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IN THE UNITED STATES DISTRICT COURTFOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
OLE K. NILSSEN and )GEO FOUNDATION, LTD., )
)Plaintiffs, )
)v. ) Case No. 3:04cv0080
)UNIVERSAL LIGHTING TECHNOLOGIES, INC., ) Judge Thomas A. Wiseman, Jr.
)Defendant. )
MEMORANDUM AND ORDER
Before the Court are two motions filed by defendant Universal Lighting Technologies, Inc.
(ULT): a Motion for Attorneys Fees (Doc. No. 186) and (2) a Supplemental Motion for Attorneys Fees
(Doc. No. 191).
I. LEGAL STANDARDS
ULT seeks attorneys fees in this action pursuant to 35 U.S.C. 285, which permits courts to
award fees to the prevailing party in a patent action, but only in exceptional cases. The statute states in
full: The court in exceptional cases may award reasonable attorney fees to the prevailing party. Id.
Plaintiffs oppose the motion, contending both that this case lacks the requisite exceptionality and that,
even if it does qualify as an exceptional case, this Court should exercise its discretion to deny the motion.
A trial court is to undertake a two-step inquiry when adjudicating a request for attorney fees under
285. First, the court determines whether there is clear and convincing evidence that the case is
exceptional; if so, the court then considers whether, in the exercise of its discretion, an award of attorney
fees to the prevailing party is warranted. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir.
1998) (en banc); J.P. Stevens Co. v. Lex Tex Ltd., 822 F.2d 1047, 1050 (Fed. Cir. 1987). The trial courts
finding that a case is exceptional is a factual determination reviewed for clear error. The subsequent
determination of whether attorneys fees are warranted lies within the district courts sound discretion.
See, e.g., Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1357 (Fed. Cir. 2008); nCube Corp. v.
Seachange Intl, Inc., 436 F.3d 1317, 1319 (Fed. Cir. 2006); Cybor Corp., 138 F.3d at 1460. Factors that
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may demonstrate that a case is exceptional include willful infringement, bad faith, litigation misconduct,
and unprofessional behavior. Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1674 (Fed. Cir. 1996).
In addition, inequitable conduct may constitute a basis for an award of attorney fees under 35
U.S.C. 285. Osram, 528 F.3d at 138 (quoting A.B. Chance Co. v. RTE Corp., 854 F.2d 1307, 1312
(Fed. Cir. 1988)). As the Federal Circuit noted in its recent Osramholding, however, there is no per se
rule of exceptionality in cases involving inequitable conduct. Osram, 528 F.3d at 138. The court further
recognized that it had on many occasions affirmed a district courts denial of attorney fees in cases
involving inequitable conduct, and had likewise affirmed the courts decisions to award attorney fees on
the basis of inequitable conduct. Id. (collecting cases and stating, In short, our case law provides wide
discretion to district courts; courts may award attorney fees in inequitable conduct cases, but are not
required to do so.).
The Federal Circuit has also made it clear that a prior finding of inequitable conduct by a different
court in an action involving the same plaintiff and the same patents will have a preclusive effect in
subsequent proceedings. In Upjohn Co. v. Mova Pharm. Corp., 31 F. Supp. 2d 211 (D.P.R. 1998), a jury
determined that the defendant had proved by clear and convincing evidence that the subject patent was
invalid as obvious under 35 U.S.C. 103, and unenforceable due to the plaintiffs inequitable conduct.
Upjohn subsequently filed a motion for judgment as a matter of law (JMOL) or, alternatively, for a new
trial. While that motion was pending, a different district court in a different case involving the same
plaintiff granted summary judgment for the defendant, based in part upon its collateral application of the
Mova judgments of invalidity and unenforceability. The Federal Circuit affirmed. Pharmacia & Upjohn
Co. v. Mylan Pharm., Inc., 170 F.3d 1373 (Fed. Cir. 1999) (Mylan I). After the Movadistrict court denied
the JMOL motion, the Mylan district court denied the defendants motion for attorney fees, expressly
finding that the plaintiffs litigation tactics were in good faith and raised genuine issues of patent
infringement. It therefore found that the case was not an exceptional one meriting a fee award.
