United States District Court, M.D. Florida, Orlando Division
ANTDON II, UNITED STATES DISTRICT JUDGE.
returned a verdict finding that Environmental Manufacturing
Solutions, LLC (EMS) infringed a patent owned by Peach State
Labs, Inc. (Peach State). Based on that verdict, this Court
entered a permanent injunction preventing EMS from further
infringing the patent. Peach State also alleged that EMS
engaged in litigation misconduct, and the Court, after
holding an evidentiary hearing, agreed. But the Court
withheld imposition of sanctions pending the United States
Patent and Trademark Office's (USPTO) reconsideration of
the validity of Peach State's patent. More than five
years after the jury returned its verdict, the USPTO declared
Peach State's patent invalid. The Court then entered
judgment reflecting the USPTO's determination of
invalidity and vacated Peach State's favorable jury
State now submits Proposed Findings of Fact Regarding
Litigation Misconduct, (Peach State Facts, Doc. 385),
 and moves
the Court to award attorneys' fees and costs it incurred
during the litigation, (Mot. for Fees, Doc. 369). Peach State
further requests the Court to impose a monetary contempt
sanction against EMS for its misconduct, (Id. at
23-25). EMS filed objections to the proposed findings of
fact, (Objs. to Facts, Doc. 392), and a memorandum in
opposition to Peach State's request for attorneys'
fees and costs, (Resp. to Mot. for Fees, Doc. 386). As set
forth below, Peach State's motion is granted in part and
denied in part.
February 27, 2009, EMS sued Peach State in this Court,
 seeking a
declaratory judgment that Patent No. 5, 672, 279 (the
'279 Patent)-owned by Peach State-is invalid and not
infringed by EMS. (Compl., Doc. 1, ¶¶ 18-23). Along
with its answer, Peach State filed a counterclaim alleging
that several of EMS's products infringed the '279
Patent, that EMS contributed to and induced infringement of
the '279 Patent by others, and that EMS's
infringement was willful. (Am. Answer & Countercl., Doc.
29, ¶¶ 20-24).
The '279 Patent
'279 Patent is titled "Method for Using Urea
Hydrochloride" and describes a method of solubilizing
calcium carbonate using urea hydrochloride to remove unwanted
calcium carbonate, which is often produced in industrial
processes but is only slightly soluble in
water. (Ex. A
to Compl., Doc. 1 at 12). Calcium carbonate is a major cause
of boiler scale in heating systems and raises the pH and
solids content of industrial liquids, preventing their
disposal in publicly owned treatment facilities. Peach
State's patent provided a method using urea hydrochloride
for removing that mineral buildup.
State alleged that several of EMS's products (the Accused
Products) contained urea hydrochloride and were used in a
method claimed in the '279 Patent. (Doc. 29 ¶ 21).
Specifically, Peach State contended that EMS, by selling the
Accused Products to its customers with instructions on how to
use it in a manner that infringes the '279 Patent,
induced its customers to infringe the '279 Patent and
contributed to the infringement. (Id. ¶¶
21-22). Peach State sought damages, in part, in the form of a
reasonable royalty based on all sales of the Accused Products
from June 2008 through trial. (Peach State Trial Br., Doc.
138, at 11).
stipulated that its Accused Products contained urea
hydrochloride in the molar concentration set forth in the
'279 Patent, (Trial Tr. Vol. II, Doc. 222, at 113), but
nonetheless contended that the '279 Patent was invalid
and that the Accused Products did not literally infringe the
'279 Patent because the active ingredient in the Accused
Products that converted unwanted calcium carbonate into
water-soluble salt was not urea hydrochloride. With regard to
the latter contention, EMS argued that its products contained
so little urea hydrochloride that urea hydrochloride could
not have been the driver behind the Accused Products'
ability to convert calcium carbonate into water-soluble salt.
