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Parallel Iron LLC v. NetApp, Inc.

United States District Court, D. Delaware

March 25, 2015

Parallel Iron LLC, Plaintiff;
v.
NetApp, Inc., Defendant

Richard D. Kirk, Esq., Bayard, PA, Wilmington, DE; Stephen B. Brauerman, Esq., Bayard, PA, Wilmington, DE; Vanessa R. Tiradentes, Esq., Bayard, PA, Wilmington, DE; Sara E. Bussiere, Esq., Bayard, PA, Wilmington, DE, attorneys for the Plaintiff.

Jack B. Blumenfeld, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Rodger D. Smith, II, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Michael J. Flynn, Esq., Morris, Nichols,Arsht & Tunnell LLP, Wilmington, DE; Natalie Hanlon-Leh, Esq., Faegre, Baker, Daniels LLP, Denver, CO; Joel D. Sayres, Esq., Faegre, Baker, Daniels LLP, Denver, CO, attorneys for the Defendant.

MEMORANDUM OPINION

Richard G. Andrews, Unite States District Judge.

Currently before the Court is Defendant NetApp, Inc.'s request for attorney's fees. (D.I. 94). This matter has been fully briefed. (D.I. 94, 103, 104). For the reasons set forth herein, Defendant's request is GRANTED IN PART. Defendant's requests for discovery and an injunction are DENIED.

BACKGROUND

Plaintiff brought this suit against Defendant on June 18, 2012. (D.I. 1). Plaintiff alleged that Defendant infringes U.S. Patent Nos. 7,197,662, 7,958,388, and 7,543,177. ( Id.) The complaint identifies the accused products as " by way of example and without limitation, those implementing" parallel Network File System (" pNFS" ).[1] ( E.g., id. at ¶ 13). On February 15, 2013 Plaintiff served its Section 4(a) disclosures, which continued to identify the accused products only in relation to their implementation of pNFS, citing one example, the E-Series Platform products. (D.I. 43-1 at 2-3). Plaintiff served its " Amended Disclosures" on April 23, 2013, only identifying products by their use of pNFS, and adding a second example. ( Id. at 5-6). On May 7, 2013, Plaintiff served its second amended disclosures, which continued to identify accused products based on their use of pNFS and added Hadoop-related products as examples of products implementing pNFS. ( Id. at 8-9). After receiving Plaintiff's second amended disclosures, Defendant wrote to Plaintiff on May 16, 2013 regarding " (1) the untimeliness of [Plaintiff]'s purported amendments to its disclosures; (2) the failure of [Plaintiff] to sufficiently identify an accused product other than its reference to pNFS; and (3) that the E-Series category of products referenced in [Plaintiff]'s disclosures did not practice pNFS." (D.I. 59 at 13 (citing D.I. 43-1 at 11-14)). Additionally, Defendant's letter requested the pre-suit basis for Plaintiff's allegations regarding pNFS. (D.I. 59 at 13; D.I. 43-1 at 16). On May 25, 2013, Plaintiff served 2,600 pages of infringement contentions. (D.I. 59 at 14). The contentions listed specific products, but did not mention pNFS. ( Id.) The parties had a meet-and-confer call on August 22, 2013, during which Plaintiff confirmed that it was no longer accusing pNFS. ( Id. at 15).

Based upon Plaintiff's indication that it was no longer accusing pNFS, Defendant requested a discovery dispute conference with the Court, and filed a discovery dispute letter as per the scheduling order for this case. (D.I. 43). The Court held a discovery conference on September 27, 2013. (D.I. 47). Based upon a joint stipulation (D.I. 49), the Court granted a stay of this case on October 10, 2013, pending the final resolution of several related cases involving the same patents. (D.I. 50). The Court granted this stay in part as a remedy to Defendant for Plaintiff's altering its allegations from pNFS to Hadoop. ( Id. at 1).

