United States District Court, D. Minnesota
M-I DRILLING FLUIDS UK LTD. and M-I LLC, Plaintiffs/Counter-Defendants,
DYNAMIC AIR INC., Defendant/Counter-Claimant.
D. Swain and Scott J. Pivnick, ALSTON & BIRD LLP, Patrick
J. Flinn, ALSTON & BIRD LLP, and Casey A. Kniser and Eric
H. Chadwick, PATTERSON, THUENTE, CHRISTENSEN, PEDERSEN, PA,
for M-I Drilling Fluids UK Ltd. and M-I LLC.
G. Carlson, Nathan Louwagie, and Todd S. Werner, CARLSON
CASPERS VANDENBURGH LINDQUIST & SCHUMAN PA, for Dynamic
MEMORANDUM OPINION AND ORDER ADOPTING REPORT AND
R. TUNHEIM Chief Judge
to 35 U.S.C. § 285, 28 U.S.C. § 1927, and the
Court's inherent powers, Defendant Dynamic Air Inc.
(“DAI”) filed a motion for reasonable attorney
fees, expert witness fees, and costs incurred by DAI in
defending against patent infringement claims brought by
Plaintiffs M-I Drilling Fluids UK Ltd. and M-I LLC
(collectively “M-I”). DAI further moved for costs
associated with this case pursuant to Fed.R.Civ.P. 54(d). DAI
brought this motion at the conclusion of protracted and
contentious litigation against M-I.
first brought a patent infringement action against DAI in
2013 (referred to as “the 2013 Minnesota case”).
The court dismissed M-I's claims without prejudice
because M-I had not “alleged enough factual specifics
concerning [DAI]” to state a claim for relief. M-I
Drilling Fluids UK Ltd. v. Dynamic Air Inc., No. 13-2385
(ADM/HB), 2014 WL 494680, at *7 (D. Minn. Feb. 6,
2014). In 2014, M-I filed another patent
infringement against DAI, this time including more detailed
allegations in its complaint. After conducting extensive
discovery and amending its complaint, M-I dismissed its
action against DAI. M-I “judg[ed] that pursuit of the
indirect infringement case against DAI did not justify the
effort.” (Decl. of Scott Pivnick (“Pivnick
Decl.”) ¶ 17, June 24, 2016, Docket No. 246.) In
June 2016, DAI brought this motion seeking attorney fees from
States Magistrate Judge Hildy Bowbeer issued a Report and
Recommendation (“R&R”) on February 3, 2017,
recommending that the Court award DAI attorney fees and costs
under § 285 and Fed.R.Civ.P. 54(d) respectively.
(R&R at 36, 38-39, Feb. 3, 2017, Docket No. 270.) The
Magistrate Judge found that an award of other sanctions was
filed timely objections to the R&R asserting that (1) its
action was not exceptional enough to warrant attorney fees
under § 285, and (2) even if its action was exceptional,
DAI's culpable conduct during the litigation negates
recovering any award. (See Pls.' Objs. to
R&R (“Objs.”), Feb. 17, 2017, Docket No.
M-I relied upon insufficient evidence to support its detailed
allegations in the 2014 complaint and 2015 amended complaint,
the Court will overrule M-I's objections, adopt the
R&R, and award attorney fees and costs to DAI.
THE 2013 COMPLAINT: DISMISSED BASED UPON AN ALTER EGO THEORY
a petroleum services company based in the United Kingdom.
(Compl. ¶¶ 2, 4, Nov. 25, 2014, Docket No. 1.) M-I
also has a sister company named M-I Swaco do Brasil-Comerico,
Servicos E Mineracao Ltda. (“M-I Brazil”).
M-I Drilling Fluids, 2014 WL 494680, at *1. DAI is a
Minnesota corporation principally located in St. Paul,
Minnesota. (Compl. ¶ 3.) DAI is the 51%
majority owner of Dynamic Air Limitada
(“Limitada”), a Brazilian company. (Decl. of Todd
S. Werner (“Werner Decl.”), Ex. 14 ¶¶
1, 2, 10, June 3, 2016, Docket No. 231.)