(See EMS Mot. Summ. J., Doc. 126, at 21-31; Pretrial
Statement, Doc. 143, at 7 ("As a result of the extremely
low percentage of [urea hydrochloride] in the Accused
Products (between 2% to 10%), EMS denies that Peach State can
prove [urea hydrochloride] is actually solubilizing calcium
carbonate insofar as the EMS Accused Products are
concerned."); jg\ at 8 ("The most the evidence
could possibly show is that the presence of [urea
hydrochloride] in these Accused Product formulas tends to
enhance the reaction rate.")). On the contrary, EMS
contended that the driving force behind its products'
ability to solubilize calcium carbonate was glycolic acid or
phosphoric acid, both of which were present in much greater
amounts in the Accused Products and were exclusively
responsible for its products' effectiveness in converting
unwanted calcium carbonate into water-soluble salt.
(See Doc. 126 at 27 ("Dr. Grubbs provides
scientific evidence that the solubilizing that is observed
[in the Accused Products] occurs primarily because of the
presence of phosphoric acid or glycolic acid." (internal
quotation marks omitted)); Id. ("[I]f urea
hydrochloride were not present in [the Accused Products],
they would still work." (footnote and quotation marks
parties further disagreed about whether the '279 Patent
was valid; whether the inventors were accurately listed on
the '279 Patent; whether EMS induced its customers to use
the product in the manner claimed in the '279 Patent;
whether EMS contributorily infringed the '279 Patent;
whether the infringement was willful; and the amount of
damages. (See Doc. 143 at 20).
discovery, Peach State sought information from EMS about the
Accused Products. In its requests for production, Peach State
defined "Accused Products" to include Ready Mix
Truck Wash and Wax, Basic CR, Barracuda, BlowOut, Eximo,
SynTech pH, and SynTech I. (Peach State Am. Reqs. for Produc,
Doc. 71-2, at 3). Peach State's list of Accused Products
was based on deposition testimony of John MacDonald,
EMS's owner and manager, who testified regarding which
EMS products contained urea hydrochloride. (Doc. 385-11 at
4). Peach State served a broad request for production of
documents concerning those products. (Doc. 71-2 at 7-10). In
those requests, Peach State sought samples and a description
of the chemical formulas composing each of the Accused
Products, (]d at 8, 10). After EMS did not produce the
requested information, Peach State moved to compel
production. (Mot. to Compel, Doc. 71). On October 18, 2010,
Magistrate Judge Baker issued an order on Peach State's
motion to compel, requiring EMS to produce unredacted
formulas and samples of the Accused Products and a summary of
its sales data. (Order on Mot. to Compel, Doc. 107, at 8-9).
produced the formulas along with one-gallon samples of each
Accused Product as required by the order. (See EMS
Sworn Summ., Doc. 385-1 at 2-3). EMS also produced a
"sworn summary" of its sales, (]d. at 4-5). Along
with the documents, EMS submitted a sworn statement of Mr.
MacDonald, who attested that the information was true and
correct and was kept in the ordinary course of EMS's
business. (Id. at 9).
formulary data confirmed EMS's position that urea
hydrochloride was present in the Accused Products in low
amounts-concentrations ranging from 0% to 10%. (Doc. 385-6 at
2-7; Doc. 385 ¶ 17). Moreover, the formulary data confirmed
that many of the products contained 25%-40% of either
glycolic or phosphoric acid. (Id.).
Motions for Summary Judgment
discovery, the parties filed cross motions for summary
judgment on all issues- invalidity, infringement, and
inventorship. (Docs. 125 & 126). With regard to the issue
of infringement, EMS contended in part that Peach State could
not establish that urea hydrochloride-as opposed to glycolic
or phosphoric acid-was the driving force behind the Accused
Products' mechanism of solubilizing calcium carbonate.
(Doc. 126 at 21-31). In support, EMS introduced expert
opinions that "the phosphoric and glycolic acids in the
Accused Products solubilized calcium carbonate-not the urea
hydrochloride." (Order on Mot. Summ. J., Doc. 169, at
31; see Doc. 126 at 26-27).
