Free Memorandum - District Court of Arizona - Arizona

1 PELINO & LENTZ, P.C.
John W. Pelino - PA Bar No. 03631

2 Howard W. Rosenthal - PA Bar No. 25632
Edward L. Ciemniecki - PA Bar No. 31539

3 One Liberty Place
Thirty-Second Floor

4 1650 Market Street
Philadelphia, PA 19103

5 (215) 665-1540 6 POLESE, PIETZSCH, WILLIAMS & NOLAN, P.A.
James F. Polese - Arizona Bar No. 003451

7 2702 North Third Street, Suite 3000
Phoenix, Arizona 85004-4607

8 (602) 280-1500 9 Attorneys for Defendant,
Keystone Foods LLC

10 11 12 13 14 15 & RESEARCH FOUNDATION, 16 17 18 19 20 21 22
Pursuant to 35 U.S.C.A. § 285 and Rule 54.2 of this : : LIMITED PARTNERSHIP, : : Plaintiff, : : v. : : ALCON LABORATORIES, INC., : et. al. : : Defendant. : ______________________________: LEMELSON MEDICAL, EDUCATION No. CV 00-661 PHX PGR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

MEMORANDUM OF LAW IN SUPPORT OF MOTION OF KEYSTONE FOODS LLC FOR AN AWARD OF ATTORNEYS' FEES AND RELATED NON-TAXABLE EXPENSES

23 Court's Local Rules of Civil Procedure, Keystone Foods LLC 24 ("Keystone") files this Memorandum of Law in support of its 25 Motion seeking an award of attorneys' fees and related non26 taxable expenses. 27 28
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ELIGIBILITY On or about April 4, 2000, plaintiff, Lemelson

3 Medical, Education & Research Foundation, Limited Partnership 4 ("Lemelson"), initiated this proceeding by filing a Complaint 5 alleging that numerous defendants, including Keystone, infringed 6 certain patents issued to Jerome H. Lemelson by utilizing bar 7 code scanners or similar systems in their various operations. 8
On or about November 3, 2000, Keystone filed its

9 Answer, Affirmative Defenses and Counterclaim denying liability 10 to Lemelson.
As part of its Counterclaim, Keystone sought entry

11 of a declaratory judgment that Lemelson's patents were invalid, 12 unenforceable and not infringed by Keystone; this case is 13 exceptional; and Keystone is entitled to attorneys' fees, costs 14 and expenses in this action. 15
On or about December 22, 2005, Lemelson filed a Motion

16 to Dismiss this case in its entirety, with prejudice, as a 17 result of the Federal Circuit's determination in Symbol 18 Technologies, Inc. v. Lemelson Medical, Education & Research 19 Foundation, Limited Partnership, United States Court of Appeals 20 for the Federal Circuit, No. 04-1451, that the patents at issue 21 in this proceeding are unenforceable. 22
On February 1, 2006, this Court entered an Order of

23 Dismissal dismissing Lemelson's action in its entirety, with 24 prejudice.
A final judgment dismissing this action in its

25 entirety, including all claims and Counterclaims, was entered by 26 the Court on February 2, 2006. 27 28
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1

As a result of the Court's dismissal of Lemelson's

2 action, with prejudice, Keystone is a prevailing party in this 3 proceeding. 4
In connection with patent litigation such as this

5 proceeding, Section 285 of Title 35 of the United States Code 6 Annotated, 35 U.S.C.A. § 285, provides that "(t)he court in 7 exceptional cases may award attorney fees to the prevailing 8 party."
"Exceptional" cases include those in which a party

9 acted in bad faith or engaged in conduct that was unfair, 10 inequitable, unconscionable, vexatious or reckless. 11 12
ENTITLEMENT In order to prevail in its request for attorneys'

13 fees, Keystone must establish that this proceeding constitutes 14 an "exceptional case" within the meaning of 35 U.S.C.A. § 285. 15 Courts have consistently held that exceptional cases include 16 those which involve litigation misconduct, vexatious, 17 unjustified, and otherwise bad faith litigation; frivolous 18 suits; willful infringement; or fraud or inequitable conduct in 19 procuring the patent.
Phonometrics, Inc. v. Westin Hotel Co.,

20 350 F.3d 1242 (Fed. Cir. 2003); Epcon Gas Systems, Inc. v. Bauer 21 Compressors, Inc., 279 F.3d 1022 (Fed. Cir. 2002); Engineered 22 Products Co. v. Donaldson Company, Inc., 335 F.Supp. 2d 973 23 (N.D.Iowa E.D. 2004). 24
In proceedings in which the alleged infringer is the

25 prevailing party, the Courts have held that exceptional 26 circumstances may exist "where the patentee engaged in `bad 27 faith litigation' or in `fraud or inequitable conduct' in 28
3 Case 2:00-cv-00661-HRH Document 537 Filed 04/03/2006 Page 3 of 12

1 securing the patent."