Pharmacia & Upjohn Co. v. Mylan Pharm., Inc., No. 1:97-CV-41 (N.D. W. Va. Aug. 17, 1998). The
defendant appealed the district courts denial of its motion for attorney fees, arguing that the district court
had erred in failing to consider the outcome of Mova.
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The Federal Circuit agreed, and reversed and remanded for reconsideration of whether the case
was exceptional in light of the Movacourts finding that the plaintiff had engaged in inequitable conduct.
Pharmacia & Upjohn Co. v. Mylan Pharmaceuticals, Inc., 182 F.3d 1356 (Fed. Cir. 1999) (Mylan II). The
court specifically noted that its precedent in patent cases establishes that inequitable conduct is a
substantive patent issue that must be taken into consideration in determinations under 35 U.S.C. 285.
Mylan II, 182 F.3d at 1359. It continued:
Here, a judgment of inequitable conduct has already been made by a court of competent jurisdiction. As a matter of law, we hold that such a judgment must be considered inascertaining whether a case is exceptional under 35 U.S.C. 285. Accordingly, wevacate and remand for consideration of whether this is an exceptional case in view of the
judgment in Mova.
Id. at 1360 (footnote omitted). Notably, the appellate court did not hold that the district court mustreach
a finding of exceptionality based upon the prior judgment that the plaintiff had engaged in inequitable
conduct; rather, the district court was simply required to take that factor into consideration in determining
whether the case qualified as exceptional.
II. FACTUAL AND PROCEDURAL BACKGROUND
In a prior unrelated opinion issued in a different district in a case brought by the same plaintiff,
Ole K. Nilssen, and based in part upon the same patents at issue here, the court found that Nilssen had
engaged in inequitable conduct and, as a result that the patents in suit were unenforceable. Nilssen v.
Osram Sylvania, Inc., 440 F. Supp. 2d 884 (N.D. Ill. 2006), affd, 504 F.3d 1223 (Fed. Cir. 2007) (Osram
I). Based on Mylan II, it is clear that the district courts holding in that case has preclusive effect here,
such that this Court must acknowledge that Nilssen engaged in inequitable conduct in prosecuting the
patents that were also at issue in this case. In a subsequent opinion, the Northern District of Illinois also
granted the defendants motion for attorneys fees on the grounds that the case before it was exceptional
for purposes of 35 U.S.C. 285. Nilssen v. Osram Sylvania, Inc., No. 01 C 3585, 2007 WL 257711 (N.D.
Ill. Jan. 23, 2007), affd, 528 F.3d 1352 (Fed. Cir. 2008) (Osram II). In granting the motion for fees, the
district court noted that Nilssen had been found to have engaged in five types of inequitable conduct,
including (1) misclaiming small entity status and improperly paying small entity fees; (2) failing to disclose
ongoing, related litigation; (3) misclaiming priority to earlier filing dates; (4) withholding material prior art;
and (5) submitting misleading affidavits to the PTO during patent prosecutions. Id. at *8. In addition, the
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court had found ten of the eleven patents in suit to be unenforceable on multiple grounds of inequitable
conduct, which repeated over a long period of time. Id. As the Federal Circuit observed after Nilssen
appealed the award of fees, the lower courts exceptionality finding was supported not only by the
finding of inequitable conduct but also by the frivolous nature of the lawsuit and Nilssens litigation
misconduct. Osram II, 528 F.3d at 1356. The court found that the lawsuit was frivolous because Nilssen
knew or should have known that the suit was baseless. In support of the finding of litigation misconduct,
the court noted appellants refusal to allow [a foreign witnesss] deposition in the United States, the late
withdrawal of fifteen of the patents in suit, the belatedly-produced documents, and Nilssens last minute
waiver of the attorney-client privilege. Id. (citation omitted).