March 31, 2011, this Court issued an order on the
parties' cross motions for summary judgment, denying
EMS's motion on the issue of infringement in part because
Peach State created a genuine issue of material fact
"regarding whether the urea hydrochloride in the Accused
Products . . . solubilizes calcium carbonate in accordance
with the limitations of the '279
(Doc. 169 at 30). Additionally, the Court granted Peach
State's motion on the issue of invalidity but denied it
with regard to the question whether Peach State incorrectly
listed Richard Sargent as an inventor on the '279 Patent.
Id. at 25-26).
case then proceeded to a jury trial on the issues of induced
infringement, contributory infringement, willfulness, whether
Richard Sargent was properly named as co-inventor of the
'279 Patent, and damages.
six-day trial, on April 18, 2011, the jury returned a verdict
finding that EMS induced and contributed to infringement of
Claim 1 of the '279 Patent, that the infringement was
willful, and that Peach State was entitled to a
"reasonably royalty" in the amount of $.44 per
gallon of infringing product, or $151, 392. (Jury Verdict,
Doc. 204, at 1-3). The jury further found that EMS did not
infringe the other claims of the '279 Patent and that EMS
failed to establish that Richard Sargent was improperly named
as a co-inventor. (Id.).
trial and after the jury verdict, the parties filed various
motions. At a
June 3, 2011 hearing on those matters, Peach State raised the
issue of litigation misconduct on the part of EMS. (June 3,
2011 Mins., Doc. 245; Post-Trial Mot. Hr*g Tr., Doc. 251, at
48-57). The Court ordered a post-trial discovery period
regarding EMS's alleged misconduct. (Doc. 251 at 151-52).
On July 26, 2011, the Court held an evidentiary hearing
during which Peach State presented evidence of EMS's
misconduct. (July 26, 2011 Mins., Doc. 262). Thereafter,
counsel for both parties presented oral argument on the issue
of litigation misconduct. (Misconduct Hr'g Tr., Doc. 274,
revelations of EMS's misconduct were manifold. When EMS
produced the unredacted formulary data in response to
Magistrate Judge Baker's order, it represented that it
produced those formulas as they were "ke[pt] in the
ordinary course of its business." (Doc. 385-1 at 8). But
it is clear that EMS created those formulary documents for
litigation and in response to Magistrate Judge Baker's
order. (Doc. 385 ¶¶ 28-32). And, consistent with
EMS's representation that its products had little or no
urea hydrochloride, the formulary data indeed stated that the
Accused Products contained little or no urea hydrochloride
and a large amount of glycolic or phosphoric acid. (Doc.
385-6 at 2-7). That formulary data matched the chemical
composition of the one-gallon samples EMS produced in
response to Magistrate Judge Baker's order, but,
significantly, they did not match the composition of products
Peach State obtained directly from EMS's customers in the
marketplace. (Doc. 385 ¶¶ 20-25, 51-54; see Doc.
385-2 at 4-5, 7-8, 26-27). The samples Peach State obtained
in the marketplace were shown to contain no glycolic or
phosphoric acid and more urea hydrochloride than was
represented in EMS's formulary sheet. (Doc. 385
¶¶ 20-25; see Doc. 385-2 at 4-5, 7-8,
the post-trial discovery period, Peach State analyzed Mr.
MacDonald's computer and found a document from May 2010
titled "Product Formulas" that contained formulas
for the Accused Products that someone had tried to delete and
that was not produced during trial. (Doc. 385 ¶¶
34, 85; see Doc. 385-9). In that document, none of the
Accused Products were listed as having either glycolic or
phosphoric acid as ingredients, but some were shown to
contain significantly higher levels of urea hydrochloride
than originally disclosed. (Doc. 385 ¶ 34; see Doc.
