United States District Court, D. Delaware
REPORT AND RECOMMENDATION REGARDING DEFENDANT'S MOTION FOR FEES AND COSTS AS PREVAILING PARTY
JOEL SCHNEIDER, Magistrate Judge.
This matter is before the Court on defendant's "Motion for Fees and Costs as Prevailing Party." (D.I. 317). Defendant's motion was referred to this Court for a Report and Recommendation issued pursuant to 28 U.S.C. § 636(b)(1)(B). The Court received the parties' extensive briefs and recently held oral argument.
Plaintiff filed this patent infringement lawsuit on March 2, 2012. The Honorable Renee Marie Bumb granted defendant's summary judgment motion on October 7, 2013. The Federal Circuit summarily affirmed the decision on October 17, 2013. The issue now before the Court is whether this is an "exceptional case" entitling defendant to recover its attorneys' fees pursuant to 35 U.S.C. § 285. If the answer is yes the next step is to determine the amount of fees to award.
For the reasons to be discussed, the Court respectfully recommends that defendant's motion be GRANTED in part and DENIED in part. Having managed the case for years and being familiar with everything that has occurred, and after exhaustively reviewing the proceedings and record before the District Court and the Federal Circuit, the Court is left with the firm conviction that this is an "exceptional case." Thus, the Court recommends that defendant's motion be granted to the extent it asks for a finding that this is an exceptional case pursuant to 35 U.S.C. § 285. The Court also recommends that defendant's motion be granted to the extent defendant asks for an award of substantial attorneys' fees. The Court recommends that defendant's motion be denied but only to the extent defendant asks for an award of fees for work done on the Bayer I lawsuit prior to June 29, 2012, the date the Bayer II complaint was served, and to the extent defendant asks for an award of costs. Because Dow has incurred additional fees, the Court recommends that Dow be permitted to update its claimed fees if this Report and Recommendation is adopted. The net amount of attorneys' fees the Court recommends be awarded is $5, 462, 889.10.
The background of this matter is set forth in detail in Judge Bumb's comprehensive decision granting defendant's motion for summary judgment. Bayer CropScience AG v. Dow AgroSciences, LLC, C.A. No. 12-256 (RMB/JS), 2013 WL 5539410 (D. Del. Oct. 7, 2013). Rather than repeating what the parties already know, the Court incorporates by reference Judge Bumb's summary. The salient points will be highlighted along with a discussion of other matters not pertinent to Judge Bumb's decision but which the parties, but not necessarily this Court, deem relevant to the present motion.
Plaintiff filed its complaint in the District of Delaware on March 2, 2012 and alleged defendant violated seven patents. Complaint ¶ 8, (D.I. 1). The patents-in-suit claim a soybean technology known as a "Triple Gene Event, " comprising three soybean genes genetically engineered for herbicide resistance. The litigation involves Dow's Enlist E3 ("E3") product. Bayer alleged that Dow planned to commercialize the soybean technology in violation of Bayer's patent rights. Although the case was originally referred to the Honorable Richard G. Andrews, on April 10, 2013, Judge Bumb was designated to hear the case. (D.I. 100). The case was referred to this Court the same date to handle case management, discovery, and other non-dispositive matters.
Dow presented a twofold defense to Bayer's complaint. First, Dow argued it did not violate Bayer's patents. Second, and more importantly as it pertains to the present motion, Dow argued it had a valid sublicense that authorized the conduct Bayer challenged. Dow filed a motion to dismiss on its sublicense defense which Judge Andrews denied on December 6, 2012. (D.I. 26). Dow filed its answer on December 20, 2012 (D.I. 29) and, as noted, shortly thereafter the case was referred to Judge Bumb and then to this Court to address case management, scheduling and other non-dispositive issues, including all discovery disputes. With the agreement of the parties the first phase of the case focused on Dow's contract defense. After extensive discovery was conducted on the issue, Dow filed its motion for summary judgment on May 9 2013 (D.I. 126) which was granted on October 7, 2013, and affirmed on appeal on October 17, 2014.
The facts as found by Judge Bumb reveal that in 2003 Bayer decided to divest itself of certain soybean assets. Consistent with that decision Bayer entered into a series of agreements in 2004 with Stine Seed Farm, Inc. ("Stine") and MS Technologies, LLC ("MS Tech"), under which Stine and MS Tech obtained certain assets and licenses for soybean technology. As Judge Bumb noted, two of the agreements are central to the case.
In the first key agreement, Bayer entered into an agreement with Stine under which Stine was granted a nonexclusive license to "market, distribute for sale, sell and offer for sale" soybean seeds containing "events" already made by Bayer, or new events made by or for MS Tech. In the second key agreement executed the same day, Bayer entered into an agreement with MS Tech titled "Acquisition Agreement of Certain Soybean Assets of Bayer CropScience S.A. and License Agreement" (hereinafter "Agreement"). Thereafter, in 2008, MS Tech entered into a series of agreements to cooperatively develop and sell E3. As part of those agreements MS Tech granted Dow a sublicense under the 2004 Bayer/MS Tech Agreement. Without getting into a detailed discussion of the language in the Bayer/MS Tech Agreement, the parties' central dispute involved whether Bayer granted MS Tech the right to commercialize under the Agreement. This dispute was critical because if MS Tech did not have the right to commercialize, then MS Tech could not sublicense that right to Dow. Bayer's second major argument was that MS Tech only had the right to sublicense M.S. Soybean Events and that E3 was not a M.S. Soybean Event. Bayer argued that E3 was not an M.S. Soybean Event because E3 was not made "by or for" MS Tech. With regard to Dow's arguments, Judge Bumb and the Federal Circuit emphatically held that Dow had the right to do what it was doing.
Because the parties insist it is relevant, the Court will briefly summarize the different proceedings to which they make reference. On December 3, 2010 Bayer filed its 2, 4-D lawsuit alleging that Dow infringed its 401 Patent ("Bayer I"). That case was referred to Judge Bumb and then to this Court to handle non-dispositive matters. On August 24, 2011, Dow filed a motion for leave to amend its Bayer I complaint to add a claim that Dow infringed seven additional glyphosate patents. (D.I. 39). When it opposed the motion Dow produced a copy of the 2011 amendment to its 2008 sublicense. Bayer subsequently withdrew its motion to amend and later filed Bayer II on March 12, 2002. On September 27, 2012 Judge Bumb granted Dow's motion for summary judgment in Bayer I holding that Bayer's patent did not cover Dow's product and that under Dow's construction Bayer's claim would fail as a matter of law. Bayer CropScience AG v. Dow AgroSciences LLC, C.A. No. 10-1045 (RMB/JS), 2012 WL 4498527, at *10 (D. Del. Sept. 27, 2012). The Federal Circuit affirmed the decision on September 3, 2013. See 728 F.3d 1324 (Fed. Cir. 2013).
Bayer filed another lawsuit against Dow in the Eastern District of Virginia on January 20, 2012. (Bayer III). Bayer alleged in that lawsuit that Dow infringed four patents relating to crops genetically modified to tolerate the herbicide "glufosinate." Dow Opening Brief ("OB") at 7. (D.I. 317). Dow argued it had a valid license to the patents. Id . After the Virginia case was filed the case was stayed and referred to arbitration before the International Chamber of Commerce International Court of Arbitration. See Bayer CropScience AG v. Dow AgroSciences LLC, C.A. No. 12-00047 , 2012 WL 2878495 (E.D. Va. July 13, 2012).