Kao Corporation v. Unilever United As

2 States, Inc., 2006 U.S. App. LEXIS 6892 (Fed. Cir. 2006).

3 stated in McNeil-PPC, Inc. v. L. Perrigo., 337 F.3d 1362 (Fed. 4 Cir. 2003): 5 6 7 8
"In the case of awards to prevailing accused infringers. . . `exceptional cases' are normally those of bad faith litigation or those involving fraud or inequitable conduct by the patentee in procuring the patent." Nutrients, Inc., 962 F.2d 1048, 1050-1051 (Fed. Cir. 1992).

9 337 F.3d at 1371-1372 quoting, Cambridge Prods. Limited v. Penn 10
The type of improper conduct needed to support an

11
award of attorneys' fees to an accused infringer need not rise

12
to the level of actual fraud. The United States Court of

13
Appeals for the Ninth Circuit in Maurice A. Garbell, Inc. v.

14
McDonnell Douglas Corporation, 546 F.2d 297 (9th Cir. 1976) set

15
forth the standard as follows:

16 17 18 19 20 21 22 23 24 25 26 27 28
4 Case 2:00-cv-00661-HRH Document 537 Filed 04/03/2006 Page 4 of 12 "A patent applicant owes a duty to the patent office to make a full and fair disclosure of all facts which may affect the patentability of his invention. A breach of that duty is relevant not only in determining the validity of the patent but also the good faith of the applicant in maintaining subsequent infringement actions. While the district court noted that the conduct of the plaintiff may not have amounted to fraud, it `was below the standards of good faith and candor required by inventors dealing with the patent office.' This finding of bad faith is an adequate foundation for deciding that this case is exceptional within the meaning of 35 U.S.C. § 285."

1 546 F.2d at 300 (citations omitted). 2
The same rationale was used by the District Court for

3 the Western District of Oklahoma to justify an award of 4 attorneys' fees in Plastic Container Corporation v. Continental 5 Plastics of Oklahoma, Inc., 515 F.Supp. 834 (D.Okla.W.D. 1981): 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
"In considering an award of attorney's fees under § 285 of the patent statute, the patentee's conduct in obtaining his patent should be scrutinized, and his acts before the Patent Office, though short of fraud, will justify such award if in excess of simple negligence. The exercise of discretion in favor of the allowance of attorneys' fees should have its source in unfairness or bad faith on the part of the losing party, or in some other equitable consideration such as vexatious or unjustified litigation which makes it unjust for the prevailing party in a particular case to bear the burden of its own counsel fees. Some willfulness must exist on the part of a losing party before attorney's fees are awarded in a patent case. To be unconscionable, however, the losing party's conduct need not be actually fraudulent or amount to legal fraud, and any willful act with respect to the matter in litigation which would be condemned and pronounced wrongful by honest and fair-minded men will be sufficient to make the hands of the plaintiff unclean and vest the trial court with discretion to award reasonable attorney's fees to the prevailing party."

26 515 F.Supp. at 856. 27 28
5 Case 2:00-cv-00661-HRH Document 537 Filed 04/03/2006 Page 5 of 12

1

The actions of Lemelson in pursuing the patents at

2 issue in this proceeding were scrutinized by the Nevada District 3 Court in Symbol Technologies, Inc. v. Lemelson Medical, 4 Education & Research Foundation, Limited Partnership, 301 5 F.Supp.2d 1147 (D.Nev. 2004).
After reviewing the tactics

6 employed by Lemelson to extend its patents, the Court stated 7 that: 8 9 10 11 12 13
"Lemelson's 18 to 39 year delay in filing and prosecuting the asserted claims under the fourteen patents-in-suit after they were first purportedly disclosed in the 1954 and 1956 applications was unreasonable and unjustified and . . . the doctrine of prosecution laches renders the asserted claims unenforceable against Symbol and Cognex."

