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Cornell Loses Bid for $12 Million in Attorney Fees in Lengthy Patent Battle
New York Law Journal
May 22, 2009
Although its attorneys engaged in some "marginally" vexatious litigation tactics, the Hewlett-Packard Co. should not be forced to pay some $12 million in attorney fees incurred by Cornell University during a protracted patent infringement battle over computer technology, a federal judge has ruled.
"Litigation by its nature is adversarial," Judge Randall R. Rader held in Cornell University v. Hewlett-Packard Company, 01-cv-01974. "Clients seek, and, in fact, deserve zealous advocacy. Taking all of the allegations of litigation misconduct as true for purposes of this motion, this court finds that actions of Hewlett-Packard's counsel did not stretch beyond the bounds of civility."
Rader did grant Cornell about $17 million in prejudgment interest on a damage award and $943,675 in costs attributable to the HP litigation, which began in December 2001 when the university and its research foundation claimed that technology used in early generations of HP servers and work stations was licensed to Cornell under a 1989 patent.
The judge had earlier affirmed a 2008 verdict by a Northern District of New York jury sitting in Syracuse that HP infringed on the Cornell patent, though he reduced the jury's damage award to $53 million from $184 million.
In seeking attorney fees, Cornell argued that HP's attorneys engaged in a series of tactics designed to get the university to abandon its infringement claim or, in the alternative, to drag out the litigation past February 2006, when the patent on the disputed technology expired. The technology, which allowed computers to process information faster, was invented by retired Cornell researcher Hwa C. Torng.
A lead attorney for Cornell, Edward G. Poplawski of Sidley Austin in Los Angeles, argued that once HP failed to get the university to abandon or settle the suit by threatening to withdraw research money from Cornell, the company then contested almost every discovery request made by the university.
That led to the filing of "countless and unnecessary" motions for discovery by Cornell and forced Northern District Magistrate Judge David Peebles to repeatedly direct HP to turn over documents requested by the university, according to Cornell. The university also complained about the delivery by HP of some 9 million pages of documents just before the close of discovery.
"HP's pattern of misconduct unnecessarily multiplied the costs of litigation and delayed trial in this matter for years," Cornell argued in a motion for attorney fees before Judge Rader. "When viewed in the totality of the circumstances, HP's litigation tactics were vexatious and amount to legal misconduct."
Judge Rader wrote that he has discretion to award legal fees in "exceptional" cases under 35 U.S.C. §285, and that "Hewlett-Packard did employ some marginally vexatious litigation tactics."
But the judge said he had to weigh other factors when deciding if the payment of attorney fees was warranted. He held that the jury did not find that HP's patent infringement was willful, that HP did not engage in inequitable conduct before the U.S. Patent and Trademark Office and that the company did not litigate in bad faith.
He cited Magistrate Judge Peebles' observation that discovery was "contentious and hard fought" by both sides and noted that at the close of discovery the magistrate judge denied Cornell's request for sanctions against HP.
"This court holds all counsel involved in this litigation in high regard with respect to their advocacy and timely assistance to the court," Judge Rader wrote. "Moreover, the parties did not violate the court's orders during trial. Weighing the totality of the circumstances, this case does not rise to the level of 'exceptional' to warrant the award of attorneys' fees."
On the question of prejudgment interest due Cornell, Judge Rader said the interest should be calculated based on the average annual Treasury bill maturity rate from August 1996, when the jury determined infringing sales began, to when the judgment against HP was entered on March 31, 2009.
Poplawski said interest would total between $17 million and $18 million under that calculation, which was urged by HP.
Judge Rader did not accept an alternative proposed by Cornell, to base the interest payment on the prime rate, compounded annually, from the date of infringement. That would have totaled just under $36 million.
Both Cornell and HP have filed notices of intent to appeal Rader's latest ruling. Poplawski said it was uncertain precisely what aspects of the judge's determination Cornell will appeal.
Poplawski, who represents clients in a number of what he called "high-stakes" patent cases, said the university continues to believe that HP's payment of attorney's fees is appropriate.
"It is not unusual for patent cases to be very hard-fought," he said in an interview. "I think what typified this case every step of the way was that everything Cornell sought to do, from discovery to procedural issues, was hotly contested by HP. Even after they lost, they would move for reconsideration. There were a number of instances where we thought they exceeded the bounds of propriety."
Cornell counsel James J. Mingle was among the staff attorneys at the Ithaca college who also represented Cornell.
John Allcock of DLA Piper in San Diego was the lead trial counsel for HP, which was also represented in the litigation by Harter, Secrest & Emery of Rochester. N.Y., and Fish & Richardson's office in Austin, Texas.
Allcock did not return calls seeking comment.
HP is also appealing Rader's ruling affirming the jury's finding that it infringed on the Cornell patent.
All appeals in the case now go to the U.S. Court of Appeals for the Federal Circuit, which hears appeals of federal patent infringement cases.
Rader, a judge on the Federal Circuit court, was sitting by designation in the Northern District when he presided over the 2008 trial in the Cornell-HP case and decided related appeals.