385-9). Additional documents were recovered from a
"server computer" at EMS that contained formulary
information that was not previously disclosed. (Doc. 385
¶¶ 46-50). The documents found on the server
computer collectively showed that there was no glycolic or
phosphoric acid in any of the Accused Products and that urea
hydrochloride was found in much higher quantities than
represented in the originally produced formulary sheets.
EMS sought and obtained a patent-Patent No. 7, 938, 912
('912 Patent)-that indicated that the Accused Products
contained much higher concentrations of urea hydrochloride
and no glycolic or phosphoric acid. (Doc. 385 ¶¶
13-15; Ex. A to EMS Mot. New Trial, Doc. 229-1, at 2-4). EMS
applied for the patent on April 7, 2009, and the USPTO
awarded it on May 10, 2011-after the jury trial but before
the post-trial motions. (Doc. 229-1 at 2). The patent is for
a method for removing concrete, cement, and masonry from
industrial surfaces, (Id. at 2-3), with a solution
that has a minimum 14.3% to a maximum 50% concentration of
urea hydrochloride. (Williams Decl., Doc. 243-1. ¶¶
5-12). And, according to the '912 Patent, the solution
contains no glycolic or phosphoric acid. (]d. ¶¶
6-8; see Doc. 229-1 at 2-4). Significantly, EMS represented
in its motion for a new trial that the Accused Products
"practiced the patented methods" of EMS's new
'912 Patent. (Doc. 229 at 25 (stating that because the
'912 patent had not yet been awarded at the time of the
trial, "Mr. MacDonald could not testify that the Accused
Products, when used as instructed, merely practiced the
patented methods claimed in the 912 Patent.")). That
representation was essentially an admission that the Accused
Products contained between 14% and 50% urea hydrochloride,
that the Accused Products did not contain glycolic or
phosphoric acid, and that urea hydrochloride was the driving
force behind the Accused Products' ability to solubilize
calcium chloride. (Doc. 243-1 ¶¶ 7-12).
the sworn summary of sales data provided by EMS in response
to Magistrate Judge Baker's order does not match the
production logs and invoices that Peach State obtained from
EMS's customers, which show that EMS sold high volumes of
products that contained concentrated urea hydrochloride that
were never disclosed to Peach State as products containing
urea hydrochloride. (Doc. 385 ¶¶ 66-81).
Specifically, in an earlier deposition, Mr. MacDonald failed
to disclose several products that were highly concentrated
versions of the Accused Products and EMS did not disclose
those products or the sales from those products at any time
during the litigation. (Id. ¶¶2, 11).
conclusion of the hearing on EMS's misconduct, the Court
found that "there is clear and convincing evidence of
litigation misconduct"; that the misconduct was
"egregious"; and that the misconduct,
"together with the totality of the circumstances in this
case, some of which are unique, is sufficient to meet the
standard for enhancement of damages and fees pursuant to 35
[U.S.C. §]... 285." (Doc. 274 at 187-88).
August 12, 2011, the Court entered a permanent injunction
against EMS, enjoining it from infringing, inducing
infringement of, and contributorily infringing any one or
more claims of the '279 Patent until its expiration.
(Order on Mot. for Inj., Doc. 276, at 16-19). The Court found
that "the injunction is properly applied to both the
Accused Products and those products presented during the July
26, 2011 evidentiary hearing in light of the uncontested
evidence demonstrating that the additional products
[containing urea hydrochloride] are no more than colorable
variations of the Accused Products that clearly infringe the
'279 patent." (]d at 14 (footnote omitted)). The
Court reasoned that "it is clear that but for EMS's
litigation misconduct, the additional products [containing
urea hydrochloride] would have been disclosed to Peach State
and included in the underlying jury trial."
(Id.). The injunction required EMS to provide
ongoing testing and certifications of the content of its
products. (Id. at 18). On September 30, 2014, the
'279 Patent expired and the parties agreed that all of
EMS's obligations under the permanent injunction also
terminated. (Stip. of Expiration, Doc. 348, at 1-2).