14 301 F.Supp.2d at 1155 (emphasis added). 15 16 17 18 19 20 21 22 23 24 25 26
301 F.Supp.2d at 1156 (emphasis added). The Court further found that: "Although Symbol and Cognex have not demonstrated that Lemelson `intentionally stalled' securing the patents at issue, such a finding is not required to support the defense of prosecution laches. . . . At a minimum, Lemelson's delay in securing the asserted claims amounts to culpable neglect as he ignored the duty to claim his invention promptly. The prejudicial effect of Lemelson's failure to assert his claims without unreasonable delay is that suffered by the public, and privately by Symbol and Cognex and others, which were denied the ability to distinguish that which is claimed by Lemelson from that which is not."

27 28
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1 2 3 4 5 6 7 8

The Court concluded as follows: "In sum, Lemelson's delay in securing the asserted patent claims is unexplained and unreasonable. Plaintiff's ample evidence of intervening rights vividly illustrates the type of public and private injury which can result from an unreasonable delay in prosecuting patent claims. As a consequence, Lemelson's asserted claims must be deemed unenforceable due to prosecution laches."

9 301 F.Supp.2d at 1156, 1157 (citations omitted) (emphasis 10 added). 11
Lemelson appealed the Nevada District Court decision The Federal Circuit

12 to the Federal Circuit Court of Appeals.

13 upheld the District Court's decision, noting that the doctrine 14 of prosecution laches "should be applied only in egregious cases 15 of misuse of the statutory patent system."
Symbol Technologies,

16 Inc. v. Lemelson Medical, Education and Research Foundation, 422 17 F.3d 1378, 1385 (Fed. Cir. 2005).
The Court determined that

18 Lemelson's conduct was so egregious as to justify the 19 application of the defense of prosecution laches, concluding 20 that Lemelson's practice of "refiling an application solely 21 containing previously allowed claims for the business purposes 22 of delaying their issuance can be considered an abuse of the 23 patent system." 24
422 F.3d at 1385 (emphasis added).

According to the Courts that have reviewed Lemelson's

25 conduct, Lemelson has been guilty of "culpable neglect;" abused 26 the patent system; engaged in conduct that was unexplained and 27 unreasonable; and unjustifiably delayed the filing and 28
7 Case 2:00-cv-00661-HRH Document 537 Filed 04/03/2006 Page 7 of 12

1 prosecuting of its asserted claims for 18 to 39 years.

Such

2 actions are those that would be "condemned and pronounced 3 wrongful by honest and reasonable men" and clearly are "below 4 the standards of good faith and candor required by inventors 5 dealing with the patent office.
Plastic Container Corporation, Keystone

6 515 F.Supp. at 856; Garbell, 546 F.2d at 300.

7 respectfully requests that this Court use the discretion granted 8 to it and hold that Lemelson's bad faith actions justify an 9 award of attorneys' fees in this proceeding.
See, Brooktree

10 Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1582 (Fed. 11 Cir. 1992) ("The trial court has broad discretion in the 12 criteria by which it determines whether to award attorney 13 fees."); Imonex Services, Inc. v. W.H. Munzprufer, 408 F.3d 1374 14 (Fed. Cir. 2005). 15
In addition to its attorneys' fees, Keystone also

16 requests an award of its litigation-related costs and expenses 17 detailed in the attached Exhibit "4."
Lam, Inc. v. Johns-

18 Manville Corporation, 718 F.2d 1056 (Fed. Cir. 1983); Scott 19 Paper Company v. Moore Business Forms, Inc., 604 F.Supp. 835 20 (D.Del. 1984). 21
Keystone also reserves its right to supplement its

22 request for attorneys fees to include fees for the reasonable 23 time expended in preparing its Motion and this supporting 24 Memorandum of Law.
Scott Paper, 604 F.Supp. 835; Central Sarga

25 Co. v. George Hormel & Company, 723 F.2d 1573 (Fed. Cir. 1983). 26 27 28
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REASONABLENESS OF REQUESTED AWARD Keystone is a multi-national company engaged in the

3 manufacture and distribution of food and other products utilized 4 by the food services industry.
Keystone distributes its

5 products internationally and is the principal supplier of food 6 products for McDonald's Restaurants worldwide. 7
Pelino & Lentz ("P&L") has an attorney-client

8 relationship with Keystone that has existed for more than 30 9 years.
As a result of their long-standing relationship, P&L has

10 been retained by Keystone to handle virtually all of its 11 domestic legal work. 12
As indicated in the attached time records, P&L was

13 contacted initially by Keystone in September, 1990 in response 14 to correspondence Keystone received from Lemelson concerning 15 potential patent infringement.
P&L assisted Keystone in