On January 22, 2014, Plaintiff granted a license to the asserted patents to Unified Patents, Inc.[2] (D.I. 59 at 16; D.I. 82 at 7). The agreement granted a sublicense to Defendant, with no requirement for Defendant to pay any money to Plaintiff. ( Id.).

On March 31, 2014, NetApp moved for attorney's fees under 35 U.S.C. § 285 and the Court's inherent powers. (D.I. 58). The Court granted the motion on September 12, 2014. (D.I. 92). The Court did not grant fees under § 285 because Defendant was not a " prevailing party," since the suit was resolved by way of a license agreement and not a decision on the merits. (D.I. 91 at p. 8). However, the Court granted attorney's fees under its inherent powers because it found that Plaintiff acted " in bad faith, vexatiously, and wantonly as it brought this suit without a good faith basis and then continued to litigate the case via a misleading and prejudicial litigation strategy." ( Id. at pp. 9-10).

After an in camera review of all the materials gathered and created as part of Plaintiff's pre-suit investigation, the Court found that Plaintiff initiated the suit without a good-faith belief that the accused instrumentalities implemented pNFS in an infringing manner. ( Id. at p. 11 ). The Court further found that Plaintiff " provided no evidence that there was even a minimal investigation into NetApp's actual implementation of pNFS." ( Id. at p. 12). The Court found that Plaintiff then " strung the Defendant along for one year, one month, and eighteen days stating that they were accusing products that implemented pNFS, only to state, when directly asked in an interrogatory, that they had no intention of accusing products implementing the pNFS standard." ( Id. at p. 11 (footnotes omitted)). The Court found that such conduct warranted an award of attorney's fees " not only to compensate NetApp, but also to deter Parallel Iron from continuing to litigate in such a manner in the future." ( Id. at p. 15).

LEGAL STANDARD

" It has long been understood that certain implied powers must necessarily result to our Courts of justice from the nature of their institution, powers which cannot be dispensed with in a Court, because they are necessary to the exercise of all others." Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (internal quotation marks and brackets omitted). The court's " power reaches both conduct before the court and that beyond the court's confines" as the underlying purpose of the court's power is to stem " disobedience to the orders of the Judiciary, regardless of whether such disobedience interfered with the conduct of trial." Id. at 44 (internal quotation marks and brackets omitted). Furthermore, a court " may assess attorney's fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Id. at 45-46 (internal quotation marks omitted). The Third Circuit has held, " In exercising its discretion under its inherent powers, the court should be guided by the same considerations that guide it in the imposition of sanctions under the Federal Rules." Republic of Philippines v. Westinghouse Elec. Corp., 43 F.3d 65, 74 (3d Cir. 1994).

" The court calculates attorney fees pursuant to the 'lodestar' approach. The lodestar amount results from multiplying the amount of time reasonably expended by reasonable hourly rates .... The prevailing community market rates assist the court in determining a reasonable hourly rate." Asahi Glass Co. v. Guardian Indus. Corp., 2013 WL 936451, at *1 (D. Del. Mar. 11, 2013) (internal citations omitted). The court should exclude all hours that were not " reasonably expended." Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). The party seeking fees " bears the burden of establishing the reasonableness of both the time expended and the hourly rates." Asahi, 2013 WL 936451, at* 1. Once the amount of time has been multiplied by a reasonable hourly rate, there are several factors a court may consider to adjust the award upwards or downwards. Id. at *2. The Court can consider these factors to the extent they are raised by the parties. Id. The only factor Plaintiff in this case identified was a reduction based on the " results obtained." (D.I. 103 at p. 10; see Asahi, 2013 WL 936451, at *2 n.2).

ANALYSIS

A. Fee Award

Defendant seeks attorney's fees in the amount of $594,162,[3] which reflects the fees incurred (1) during the time Plaintiff accused pNFS and (2) in bringing the fee motion. (D.I. 94 at pp. 1-2). Defendant calculated fees based on the lodestar approach, using average rates for New York attorneys as reported by the American ...


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