Leviton Mfg. Co., Inc. v. Shanghai Meihao Elec.

• Citation: 613 F.Supp.2d 670
• Decision Date: 12 May 2009
• Docket Number: Civil No. AMD 05-889.
• Parties: LEVITON MANUFACTURING COMPANY, INC., Plaintiff v. SHANGHAI MEIHAO ELECTRIC, INC., et al., Defendants.
• Court: U.S. District Court — District of Maryland

613 F.Supp.2d 670

LEVITON MANUFACTURING COMPANY, INC., Plaintiff v. SHANGHAI MEIHAO ELECTRIC, INC., et al., Defendants.

Civil No. AMD 05-889.

United States District Court, D. Maryland.

May 12, 2009.

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Steven Edward Tiller, Gregory Milton Stone, Whiteford Taylor and Preston LLP, Baltimore, MD, James T. Hosmer, Joseph S. Presta, Joseph A. Rhoa Larry S. Nixon, Updeep S. Gill, Nixon and Vanderhye PC, Arlington, VA, Gary M. Hnath, Susan Baker Manning, Bingham McCutchen LLP, Frederick S. Frei, Andrews Kurth LLP, Washington, DC, for Plaintiff.

Maurice U. Cahn, William E. Bradley, Cahn and Samuels LLP, Washington, DC, for Defendants.

MEMORANDUM AND ORDER ADOPTING REPORT AND RECOMMENDATION OF MAGISTRATE JUDGE SUR ATTORNEYS' FEES AND COSTS

ANDRE M. DAVIS, District Judge.

In this consolidated patent infringement action, now pending are the objections of plaintiff Leviton Manufacturing Co., Inc. ("Leviton"), to the Report and Recommendation of Magistrate Judge Susan K. Gauvey, who has recommended that defendant Shanghai Meihao Electric, Inc. ("Meihao"), be awarded attorneys' fees and costs. For the reasons set forth by Judge Gauvey and stated herein, the court overrules Leviton's objections and awards fees and costs.

I.

On March 31, 2005, Leviton filed suit against Universal Security Instruments, Inc., and USI Electric, Inc., for infringement of U.S. Patent No. 6,864,766 ('766 Patent), claiming a ground fault circuit interrupter ("GFCI"). On May 5, 2005, Meihao, which manufactured and supplied the products alleged by Leviton to be infringing, sought a declaratory judgment that the '766 Patent is (1) not infringed; (2) invalid; and/or (3) unenforceable. In due course, the two cases were consolidated.

Discovery on the issue of patent enforceability, i.e., inequitable conduct, proved contentious and protracted; consequently, by order entered on May 24, 2007, the court referred the case to Magistrate Judge Gauvey pursuant to 28 U.S.C. § 636(b)(1)(A) for the management of discovery. Judge Gauvey promptly turned her attention to that task, issuing several orders and holding a hearing on various motions to compel and/or for protective order.

Somewhat abruptly, on November 28, 2007, just as Judge Gauvey was prepared to issue a comprehensive opinion rejecting Leviton's motion for a protective order and requiring Leviton to produce documentary and testimonial evidence regarding inequitable conduct, Leviton sought leave to dismiss voluntarily all its claims. Meihao responded that, provided its right to seek an award of fees and costs was preserved, it (and the other defendants) would have no objection to the dismissal of the claims for infringement. Thereafter, the court dismissed all claims while preserving Meihao's right to seek fees and costs. Meihao timely filed its motion. As Judge Gauvey had become intimately familiar with the case through her extensive work on discovery issues, I referred the motion for fees and costs to her on February 25, 2008, for a report and recommendation.

Judge Gauvey reviewed the parties' voluminous briefing on the motion for fees and costs and held a hearing on September 3, 2008. In an extraordinarily thorough and meticulous 128-page Report and Recommendation (which I adopt and attach hereto) issued pursuant to Fed.R.Civ.P. 72(b), she found and concluded that the case presented exceptional circumstances under 35 U.S.C. § 285 (i.e., that Leviton had been shown to have engaged in (1) inequitable conduct before the United States Patent and Trademark Office ("PTO") and (2) vexatious litigation tactics in this case). Ultimately, Judge Gauvey also found and concluded that an award of fees and costs was necessary to avoid gross injustice. Thus, she recommended an award to Meihao in the amount of $84,080.20 in costs and $726,579.15 in attorneys' fees. (She has also recommended that Meihao be awarded its reasonable costs and fees incurred in litigating the motion for fees and costs). Leviton timely filed its objections and the issues have been fully briefed by the parties. No hearing is necessary.

II.