16 auditing its operations and performing the investigation and 17 analysis necessary to determine the reasonableness of Lemelson's 18 claims as well as well as Keystone's potential liability.
Upon

19 ascertaining that Lemelson's claims could result in potential 20 damages exceeding $350,000, P&L also engaged in negotiations 21 with Lemelson's counsel to seek an amicable resolution of this 22 dispute.
P&L also performed necessary background research on

23 the types of bar coding mechanisms utilized by Keystone and the 24 similarity between those mechanisms and the items covered by 25 Lemelson's patents.
Due to the unique nature of patent law, P&L

26 also consulted patent counsel and an expert in "patent mapping" 27 28
9 Case 2:00-cv-00661-HRH Document 537 Filed 04/03/2006 Page 9 of 12

1 in order to be able to properly defend against Lemelson's 2 claims. 3
Following Keystone's receipt of Lemelson's Complaint,

4 P&L continued to negotiate with Lemelson while also researching 5 venue issues and drafting an Answer and Counterclaim.
P&L

6 retained local counsel in Arizona and arranged to be admitted 7 pro hac vice to this Court. 8
From Keystone's receipt of the Complaint in August,

9 2000 to the present, P&L has monitored this action as well as 10 Lemelson's litigation in both Nevada and the Federal Circuit 11 Court of Appeals.
On behalf of Keystone, P&L also prepared and

12 filed a Motion to Stay Proceedings. 13
As a result of its long relationship with Keystone and

14 the substantial exposure involved, P&L personnel devoted a 15 significant amount of time and energy in responding to 16 Lemelson's claims.
Involved P&L personnel included paralegals

17 and members of P&L's business and litigation departments. 18 Keystone was charged on a straight hourly basis, with rates 19 ranging from $60 per hour for work performed by paralegals in 20 2000 to $425 per hour for legal services rendered by a senior 21 member of P&L's litigation department. 22
P&L submits that the rates charged for the services

23 rendered to Keystone in this matter are appropriate and 24 consistent, with or below, the rates charged by other attorneys 25 in the Philadelphia, Pennsylvania area with similar experience 26 and expertise. 27 28
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1

In addition to P&L, the Phoenix, Arizona law firm of

2 Polese, Pietzsch, Williams & Nolan, P.A. ("PPW&N") was retained 3 to act as local counsel.
PPW&N assisted P&L counsel in getting

4 admitted pro hac vice, monitored settlement discussions and 5 reviewed pleadings to ensure compliance with local court rules. 6
Although Keystone's potential liability exceeded

7 $350,000, P&L's vigorous defense against Lemelson's claims and 8 Keystone's unwillingness to concede the validity thereof, 9 resulted in the absence of any monetary award to Lemelson in 10 this proceeding. 11 12
SUPPORTING DOCUMENTATION

13 Statement of Consultation 14
A statement describing the attempts of the parties to

15 resolve the outstanding issues concerning Keystone's request for 16 attorneys' fees is attached as Exhibit "1." 17 Fee Agreement 18
A description of the fee arrangement between P&L and

19 Keystone is attached as Exhibit "2." 20 Itemized Statements of Fees and Expenses 21
Attached are itemized statements of the fees (Exhibit

22 "3") and expenses (Exhibit "4") charged to Keystone by P&L in 23 connection with this proceeding.
Attached as Exhibit "5" are

24 true and correct copies of the invoices of PPW&N. 25 Attorney Affidavit 26
The Affidavit of undersigned counsel is attached as

27 Exhibit "6." 28
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CONCLUSION For all of the above reasons, Keystone respectfully

3 requests that the Court issue an Order awarding Keystone 4 attorneys' fees in the amount of $98,602.00 and expenses in the 5 amount of $5,677.84, together with applicable interest and the 6 fees and expenses incurred in connection with the preparation of 7 this Memorandum of Law. 8 9 10 11 12 13
Of Counsel: /s/ Edward L. Ciemniecki John W. Pelino Howard A. Rosenthal Edward L. Ciemniecki Attorneys for Defendant, Keystone Foods, LLC Respectfully submitted

14 Pelino & Lentz, PC
One Liberty Place

15 Thirty-Second Floor
1650 Market Street

16 Philadelphia, PA 19103
(215) 665-1540

17
James F. Polese

18 Polese, Pietzsch, Williams
& Nolan, P.A.

19 2702 North Third Street
Suite 3000

20 Phoenix, AZ 85004-4607
(602) 280-1500

21 22 23 24 25 26 27 28
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