Reexamination of Patent with USPTO
9, 2011, a few weeks after the jury returned its verdict, EMS
filed a Request for Reexamination of the
'279 Patent with the USPTO. (See Doc. 368 at 3).
The USPTO accepted the request, and on June 29, 2011, it
issued an order indicating that Claims 1 through 5 of the
'279 Patent would be reexamined. (Id.)- On
September 27, 2012, the USPTO found that all claims in the
'279 are unpatentable under 35 U.S.C. § 103(a).
(Id.). On November 1, 2013, the Patent Trial and
Appeal Board (PTAB) affirmed the USPTO's decision, and on
February 5, 2014, the U.S. Court of Appeals for the Federal
Circuit did the same. (Id.). On March 23, 2015,
Peach State filed a Petition for Panel Rehearing or Rehearing
En Banc with the Federal Circuit, which was denied, (]d). On
May 25, 2016, the USPTO issued an Ex Parte Reexamination
Certificate canceling Claims 1 through 5 of the '279
Patent-the claims upon which this lawsuit was based,
(Id.; Doc. 359-1 at 3).
on August 12, 2011, the Court had directed the Clerk to enter
final judgment for Peach State "in accordance with the
portion of the Verdict Form" finding that EMS induced
and contributed to infringing the patent. (Doc. 276 at 15).
The Court stated that "[a]ll other issues raised in the
Motion for Final Judgment. . . will be addressed in a
separate order to be entered at a later date."
(Id. at 2 n.2). The Clerk did not enter final
judgment at that time. On August 26, 2011, Peach State moved
for attorneys' fees, expert fees, expenses, and a
monetary sanction. (Doc. 282). On September 29, 2011, the
Court ordered that the motion for attorneys' fees was
premature and instructed Peach State to renew the motion
after final judgment was entered in the case. (See
Order on First Mot. for Fees, Doc. 300, at 2 ("No final
judgment is reflected in the docket.")). On August 6,
2015, after the Federal Circuit affirmed the USPTO's
decision to cancel the '279 Patent, the Court held a
status conference and encouraged the parties to attempt to
settle the matter. (August 6, 2015 Mins., Doc. 357). The
Court ordered that if settlement efforts were unsuccessful,
the parties were to submit a proposed form of final judgment
and a proposed schedule for pending motions. (Id.).
26, 2016, the parties submitted a proposed form of final
judgment, (Doc. 361), which was adopted and issued by the
Court on August 5, 2016. (Order & Judgment, Doc. 368).
The judgment states:
(1) Based on the USPTO's reexamination, which concluded
May 25, 2016, claims 1, 3, and 4 of U.S. Patent No. 5, 672,
279 are invalid.
(2) Because there can be no infringement of an invalid claim,
EMS is not liable for direct infringement, induced
infringement or contributory infringement of claims 1, 3, or
4 of U.S. Patent No. 5, 672, 279.
(3) Because there can be no infringement of an invalid patent
and as a result of the USPTO's cancelation of claims 1,
3, and 4, judgment of invalidity of claims 1, 3, and 4 of
U.S. Patent No. 5, 672, 279 and noninfringement of claims 1,
3, and 4 U.S. Patent No. 5, 672, 279 is hereby entered in
favor of EMS.
(4) The Jury Verdict entered on April 18, 2011 (Doc. 204)
finding that EMS induced and contributed to infringement of
claim 1 of the '279 patent; that infringement was
willful; and that Peach State was entitled to damages in the
amount of $151, 392, or $ 0.44 per gallon of infringing
product is hereby set aside and vacated.
(5) Partial Judgment was previously entered in favor of
Plaintiff, Peach State Labs, and against Defendant, EMS, in
the form of a Permanent Injunction, which was in place and in
force until U.S. Patent No. 5, 672, 279 patent expired on
September 30, 2014. The Permanent Injunction is no longer in
place and has no effect.