The role of the district judge in these circumstances is clear and well-settled. See Rule 72(b)(3) ("The district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to. The district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions."); see Segal v. L.C. Hohne Contractors, Inc., 303 F.Supp.2d 790, 792-95 (S.D.W.Va.2004). After a searching, de novo review of Judge Gauvey's Report and Recommendation, in light of Leviton's objections, and the exhaustive briefing by the parties, the court is satisfied that Judge Gauvey committed no error of fact or law. To the contrary, her findings and conclusions reflect that she correctly identified controlling legal principles, she cogently identified and marshaled the undisputed facts bearing on the issues presented, and she faithfully applied those principles to those undisputed facts. I adopt her findings and conclusions as the opinion of this court.

III.

A.

Under 35 U.S.C. § 285 and Fed. R.Civ.P. 54(d), attorneys' fees and costs may be awarded to a prevailing party. Inland Steel Co. v. LTV Steel Co., 364 F.3d 1318, 1319-20 (Fed.Cir.2004). Here, Meihao is the prevailing party because Leviton voluntarily dismissed all of its claims with prejudice. See Power Mosfet Technologies, LLC v. Siemens AG, 378 F.3d 1396, 1415 (Fed.Cir.2004) ("The dismissal of a claim with prejudice . . . is a judgment on the merits under the law of the Federal Circuit."). As the prevailing party, Meihao is eligible for an award of attorneys' fees upon proving the existence of an "exceptional case." As relevant here, an exceptional case is one in which one party has (1) committed inequitable conduct before the PTO or (2) engaged in litigation misconduct (through vexatious litigation tactics) in the district court. See Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed.Cir.2002). Judge Gauvey properly focused on, and found that fees and costs were appropriately to be awarded, under each of these rubrics.

B.

Leviton's objections to the Report and Recommendation comprise in the main a jumble of miscitations to legal standards; blatant ignoring of other, controlling standards; reliance on arguments that are waived (because they were not presented to the Magistrate Judge) or utterly irrelevant to the issues presented; and a veritable sea of red herrings. Most striking of all, it makes the curious assertion, which it repeatedly and vigorously advances, that "no evidence" supported the subsidiary factual findings arrived at by Judge Gauvey. None of these plaints, either singly or in the aggregate, provide a basis for rejecting the Report and Recommendation. As a concession to the shortness of life, the court here simply identifies (and rejects) the most plausible and earnestly urged challenges Leviton has mounted.

1.

Leviton objects that Judge Gauvey erred in ruling without a factual basis for her conclusions and that, in any event, in opposing the motion for fees and costs, it demonstrated the existence of genuine disputes of fact, thus precluding the resolution of the request for fees and costs absent a full-blown evidentiary hearing. Indeed, Leviton asserts that Judge Gauvey's adjudication of the motion for fees and costs deprived it of due process. These contentions wholly lack merit.

It is well-established that, under Federal Circuit law, a court may decide a claim for attorneys' fees under § 285 after a dismissal with prejudice. Highway Equip. Co., Inc. v. FECO, Ltd., 469 F.3d 1027, 1035 (Fed.Cir.2006); see also Tenax Corp. v. Tensar Corp., 22 U.S.P.Q.2d 1264, 1267 (D.Md.1991) (collecting cases). Judge Gauvey's determination of inequitable conduct (one way of establishing an exceptional case under § 285) was procedurally and substantively proper. In particular, as is clear in her detailed, lengthy analysis of the issues, she relied on undisputed facts and sound interpretations of controlling legal principles. Digital Control, Inc. v. Charles Machine Works, 437 F.3d 1309, 1313 (Fed.Cir.2006) (courts may make a ruling on inequitable conduct as a matter of law). To the extent Leviton complains of the absence of an adversary evidentiary hearing, it suffices to observe that a litigant cannot be deprived of that which it never sought. Wilson v. Bd. of Trustees, 333 F.Supp.2d 392, 396 (D.Md.2004) ("It is difficult to see how one can be unconstitutionally deprived of that which one never desired or sought in the first instance.").

2.

As previously stated, an exceptional case is one, inter alia, in which one party has committed (1) inequitable conduct before the PTO or (2) litigation misconduct (e.g., vexatious litigation tactics). See Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed.Cir.2002). The gravamen of Leviton's objections is that inequitable conduct before the PTO has not been proven. Leviton is wrong.

Inequitable conduct results from an applicant's failure to comply with his duty of candor in all dealings with the PTO. Cf. 37 C.F.R. § 1.56; Molins P.L.C. v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir.1995). Actions of a patent applicant's attorney are chargeable to the applicant. See, e.g., id. An issued patent may be deemed unenforceable due to inequitable conduct where it is shown by clear and convincing evidence that (1) the patentee (or his agent/attorney) withheld or misrepresented material information and (2) did so with the intent to deceive the PTO examiner into granting the patent. See, e.g., Impax Labs., Inc. v. Aventis Pharmaceuticals, Inc., 468 F.3d 1366, 1374 (Fed. Cir.2006). Under one of several equally...