2011 or early 2012, Petróleo Brasileiro
(“Petrobras”), a nonparty petroleum company
organized under Brazilian law with its principal place of
business in Brazil, sought design proposals for a pneumatic
conveyance system designed to transport waste rock, sand, and
other materials from a drill on an offshore oil platform to a
ship. M-I Drilling Fluids, 2014 WL 494680, at *1.
M-I Brazil and Limitada both submitted bids for the project,
which Limitada won. Id. Limitada proceeded to design
and operate at least three of these systems for Petrobras.
2013, M-I sued DAI and Limitada, alleging that Limitada
“along with [DAI] designed, sold and operated  a
system” which infringed five patents held by M-I.
Id. at *5. To attempt to show liability on DAI's
part, M-I argued that Limitada was the “alter
ego” of DAI and that the corporate veil should be
pierced. Id. at *2.
Court nevertheless found the complaint to be factually
insufficient as to DAI, noting that:
M-I does not establish prima facie evidence of an alter ego
relationship between Defendants. M-I's only evidence is
two printouts of [DAI's] website, on which [Limitada] is
listed as an ‘international office' for Brazilian
sales. While website statements regarding a corporate
relationship may be relevant to alter ego analysis, M-I's
evidence standing alone does not demonstrate sufficient
control or dominance over [Limitada].
Id. at *4 (internal citation omitted). The court
also noted that “[o]n its face, the Complaint fails to
plausibly identify conduct by [DAI] that has allegedly
infringed the patents in suit.” Id. at *5. The
Court therefore dismissed M-I's infringement claims
without prejudice. Id. at *6.
THE 2014 COMPLAINT: M-I ALLEGES DIRECT, INDUCED, AND
2014, M-I again sued DAI, this time with more detailed
allegations of “direct, induced, and/or contributory
infringement of [five] patents owned by M-I.” (Compl.
of that complaint, M-I alleged that DAI was “engaging
in acts constituting infringement under 35 U.S.C. §
271.” (Id. ¶ 42.) Although the complaint
makes allegations under § 271 generally, a careful
review suggests purported liability under § 271(a), (b)
and (c). (Id. ¶¶ 42-44.) In the complaint,
M-I alleged that Limitada won the bidding process with
Petrobras but that Limitada was unequipped to complete the
contract, and thus signed it jointly with DAI as its
“partner” in the project. (Id.
¶¶ 18-19.) Thereafter, the complaint alleged, DAI
provided Limitada with infringing devices (“Accused
Systems”), which were then installed on two U.S. ships.
(Id. ¶¶ 18-21.) To support these claims
M-I alleged the following facts (“the Sixteen Detailed
• “DAI directed the design, manufacture and
installation of . . . systems for Petrobras . . . .”
(Id. ¶ 19.)
• “DAI then directed that [Limitada] install these
. . . systems aboard at least two U.S.-flagged ships . . .
.” (Id. ¶ 20.)
• “DAI provided and continues to provide onsite
support . . . including supervising and assisting in the
installation and startup of the systems aboard the two
U.S.-flagged ships.” (Id. ¶ 21.)
• “The Accused Systems are operated on the
U.S.-flagged ships either directly by DAI or under the
direction and supervision of DAI.” (Id. ¶
• “[T]he Accused Systems were manufactured, sold,
delivered and installed, ” and “[t]hese
activities were either performed directly by DAI or at the
direction of DAI.” (Id. ¶ 23.)
• “[T]he Accused Systems were then used . . . in
an infringing way” and “[t]hese activities were
either performed directly by DAI or at the direction of
DAI.” (Id. ¶ 24.)
• “DAI provided the conception and design of the .
. . system and additionally supervised and assisted with its
manufacture and installation aboard the U.S.-flagged HOS
Resolution.” (Id. ¶ 25.)
• “DAI employees visited the system to assist and
supervise its manufacture and installation.”
• “DAI employees continue to visit the system
aboard the U.S.-flagged HOS Resolution and provide
instructions for its use. During these visits, DAI ...