
• Docket Number: 2019-1884
• Citation: 958 F.3d 1162
• Parties: HITKANSUT LLC, Acceledyne Technologies, LTD, LLC, Plaintiffs-Appellees v. UNITED STATES, Defendant-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

958 F.3d 1162

HITKANSUT LLC, Acceledyne Technologies, LTD, LLC, Plaintiffs-Appellees

v.UNITED STATES, Defendant-Appellant

2019-1884

United States Court of Appeals, Federal Circuit.

Decided: May 1, 2020

John S. Artz, Dickinson Wright PLLC, Ann Arbor, MI, argued for plaintiffs-appellees. Also represented by Robert Avers ; Frank Michael Smith, Troy, MI.

Gary Lee Hausken, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by Joseph H. Hunt.

Before Prost, Chief Judge, Clevenger and Moore, Circuit Judges.

Prost, Chief Judge.

The United States appeals from a decision of the United States Court of Federal Claims ("Claims Court") awarding attorneys’ fees and costs to Hitkansut LLC and Acceledyne Technologies, Ltd., LLC (collectively, "Hitkansut") under 28 U.S.C. § 1498(a). Section 1498(a) provides for the award of attorneys’ fees when certain conditions are met, unless "the court finds that the position of the United States was substantially justified." We agree with the United States that "the position of the United States" as used in this statutory provision refers to positions taken by the United States during litigation and does not encompass pre-litigation conduct by government actors. The Claims Court erred to the extent it interpreted "the position of the United States" to include pre-litigation conduct. However, because the examples of conduct cited by the Claims Court demonstrate that the position of the United States was not substantially justified even under this narrower definition, we affirm the award of fees.

I

Hitkansut owns United States Patent No. 7,175,722 ("the ’722 patent"), entitled "Methods and Apparatus for Stress Relief Using Multiple Energy Sources." While the application that later issued as the ’722 patent was pending, Hitkansut entered into a non-disclosure agreement with Oak Ridge National Laboratory ("ORNL") and provided ORNL with a copy of the then-unpublished patent application. As the Claims Court found, ORNL staff "prepared various research reports, received funding, authored multiple publications, and received awards" for research "which was based upon unauthorized use of the ’722 patent." Hitkansut LLC v. United States , 142 Fed. Cl. 341, 346 (2019) (" Fees Decision ").

Following the issuance of the ’722 patent, Hitkansut brought suit alleging infringement by the United States (acting through ORNL) pursuant to 28 U.S.C. § 1498. Id. The Claims Court determined that certain claims of the ’722 patent were invalid but that claims 1, 6, and 11 of the ’722 patent were valid and infringed. Hitkansut LLC v. United States , 130 Fed. Cl. 353, 367, 395 (2017) (" Merits Decision "). Although Hitkansut originally sought a royalty between $4.5 million and $5.6 million, based on a percentage of the relevant research funding obtained by ORNL, the Claims Court rejected this damages theory and instead awarded $200,000, plus interest, as the hypothetically negotiated cost of an up-front licensing fee for the ’722 patent. Id. at 392–94. Reserving the issue of attorneys’ fees, the Claims Court entered judgment on the merits pursuant to Court of Federal Claims Rule 54(b), which this court affirmed. Hitkansut LLC v. United States , 721 F. App'x 992 (Fed. Cir. 2018).

Following our affirmance of the merits, Hitkansut moved for an award of attorneys’ fees and expenses pursuant to 28 U.S.C. § 1498(a), which the Claims Court granted-in-part in the amount of $4,387,889.54. Fees Decision at 368. The United States timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)(3).

II

On appeal, the United States makes three challenges to the award of attorneys’ fees. First, it argues that the Claims Court erred in statutory interpretation by determining that "the position of the United States"—which must be substantially justified under 28 U.S.C. § 1498(a) —includes not only the government’s litigation positions but also its pre-litigation conduct. Second, it argues that, regardless of statutory interpretation, the position of the United States in this case was substantially justified. Third, it argues that because Hitkansut’s damages award was lower than the maximum damages figure it initially sought, the Claims Court erred by not proportionally reducing its attorneys’ fees award. We address each argument in turn.

We review the Claims Court’s statutory interpretation de novo. Quaker State Oil Refining Corp. v. United States , 994 F.2d 824, 827 (Fed. Cir. 1993). We review the Claims Court’s determination of whether the government’s position was substantially justified, as well as its determination of the proper amount of attorneys’ fees, for an abuse of discretion. See Pierce v. Underwood , 487 U.S. 552, 559, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988) ; Biery v. United States. , 818 F.3d 704, 710 (Fed. Cir. 2016).