(6) The Court retains jurisdiction to award attorney's
fees and litigation expenses.
(Id. at 4-5 (footnote omitted)).
The Renewed Motion for Attorney's Fees, Costs, and
August 5, 2016, Peach State filed a renewed motion for an
award of attorneys' fees, experts' fees, and costs it
incurred during the lengthy litigation of this case, and
Peach State also sought a monetary contempt sanction against
EMS for its litigation misconduct. (Doc. 369). Peach State
asserts in its motion that it is the prevailing party in this
case and that as such, it is entitled to recover its
attorneys' fees in the amount of $1, 806, 269.14 and
costs totaling $233, 572.74. (]dj. Peach State also argues
that the Court should impose a monetary civil contempt
sanction of $200, 000.00 against EMS. ]d In its response
memorandum, EMS argues that Peach State is not the prevailing
party in this case and that EMS should only be liable for the
attorneys' fees and costs directly attributable to the
Findings of Fact
Court has already found based on the evidence adduced at the
July 26, 2011 evidentiary hearing that there is clear and
convincing evidence that EMS engaged in egregious litigation
misconduct. The Court further finds that EMS willfully and
intentionally violated the Court's discovery order and
that EMS's acts constitute discovery abuse. Specifically,
Peach State established that in response to Magistrate Judge
Baker's October 18, 2010 order (Doc. 107) EMS produced
false formulary data. The false formulary data contained an
incomplete list of products containing urea hydrochloride; it
underrepresented the amount of urea hydrochloride in the
products; and it listed "active ingredients" that
were not actually present in the products. The Court also
finds that, to corroborate the false formulary data, EMS
produced product samples that it had deliberately altered to
match the chemical compositions stated in the false formulary
data. Finally, EMS produced false sales data that vastly
underrepresented the amount of sales it made of products that
contained urea hydrochloride and violated EMS's patent.
These acts prolonged litigation, wasted the resources of both
Peach State and this Court in addressing frivolous arguments,
and prevented the Court from administering justice.
response to Peach State's proposed findings of fact, EMS
filed a four-page objection, stating that it "continues
to dispute the evidence submitted at the June 26, 2011 [sic]
hearing as well as in [Peach State's] most recent Second
Amended Proposed Findings of Fact." (Doc. 392 at 2). In
its objections, EMS argues that any undisclosed sales figures
"were not disclosed because [Peach State] chose to
identify the accused products in this case and it was not
EMS's duty to determine which products infringed [Peach
State's] patent." (Id. But EMS fails to
recognize that Mr. MacDonald was the one who represented in
his deposition the names of all of the products EMS sold that
contained urea hydrochloride, yet he failed to include those
samples that were highly concentrated, colorable variations
of the infringing products. (Doc. 385 ¶ 2). Moreover,
EMS did not strictly follow Peach State's
characterization of the "Accused Products"-it
volunteered sales data on a product that benefitted its
position but was not identified by Peach State as an
"Accused Product, " and it ultimately produced
sales data after trial for the concentrated products in
response to identical requests for production that EMS
previously interpreted to exclude those products,
(Id. ¶¶ 56-58).
additionally argues that it "stipulated to the fact that
its products contained urea hydrochloride in the molar ratio
claimed in the patent such that any arguments regarding the
amount of urea hydrochloride are superfluous because the
amount was already stipulated to." (Doc. 392 at 2). This
argument fails and demonstrates EMS's incorrect use of
the term "molar ratio." That term, as it was used
in the patent, was defined to mean "a ratio comparing a
number of urea molecules to a number of hydrochloric acid
molecules." (Order on Claim Construction, Doc. 96, at
18). "Molar ratio" does not have any bearing on the
percentage of urea hydrochloride that made up the Accused
Products. For example, a product may have 10% urea
hydrochloride at ¶ 1:4 molar ratio, and another product
may have 20% urea hydrochloride at ¶ 1:4 molar ratio.
