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Aviva Sports, Inc. v. Fingerhut Direct Marketing, Inc.

United States District Court, D. Minnesota

February 24, 2014

Aviva Sports, Inc., Plaintiff,
Fingerhut Direct Marketing, Inc., Menard, Inc., Kmart Corporation, Wal-Mart Stores, Inc., and Manley Toys, Ltd., Defendants.


JOAN N. ERICKSEN, District Judge.

Aviva Sports, Inc. (Aviva), sued Manley Toys, Ltd. (Manley), Fingerhut Direct Marketing, Inc. (Fingerhut), Menard, Inc., Kmart Corporation, and Wal-Mart Stores, Inc. (Wal-Mart), for patent infringement, violations of the Lanham Act, and violations of Minnesota's Uniform Deceptive Trade Practices Act. Aviva obtained a judgment against Manley on the claims under the Lanham Act and Minnesota's Uniform Deceptive Trade Practices Act. The other claims were dismissed. The case is before the Court on Menard, Kmart, and Fingerhut's motion for attorney fees and related expenses, as well as their motion for review of the clerk's taxation of costs. For the reasons set forth below, the Court denies the motions.

I. Motion for attorney fees and related expenses

Fingerhut, Menard, and Kmart moved for an award of attorney fees and costs under 15 U.S.C. § 1117(a) (2012) and 35 U.S.C. § 285 (2012). Each section states that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." Fingerhut Menard, and Kmart asserted that they prevailed on Aviva's claims of patent infringement and false advertising, that the case is exceptional within the meaning of § 1117(a) and § 285, and that an award of reasonable attorney fees and costs is appropriate. Aviva responded that no award should be made under because Fingerhut, Menard, and Kmart entered into indemnification agreements with Manley that require Manley to pay all attorney fees and costs; that it is the prevailing party if there is to be but one prevailing party; that the case is not exceptional; and that the fees and costs requested are not reasonable.

"In determining the compensatory quantum of an award under § 285 in an egregious case, courts should not be, and have not been, limited to reimbursement of only those amounts actually paid by the injured named party." Automated Bus. Cos. v. NEC Am., Inc., 202 F.3d 1353, 1356 (Fed. Cir. 2000). The indemnification agreements do not preclude an award to Fingerhut, Menard, and Kmart.

The Court turns to whether Fingerhut, Menard, and Kmart are prevailing parties. With respect to patent infringement, the Court granted summary judgment in their favor on one of the asserted claims. Later, the Court granted Aviva's motion for voluntary dismissal and dismissed with prejudice the remaining claims asserted against Fingerhut, Menard, and Kmart. As to false advertising, the Court dismissed the claim against Fingerhut, Menard, and Kmart. Fingerhut, Menard, and Kmart prevailed on the claims asserted against them. See Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 687 F.3d 1300, 1311 (Fed. Cir. 2012) (considering whether patent case was exceptional on a claim-by-claim basis), cert. granted, 134 S.Ct. 48 (2013); Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1035 (Fed. Cir. 2006); Beckman Instruments, Inc. v. LKB Produckter AB, 892 F.2d 1547, 1554 (Fed. Cir. 1989).

Section 285

"A district court has discretion to award reasonable attorney fees to a prevailing party in a patent case if the court determines that the case is exceptional.'" MarcTec, LLC v. Johnson & Johnson, 664 F.3d 907, 915 (Fed. Cir. 2012); see 35 U.S.C. § 285. "Section 285 also permits the prevailing party to recover certain disbursements incurred during preparation for a case." Rohm & Haas Co. v. Crystal Chem. Co., 736 F.2d 688, 693 (Fed. Cir. 1984).

To decide whether to award reasonable attorney fees under § 285, the court first determines whether the prevailing party has proved by clear and convincing evidence that the case is exceptional. Integrated Tech. Corp. v. Rudolph Techs., Inc., 734 F.3d 1352, 1360 (Fed. Cir. 2013); MarcTec, 664 F.3d at 915. If the case is exceptional, then the court determines whether an award of attorney fees is justified. Integrated Tech., 734 F.3d at 1360; MarcTec, 664 F.3d at 916. The court may find a case to be exceptional in a wide variety of circumstances:

A case may be deemed exceptional when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions. Absent misconduct in conduct of the litigation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.

Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005) (citations omitted); see Kilopass Tech., Inc. v. Sidense Corp., 738 F.3d 1302, 1308-09, 1317 & n.6 (Fed. Cir. 2013); Glaxo Grp. Ltd. v. Apotex, Inc., 376 F.3d 1339, 1350 (Fed. Cir. 2004) (stating "a myriad of factual circumstances may give rise to a finding that a case is exceptional" under § 285).[1] "Where... the alleged infringer prevails in the underlying action, factors relevant to determining whether a case is exceptional include the closeness of the question, pre-filing investigation and discussions with the defendant, and litigation behavior." MarcTec, 664 F.3d at 916 (internal quotation marks omitted).

To support their assertion that the case is exceptional under § 285, Fingerhut, Menard, and Kmart identified five actions as the "most unreasonable actions taken by Aviva in pressing its patent infringement claim": (1) Aviva repeatedly objected to a stay of the litigation pending reexamination by the Patent and Trademark Office (PTO); (2) Aviva repeatedly complained about its lack of financial resources while "press[ing Fingerhut, Menard, and Kmart] to spend money and resources to defend this case"; (3) Aviva asserted a patent infringement claim that was "logically impossible" given the patentee's statements to the PTO; (4) Aviva did not dismiss its "secondary infringement allegations" despite having no evidence to support them at trial; and (5) Aviva "abruptly dismissed" its remaining patent infringement allegations a few days before trial. The Court does not find that the case was exceptional under § 285.

A court has discretion to stay litigation pending reexamination of a patent. Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 848-49 (Fed. Cir. 2008); Viskase Corp. v. Am. Nat'l Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001) ("The court is not required to stay judicial resolution in view of the reexaminations."). Nothing in Aviva's opposition to Fingerhut, Menard, and Kmart's repeated requests for stays - one of which the Court denied in part and two of which the Court denied - renders this case exceptional. Cf. Fresenius USA, Inc. v. Baxter Int'l, Inc., 582 F.3d 1288, 1305 (Fed. Cir. 2009) (Newman, J., concurring) ("[I]f routinely available to delay the judicial resolution of disputes, the [reexamination] procedure is subject to inequity, if not manipulation and abuse, through the delays that are inherent in PTO activity.").

As to Fingerhut, Menard, and Kmart's assertion about the parties' relative financial positions, nothing about Aviva's pursuit of this action while Aviva was experiencing financial ...

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