S.D. Cal. Finds Litigation Funding Agreement And Materials Are Work Product

On October 20, 2020, the Southern District of California issued an order in Impact Engine, Inc. v. Google LLC (available here). In the order, Judge Bencivengo found that a litigation-funding agreement and related materials were protected from discovery under the work-product privilege: “It is clear these documents were created because of the litigation they will fund. . . . In this case, disclosure of the litigation funding agreement, including the preparatory materials, to the litigation funder, a party to the agreements, did not substantially increase the opportunity for Google, Impact Engine’s litigation adversary, to obtain the agreements. The documents reviewed by the Court included confidentiality provisions regarding the agreements, the terms and the information related to them.”

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Attempting to Litigate Invalidated Patent Leads to “Exceptional” Case Attorney Fees

On October 13, 2020, the District of Delaware issued a memorandum opinion in Rothschild Digital Confirmation LLC v. CompanyCam, Inc. (available here). The Court ordered the Rothschild entity to pay the patent-infringement defendant’s attorney’s fees after it found Rothschild’s loss to be “exceptional” under 35 U.S.C. § 285:

Here, as noted above, Plaintiff’s case with respect to the § 101 issues was relatively weak. . . . [I]n addition, there is a pattern of troubling litigation conduct. Plaintiff has asserted the ’872 Patent (and apparently others) numerous times against a broad swathe of defendants. Almost all of those cases failed to advance beyond the pleadings. Moreover, here, after hearing the Court’s ruling as to the ’872 Patent, Plaintiff unilaterally dismissed its case against Defendant before the Court’s order was entered and then prolonged litigation against defendants in other cases before giving up when called to face the Court. Thus, in light of the totality of the circumstances, the Court finds this case to be exceptional.

There is a lesson here: if your patent is invalidated as to one defendant under Section 101, do not tell the Court that your other cases alleging infringement of the same patent “should proceed notwithstanding the Court’s ruling.”

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Are All RPX And Unified Patents Members Real Parties In Interest For IPRs?

On October 2, 2020, the PTAB issued a key decision in RPX Corporation v. Applications in Internet Time, LLC (available here) finding that Salesforce was a real party in interest to an RPX inter partes review (and, as such, declining to institute RPX’s IPR because RPX filed it after Salesforce’s 1-year bar date). It is a fact specific decision (with the gist being that RPX was acting on behalf of its member Salesforce in filing the IPR), but patent owners will use the decision to argue that any IPR filed by RPX or Unified Patents should not be instituted unless all of their members are listed as real parties in interest (or, at a minimum, any member presently in litigation concerning the patent-at-issue is not listed as a real party in interest). The decision may also spell trouble for any IPR filed by RPX or Unified Patents 1 year after a complaint asserting the patent-at-issue has been served on any of their members. It will be interesting to see how, if at all, RPX and Unified Patents change their business models in view of the decision and how their members will react to the decision. All things considered, a favorable decision for patent owners faced with potential IPRs from RPX and Unified Patents, as it provides a potential avenue to have the IPR denied. 

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D. Del. Rejects Attempt To Avoid Litigation-Funding Questions On Relevance Grounds

On October 1, 2020, the District of Delaware’s Magistrate Judge Burke issued an oral order in Red Hat, Inc. v. Sequoia Technology, LLC (available here). Magistrate Judge Burke held that it is improper to instruct a witness not to answer questions regarding litigation funding based on a relevance objection—“it is not proper to instruct a witness not to answer deposition questions on relevance grounds[.]” The Court allowed a new deposition where Defendant “may re-ask such questions and have them answered.”

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E.D. Pa. Finds Litigation Funding Materials Discoverable and Not Privileged

On September 16, 2020, the Eastern District of Pennsylvania issued a decision in Midwest Athletics & Sports Alliance LLC v. Ricoh USA, Inc. (available here). The decision finds litigation-funding materials discoverable, and rejected a common-interest privilege argument. It further finds that disclosure of privileged materials to a funder waives privilege. A work-product argument was rejected because the “documents [at issue] [were] transactional” even if the “documents have some indirect connection to litigation because [plaintiff] was formed in order to monetize patents through litigation.” The court held that valuation documents shared with potential funders are (i) relevant to damages and (ii) not privileged (because they were shared). Bottom line: the law concerning discovery of litigation funding materials/communications remains in flux.