The percentage of urea hydrochloride in the Accused
Products-as opposed to its molar ratio-was a hotly contested
issue in the case and was not a stipulated issue. The
percentage of urea hydrochloride in the Accused Products was
relevant to the issue of damages-which, according to
EMS's experts, should be calculated based on the amount
of urea hydrochloride in the Accused Products. That
percentage was also relevant to the issue of literal
infringement-that is, whether the Accused Products'
mechanism of converting calcium carbonate into a
water-soluble salt was carried out by urea hydrochloride or
by some other acid (such as glycolic or phosphoric acid).
remainder of EMS's arguments-that the samples were not
fabricated and that samples obtained from the marketplace
should not be trusted-are without support in the record.
EMS's objections to Peach State's proposed findings
of fact are overruled.
motion for attorneys' fees and costs, the movant must
"specify the judgment and the statute, rule, or other
grounds entitling the movant to the award." Fed.R.Civ.P.
54(d)(2)(B)(ii). Peach State argues that it has four bases
for entitlement to attorneys' fees: (1) under 35 U.S.C.
§ 285, based on this case's status as an
"exceptional" patent case; (2) pursuant to the
Court's inherent authority; (3) pursuant to Federal Rule
of Civil Procedure 37(b)(2)(C) based on EMS's failure to
comply with the Court's discovery order; and (4) pursuant
to Rule 56(h) based on EMS's submission in bad faith of
an affidavit in support of a summary judgment motion. Peach
State seeks to recover the full amount of its attorneys'
fees or, alternatively, to recover fees that are attributable
to EMS's misconduct.
35 U.S.C. § 285
court in exceptional [patent infringement] cases may award
reasonable attorney fees to the prevailing party." 35
U.S.C. § 285."[A]n 'exceptional' case is
simply one that stands out from others with respect to the
substantive strength of a party's litigating position
(considering both the governing law and the facts of the
case) or the unreasonable manner in which the case was
litigated." Octane Fitness. LLC v. ICON Health &
Fitness. Inc.. 134 S.Ct. 1749, 1756 (2014).
"District courts may determine whether a case is
'exceptional' in the case-by-case exercise of their
discretion, considering the totality of the
circumstances." ]d This Court has already exercised its
discretion and determined that this case is exceptional based
on EMS's egregious misconduct. (Doc. 274 at 187-88). But
since that determination, Peach State's patent has been
declared invalid by the USPTO and the jury verdict finding
infringement and awarding damages has been vacated. (Doc. 368
at 4-5). This is important because under 35 U.S.C. §
285, attorneys' fees can only be awarded to a prevailing
party. Inland Steel Co. v. LTV Steel Co.. 364 F.3d
1318, 1319-20 (Fed. Cir. 2004). The Court must now determine
whether Peach State is still the "prevailing
may be considered "prevailing parties" for
attorney's fees purposes if they succeed on any
significant issue in litigation which achieves some of the
benefit the parties sought in bringing the suit."'
Farrar v. Hobby. 506 U.S. 103, 109 (1992) (quoting
Hensley v. Eckerhart. 461 U.S. 424, 433 (1983)).
This occurs when the plaintiff "obtain[s] an enforceable
judgment against the defendant from whom fees are sought, or
comparable relief through a consent decree or
settlement." ]g\ at 111 (internal citations omitted).
"In short, a plaintiff 'prevails' when actual
relief on the merits of his claim materially alters the legal
relationship between the parties by modifying the
defendant's behavior in a way that directly benefits the
plaintiff." Id. at 111-12. There can be only
one prevailing party, but "[a] party is not required...
to prevail on all claims in order to qualify." Shum
v. Intel Corp.. 629 F.3d 1360, 1367-68 (Fed. Cir. 2010).