A

Title 28, Section 1498 of the United States Code provides that when the United States uses a patented invention "without license ... or lawful right," the patent owner may bring suit to recover "his reasonable and entire compensation for such use." 28 U.S.C. § 1498(a). The statute includes a fee-shifting provision, which states that when the patent owner is "an independent inventor, a nonprofit organization, or an entity that ha[s] no more than 500 employees," reasonable and entire compensation shall include "reasonable fees for expert witnesses and attorneys."¹ Id. This fee-shifting provision does not apply, however, "if the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust." Id.

The Claims Court, at Hitkansut’s urging, concluded that "the position of the United States" as used in § 1498(a) includes "both the position taken by the United States in the civil action and the action or failure to act by the agency upon which the civil action is based." Fees Decision at 357 (internal quotation marks omitted). We agree with the United States, however, that this is overbroad. As explained below, the "position of the United States" for the purposes of § 1498(a) refers only to the positions taken by the United States in litigation and not to its prior actions or failures to act.

Although we have never before interpreted this clause of § 1498(a), we have had prior occasion to interpret the phrase "the position of the United States." The Equal Access to Justice Act ("EAJA") similarly provides attorneys’ fees in certain circumstances "unless the court finds that the position of the United States was substantially justified." 28 U.S.C. § 2412(d)(1)(A). Like § 1498(a) today, EAJA originally did not define "the position of the United States." See Broad Ave. Laundry & Tailoring v. United States , 693 F.2d 1387, 1390 (Fed. Cir. 1982).

Tasked with interpreting "the position of the United States" in EAJA, we concluded that "[a] fair and reasonable reading of those words is that the position referred to is that taken by the United States in the civil action in which the attorney’s fees were incurred." Id. (internal quotation marks omitted). In other words, the position of the United States referred only to its litigation positions:

It would strain the normal meaning of language to construe the statutory words to cover the position the United States took in the administrative proceedings that led to the civil action in which the attorney’s fees were incurred. The petitioner here seeks attorney’s fees and expenses only for services rendered in the proceedings before the Court of Claims, and it would be inappropriate to look at the position the United States took in other forums to determine whether to award fees for those services.

Id. The Second, Fourth, and Tenth Circuits reached the same conclusion. See Boudin v. Thomas , 732 F.2d 1107, 1115–16 (2d Cir. 1984) ("[W]e look only to the government’s position in the litigation ... to determine whether its actions were ‘substantially justified.’ "); United States v. 2,116 Boxes of Boned Beef , 726 F.2d 1481, 1487 (10th Cir. 1984) ("[T]he position of the United States, for purposes of this Act, means the arguments relied upon by the government in litigation."); Tyler Bus. Servs., Inc. v. NLRB , 695 F.2d 73, 75–76 (4th Cir. 1982) ("We believe ‘position’ should be read to mean the government’s position as a party in prosecuting or defending the litigation."). In 1985, however, Congress amended EAJA to include a broader express definition of the term:

"position of the United States" means, in addition to the position taken by the United States in the civil action, the action or failure to act by the agency upon which the civil action is based.

28 U.S.C. § 2412(d)(2)(D) ; Pub. L. 99–80, 99 Stat. 183 (1985).

Eleven years after amending EAJA, Congress amended § 1498(a) to include the fee-shifting provision at issue here. Pub. L. 104–308, 110 Stat. 3814 (1996). While Congress elected to use the same "position of the United States" language from EAJA, it did not incorporate the later-added express definition of the term.

Statutory interpretation begins with the ordinary meaning of the language chosen by Congress. Microsoft Corp. v. i4i Ltd. P’ship , 564 U.S. 91, 101, 131 S.Ct. 2238, 180 L.Ed.2d 131 (2011). "[W]here Congress uses a common-law term in a statute, we assume the term comes with a common law meaning, absent anything pointing another way." Id. (internal quotation marks omitted). In evaluating the language of § 1498(a) we conclude today, as we did in Broad Avenue Laundry , that the ordinary meaning of "the position of the United States" refers to the litigation positions taken by the United States in the civil action in which the attorneys’ fees were incurred and not any underlying government action or inaction. See Broad Ave. Laundry , 693 F.2d at 1390.

Hitkansut argues, and the Claims Court concluded, that the existence of a broad express definition of the term in EAJA provides a reason to ignore the ordinary...