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Texas District Courts Must Impose COVID Safety Protocols At In-Person Depositions

On September 15, 2020, a Texas appellate court issued its opinion in In re Landstar Ranger, Inc. (available here). The Sixth Appellate District mandamused the district court and held that, if a district court will require an in-person deposition, it must impose COVID safety protocols that participants must follow. “[W]e find that the Trial Court failed to define sufficient safety procedures necessary for the parties to conduct the in-person depositions . . . . Other than mentioning that the individuals present at live depositions should wear masks when they were not speaking, the Trial Court failed to adopt safety procedures for those depositions, such as social distancing, maximum group size, and other restrictions and precautions necessary to comply with the Supreme Court’s emergency orders.”

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Attorney Fee Rates Up to $1,210/Hour Found Reasonable in Patent Case Litigated in Northern District of Texas

On June 12, 2020, Magistrate Judge Rutherford issued an opinion in the Industrial Print Technologies cases (available here) addressing a request for attorney’s fees. The District Court had previously determined that Defendants Cenveo and O’Neil Data Systems were entitled to recover attorney’s fees from Plaintiff Industrial Print Technologies under 35 U.S.C. § 285 for a certain portion of the case. Defendants sought $404,016 in fees for that time period. Defendants were represented by Weil, Gotshal, & Manges and Fish & Richardson.

In terms of rates charged by the firms:

The legal team at Weil comprised one senior partner, two senior associates, one junior associate, and four paralegals who generally bill at hourly rates of $1,165.00-$1,210.00 for senior partners, $600.00-$725.00 for junior associates, and $225.00-$375.00 for paralegals based on experience level. The Fish team included two principals and one of counsel attorney who generally bill their time at hourly rates ranging from $885.00-$990.00 for principals to $525.00-$645.00 for non-principals.

But both firms negotiated “confidential discounted rates” that Defendants paid. Judge Rutherford found that both the “standard” rates and the “discounted rates” were reasonable with respect to attorneys. But the Weil paralegal rates were adjusted downward to $225/hour. Ultimately, Judge Rutherford recommended that the Court enter final judgment awarding a total of $402,867.

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IPR Fees Are Not Available Under Section 285 Of The Patent Act

So holds the Federal Circuit in its June 4, 2020 Amneal v. Almirall decision (available here). In the case, the Federal Circuit denied Almirall’s request for fees incurred for work on an IPR filed against an Almirall patent by Amneal. The Federal Circuit found that Section 285 of the Patent Act does not authorize an award of fees for work done before the PTAB on appeal from an IPR. “[T]he plain meaning of section 285’s reference to ‘[t]he court’ speaks only to awarding fees that were incurred during, in close relation to, or as a direct result of, judicial proceedings.”

The Federal Circuit appeared to leave the door open to an attorney’s fees award where a patent office proceeding was initiated after the filing of a civil action, the proceedings “substituted for the district court litigation on all issues,” and the fees were awarded in the district court proceeding. See PPG Indus., Inc. v. Celanese Polymer Specialties Co., 840 F.2d 1565, 1569 (Fed. Cir. 1988).

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Trademark Owner Need Not Prove Willfulness To Obtain Defendant’s Profits

On April 23, 2020, the Supreme Court issued its decision in Romag Fasteners v. Fossil, Inc. (decision available here). The Court found that a plaintiff can obtain the defendant’s profits even without showing that defendant willfully infringed the plaintiff’s trademark. Despite this, the Supreme Court noted that a defendant’s state of mind “may have a bearing on what relief a plaintiff should receive.”

In Romig, the jury found that Fossil had acted “in callous disregard” of Romig’s rights, but refused to find that Fossil had acted “willfully.” Controlling Second Circuit authority required the plaintiff to prove willful trademark infringement to recover the profits defendant had earned due to its trademark infringement. The Supreme Court took the case to resolve a conflict among the circuits and reversed.

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Litigation Funding Materials Ruled Irrelevant And Not Discoverable

Here’s an important decision from Chief Judge Stark from the District of Delaware regarding the non-discoverability of communications with litigation funders. Chief Judge Stark found that defendants were not entitled to obtain discovery regarding (i) potential investments by third parties in lawsuits (e.g., solicitations to potential funders, communications with funders who declined to enter into a litigation-funding deal, communications with a funder who entered into a litigation-funding deal) and (ii) communications relating to “quarterly updates” sent about currently pending lawsuits.

CCRG is pleased to have obtained this important decision for firm client United Access Technologies and it’s a good decision for our friends in the litigation funding industry as well, especially given Chief Judge Stark’s prominence and Delaware’s status as one of leading venues for patent infringement cases in the United States.

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