In the present case, defendant ULT argues that exceptional circumstances likewise exist given
Nilssens inequitable conduct as previously found by the Illinois court. In addition, ULT argues that this
lawsuit was likewise frivolous insofar as Plaintiffs in this case, including Nilssen, knew or should have
known that their claims were meritless, and that Nilssen again engaged in litigation misconduct. More
specifically, ULT contends that Plaintiffs engaged in bad faith litigation tactics designed to increase the
costs of litigation by asserting infringement of Claim 21 of the 067 Patent even though that Claim had
been held invalid in the case of Nilssen v. Motorola, Inc., 2002 WL 206007, at *11 (N.D. Ill. 2002), before
the Complaint in this action was filed. ULT also complains that Plaintiffs failed to disclaim the invalid
claim until after expert discovery was conducted, the PTO expressly recognized that Claim 21 of the 067
Patent was invalid in light of the Motoroladecision, and ULT gave notice of intent to file a Rule 11 motion
if the claim was not withdrawn. ULT also asserts that Plaintiffs engaged in ambush tactics, in that they
initially claimed infringement of twenty-nine patents; narrowed that to eleven when they filed claim charts
nearly a year into litigation; and then on July 11, 2005, the day opening expert reports were due, informed
ULT that they were only pursuing infringement of four of the eleven Asserted Patents. ULT claims this
belated notice of the reduction in scope of the Plaintiffs claims was in bad faith given that Plaintiffs
apparently knew as early as May 2005, two months before the expert report deadline, that it did not
intend to pursue those seven patents. ULT asserts that Plaintiffs failure to give earlier notice of the
narrowing in scope resulted in the defendants wasting a substantial amount of time and effort in
preparing expert reports addressing the seven other Asserted Patents.
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In response, Plaintiffs argue that this Court is not bound by the Osramcourts decision to award
fees, that the equities and circumstances in this case are far different from those in Osramthat prompted
the court to award fees, that no litigation misconduct occurred in this case; the volume of inequitable
conduct is smaller; and Plaintiffs have already been adequately punished for Nilssens inequitable
behavior by the fee award in Osram. In support of their assertion that the fundamental circumstances of
this case are quite different from those presented in Osram, Plaintiffs have filed the Declarations of two of
their attorneys, Raymond N. Nimrod and John E. Titus, attesting to the reasonableness of their belief that
ULT had infringed all twenty-nine patents originally asserted in the complaint. Specifically, counsel point
out that they brought suit against ULT on the heels of a February 8, 2002 summary judgment decision
that ULTs predecessor company, Magnetek, infringed two of the patents named in this case (the 409
and 795 Patents). The same decision denied Magneteks motion for summary judgment of invalidity as
to the 690 Patent. That decision, argue Plaintiffs attorneys here, confirmed the reasonableness of the
Plaintiffs belief in the validity of those patents as well as three others originally asserted here. Nilssen v.
Magnetekwas ultimately settled by arbitration over one patent, the 409 Patent, and Nilssen was awarded
over $23 million in damages by the arbitrator. The district court confirmed the award, and the parties
ultimately settled for over $18 million. After that case was finally resolved, ULT acquired most of the
assets of Magneteks lighting business and continued to sell the same products that had already been
held to infringe the 409 Patent. According to the attorneys declarations, they, on behalf of the Plaintiffs,
undertook thorough pre-suit investigation of ULTs potentially infringing products and concluded that at
least one product sold by ULT infringed each of the twenty-nine patents identified in the complaint filed in
this action in February 2003.
Plaintiffs attorneys have also attested to the reasons for the subsequent narrowing of the case
and the timing thereof. According to their declarations, the decision to narrow the claims set forth in the
claim chart from twenty-nine to eleven was essentially a business decision, made before ULT had
invested much time or effort into defending against any of the claims but after and as result of a review of
the schematics, analysis of samples and the sales information provided by Universal in discovery. (Titus
Decl. (Doc. No. 210) at 29.) Titus also points out that the parties had spent most of their energy by that
time in disputing whether the case should be litigated in the Middle District of Tennessee or the Northern
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District of Illinois. (Titus Decl. 30.) Plaintiffs counsel defends the belated narrowing of claims from
eleven to four on the date on which opening expert reports were due to the health issues experienced by
Nilssens long-standing technical expert, John MacCrisken, coupled with the inability of the substitute
technical expert to provide infringement opinions on all eleven patents within the allotted time. Counsel
maintains that [i]t was not clear until the weekend before expert reports were filed that we would not file a
report from an expert on any of the remaining seven patents. (Nimrod Decl. (Doc. No. 209) at 13: see
alsoTitus Decl. 3447 (providing detailed account of the time line of events leading up to the decision
that MacCrisken would not be able to testify and that Kesan, the other expert, would not have time to get
up to speed on the other seven patents).)