State contends that it is the prevailing party because the
Court issued a permanent injunction in its favor that lasted
until it expired about three years later, during which time
"EMS was no longer able to compete in the market
utilizing a mixture that practiced Peach State's
proprietary method." (Doc. 369 at 4). Even if the patent
did not expire, Peach State argues, it still would have
enjoyed injunctive relief for nearly five years-from the
issuance of the permanent injunction on August 12, 2011,
until the USPTO issued a Reexamination Certificate canceling
the '279 Patent on May 25, 2016. EMS, however, argues
that Peach State is not the prevailing party because Peach
State's patent was ultimately declared invalid by the
USPTO. The Court agrees with EMS.
Court is unconvinced by Peach State's argument that it
prevailed because it enjoyed years of benefit under the
permanent injunction. Although EMS initially failed to carry
its summary judgment burden on the issue of invalidity, the
USPTO ultimately reexamined Peach State's patent and
found that its claims were unpatentable for obviousness under
35 U.S.C. 103(a). (Ex. A to Resp. to Mot. for Fees, Doc.
386-1, at 14 ("[I]t would have been obvious for one of
ordinary skill in the art to use [urea hydrochloride] instead
of customary [hydrochloric acid] to dissolve the calcium
carbonate in aqueous suspension or dispersions, and to arrive
at the invention of instant claims 1, 3 and 4."
(emphasis omitted))). Thus, the permanent injunction should
never have issued. That Peach State enjoyed a few years of
benefit from that injunction does not make it the prevailing
party. It would be similarly illogical for a plaintiff who
obtains a preliminary injunction in its favor but ultimately
fails on the merits to cite the preliminary injunction as
evidence of its prevailing status. Likewise, it would make no
sense for a plaintiff who prevails on the merits but is
ultimately reversed on appeal to cite "prevailing in the
trial court" as an indication of its prevailing party
status. Of course, the plaintiff in neither situation is a
the USPTO ultimately cancelled the '279 Patent, the jury
verdict in Peach State's favor was vacated and if the
patent had not already expired, the permanent injunction
would also have been extinguished. Furthermore, a final
judgment has been entered in EMS's favor on the issues of
infringement and invalidity, and "as a matter of law, a
party who has a competitor's patent declared invalid
meets the definition of 'prevailing party.'"
Manildra Milling Corp. v. Ogilvie Mills. Inc.. 76
F.3d 1178, 1183 (Fed. Cir. 1996); see also Inland
Steel. 364 F.3d at 1320 (finding that the USPTO's
determination of invalidity on reexamination renders the
party who sought invalidation the prevailing party despite
the patent holder initially succeeding on the issue of
infringement). In light of the final judgment in EMS's
Peach State cannot be the "prevailing party" under
35 U.S.C. § 285.
Rules 37(b)(2)(C) and 56(h)
Peach State seeks to recover attorneys' fees and costs
under Federal Rules of Civil Procedure 37(b)(2)(C) and 56(h),
which, respectively, authorize an award of reasonable
expenses, including attorneys' fees, incurred by a party
for the other party's failure to comply with a discovery
order and for submitting in bad faith an affidavit in support
of a summary judgment motion. Although EMS clearly violated
Magistrate Judge Baker's October 18, 2010 discovery order
by producing fraudulent documents and product samples,
misconduct in this case was vast and permeated all of the
ensuing stages of the litigation. Indeed, the ramifications
of EMS's misconduct extended into the parties'
retention of expert witnesses, their cross motions for
summary judgment, pre-trial preparation, the issues to be
litigated at trial, post-trial motions, and extensive
discovery into the misconduct. It further caused Peach State
to incur expert witness fees and other costs it would not
have otherwise incurred. Thus, instead of awarding fees and
costs under Rule 37, the Court will do so under its inherent
power, which is better suited to providing a full remedy for
EMS's misconduct. Chambers v. NASCO. Inc.. 501
U.S. 32, 50 (1991) ("[A] federal court [is not]
forbidden to sanction bad-faith conduct by means of the
inherent power simply because that conduct could also be
sanctioned under the statute or ...