Further, according to both Titus and Nimrod, the continued assertion of the validity of Claim 21 of
the 067 Patent was due to counsels own honest oversight. (Nimrod Decl. 17; Titus Decl. 48.) Titus
attests specifically that he had simply forgotten that Claim 21 had been ruled invalid, as the Motorola
courts analysis was focused on Claim 32. In any event, according to Titus, he had no reason
intentionally to assert an invalid claim given that other patent claims (namely, claims 6 and 34 of the 067
patent) covered the same products as claim 21 and there would have been no hope of prevailing on claim
21 given the prior invalidity finding. (Titus Decl. 53.) Titus also points out that it appears that ULTs
counsel had also forgotten about the invalidity ruling as to claim 21, since ULT raised no objection
regarding claim 21 until nearly a year after Plaintiffs filed their April 2004 infringement claim chart.
Finally, Plaintiffs point out that this matter was stayed effective January 5, 2006, pursuant to
ULTs unopposed motion, pending reexamination proceedings concerning three of the remaining patents
in suit by the USPTO, as well as the bench trial scheduled in Osram v. Nilssen. Essentially nothing else
substantive happened in this matter once it was stayed. The Osramcourt issued its findings of fact and
conclusions of law in June 2006. ULT sought to file a supplemental motion for summary judgment on
collateral estoppel grounds in September 2006, but the stay continued in effect pending the Federal
Circuits review of the Illinois District Courts ruling. The Federal Circuit affirmed the prior decision and
issued its mandate on January 23, 2008. Shortly thereafter, Plaintiffs counsel contacted ULTs counsel
regarding the possibility of a stipulated dismissal. ULT declined, instead choosing to file its supplemental
motion for summary judgment in order, apparently, to preserve its right to claim attorneys fees. Within a
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few weeks of the filing of the supplemental motion for summary judgment, plaintiffs counsel
communicated a willingness to agree to a consent judgment. The proposed consent judgment was
presented to and ultimately entered by this Court in April 2008.
III. FINDINGS AND CONCLUSIONS
ULTs argument to the contrary notwithstanding, while this Court is bound by the Osramcourts
finding of inequitable conduct, it is not bound by the finding of exceptionality. This case is procedurally
quite different from Osram: It did not go to trial; this Court made no substantive legal or factual
conclusions; and the parties drafted their own stipulation of dismissal. From the Courts perspective, this
case distinguished itself only by the amount of time during which it was stayed. ULT has not established
that this case was frivolous at its inception nor that Plaintiffs engaged in bad-faith litigation tactics.
Instead, Plaintiffs never opposed the stays sought by ULT and moved promptly to dispose of this case
once it was clear that the holding in Osramwas binding here. The declarations of counsel, which this
Court has no reason not to accept, indicate that Plaintiffs had a reasonable basis (or a reasonable
excuse) for their various litigation decisions and did not act in bad faith. In sum, notwithstanding the
Osramcourts finding, by which this Court is bound, that Nilssen engaged in inequitable conduct, the
Court finds that ULT has not presented clear and convincing evidence of exceptionality. On that basis, an
award of attorneys fees is not warranted by the statute. Moreover, even if the matter could be
characterized as exceptional, the Court would nonetheless exercise its discretion to deny the motion for
attorneys fees, based largely, again, upon this cases unusual procedural posture and the fact that most
of the substantive work was performed in the context of the Osram proceedings and the USPTOs
reexamination.
Accordingly, defendant ULTs Motion for Attorneys Fees (Doc. No. 186) and Amended Motion for
Attorneys Fees (Doc. No. 191) are hereby DENIED.
It is so ORDERED.
Thomas A. Wiseman, Jr.Senior U.S. District Judge
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