Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02600/USCOURTS-azd-2_09-cv-02600-5/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

James Jeffery Caron and Spellbinders Paper 

Arts Company, LLC, an Arizona limited 

liability company, 

Plaintiffs, 

vs. 

QuicKutz Inc., a Utah corporation, 

Defendant.

No. CV-09-2600-PHX-NVW

ORDER 

Before the Court is QuicKutz’s Motion for Exceptional Case Finding and Award 

of Attorney Fees and Expenses (Doc. 215). QuicKutz seeks an award of attorney fees 

and non-taxable costs in the amount of $449,788.73. 

I. BACKGROUND 

On November 13, 2012, judgment was entered in favor of Defendant QuicKutz, 

Inc., and against Plaintiffs James Jeffrey Caron and Spellbinders Paper Arts Company, 

LLC, on Plaintiffs’ complaint and QuicKutz’s counterclaim. (Doc. 211.) The judgment 

declared that U.S. Patent No. 7,469,634 (“the ’634 Patent”) is unenforceable. (Id.) 

By separate order issued the same day, the ’634 Patent was held unenforceable for 

misconduct before the United States Patent & Trademark Office (“PTO”) under the 

inequitable conduct doctrine. (Doc. 210.) The Court found that QuicKutz had shown the 

following by clear and convincing evidence: 

1. Plaintiffs misrepresented to the PTO Michael Dywan’s status as a joint 

inventor, inventorship is material, and Plaintiffs intended to deceive the 

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PTO by submitting inventorship information that suited their current 

interests without regard for its truthfulness. 

2. Plaintiffs submitted to the PTO declarations without disclosing three of the 

declarants had financial relationships with Spellbinders, misled the PTO 

regarding the qualifications of two other declarants, the qualifications and 

financial relationships were material, the PTO relied on the declarations, 

and Plaintiffs intended to deceive the PTO. 

3. Caron misrepresented his knowledge of chemical etching either to the PTO 

or during deposition and misrepresented to the PTO his knowledge of the 

teachings of an earlier patent, Caron’s 2011 declaration is an affirmative act 

of egregious misconduct, and Plaintiffs intended to deceive the PTO by 

submitting the declaration. 

(Id.) This action also was dismissed with prejudice under the Court’s inherent power as 

remedy for discovery misconduct by Plaintiffs upon specific factual findings, including 

that Plaintiffs delayed production and/or failed to preserve evidence essential for fair 

adjudication and that “Plaintiffs’ pattern of deception and discovery abuse make it 

impossible to conduct a trial with any reasonable assurance that the truth will be 

available.” (Id.) 

QuicKutz seeks an award of attorney fees under 35 U.S.C. § 285 and, 

alternatively, under the Court’s inherent powers. Because the Court will award fees 

under 35 U.S.C. § 285, it is not necessary to consider awarding fees under the Court’s 

inherent powers. 

II. ANALYSIS 

In patent infringement actions, “[t]he court in exceptional cases may award 

reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. Deciding whether to 

award attorney fees under § 285 requires a two-step inquiry: (1) whether the prevailing 

party has proved by clear and convincing evidence that the case is exceptional, and, if so, 

(2) whether an award of attorney fees is justified. MarcTec, LLC v. Johnson & Johnson, 

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664 F.3d 907, 915-16 (Fed. Cir. 2012). It is undisputed that QuicKutz is the prevailing 

party in this action. 

A. This Is an Exceptional Case. 

Whether a case is exceptional under § 285 is decided under Federal Circuit law. 

Power Mosfet Techs., LLC v. Siemens AG, 378 F.3d 1396, 1407 (Fed. Cir. 2004). “A 

case may be deemed exceptional when there has been some material inappropriate 

conduct related to the matter in litigation, such as . . . fraud or inequitable conduct in 

procuring the patent, misconduct during litigation . . . .” Brooks Furniture Mfg., Inc. v. 

Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). “Although a finding of 

inequitable conduct or ‘fraud in the Patent and Trademark Office’ is often a basis for a 

district court to find that a case is ‘exceptional,’ it is not a prerequisite to an award of 

attorney fees under § 285.” Standard Oil Co. v. American Cyanamid Co., 774 F.2d 448, 

455 (Fed. Cir. 1985). “[T]here is no per se rule of exceptionality in cases involving 

inequitable conduct,” but the lack of such a rule “does not mean that inequitable conduct 

is insufficient for a finding of an exceptional case.” Nilssen v. Osram Sylvania, Inc., 528 

F.3d 1352, 1358 (Fed. Cir. 2008). 

The Court has found by clear and convincing evidence that Plaintiffs made 

multiple, material misrepresentations with the intent to deceive the PTO and declared the 

’634 Patent unenforceable under the inequitable conduct doctrine. In addition, the Court 

has found sufficient evidence of Plaintiffs’ discovery misconduct to exercise its inherent 

power to terminate Plaintiffs’ complaint as remedy for Plaintiffs engaging “deliberately 

in deceptive practices that undermine the integrity of judicial proceedings.” See 

Anheuser-Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 348 (9th Cir. 1995). 

Based on these findings, the Court finds this case to be “exceptional” under § 285. 

B. An Award of Attorney Fees Is Justified. 

Federal Circuit case law “provides wide discretion to district courts; courts may 

award attorney fees in inequitable conduct cases, but are not required to do so.” Nilssen, 

528 F.3d at 1358. “In determining whether to award attorney fees, courts must weigh 

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factors such as degree of culpability, closeness of the questions, and litigation behavior.” 

Id. at 1359 (district court was within its discretion to award attorney fees where it 

weighed the evidence before it and determined that litigation misconduct and inequitable 

conduct were sufficient grounds to award fees to prevent a gross injustice). In an 

inequitable conduct case, the district court may award all of the fees reasonably incurred 

defending against an infringement lawsuit because the accused infringer would not have 

incurred any of the fees if the patentee had not committed inequitable conduct in pursuit 

of its patent and had not filed a claim for infringement of the improperly obtained patent. 

Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1386 (Fed. Cir. 2001). 

Here, the Court held Plaintiffs’ patent unenforceable upon finding by clear and 

convincing evidence that they made multiple, material misrepresentations with the intent 

to deceive the PTO. The Court also terminated Plaintiffs’ complaint upon finding 

evidence of repeated, intentional litigation misconduct. The rulings were not close 

questions. But for Plaintiffs’ inequitable conduct before the PTO and filing of this 

lawsuit, QuicKutz would not have incurred defense fees. Thus, the Court finds an award 

of attorney fees under § 285 is necessary to prevent a gross injustice and is justified. 

C. The Amount of the Attorney Fees Award Is Reasonable. 

Federal procedural rules govern applications for attorney fees (including nontaxable costs) and taxable costs in this Court. LRCiv 54.2 requires a party seeking 

attorney fees and related non-taxable expenses to show eligibility, entitlement, and the 

reasonableness of the requested award. LRCiv 54.2(c)(3) provides a non-exclusive list of 

factors bearing on the reasonableness of the requested fee award, which the Court has 

considered. Based on the Court’s lengthy commercial litigation experience and 

familiarity with fees charged in cases similar to this, the Court finds that the hourly rates 

charged in this case are at or below reasonable and market rates, and the fees awarded are 

reasonable in light of all the circumstances of the litigation. 

As found above, QuicKutz has shown eligibility and entitlement under § 285. 

“The methodology of assessing a reasonable award under 35 U.S.C. § 285 is within the 

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discretion of the district court.” Automated Business Co. v. NEC America, Inc., 202 F.3d 

1353, 1355 (Fed. Cir. 2000). The purpose of § 285 is to compensate the prevailing party 

for its expenses in the prosecution or defense of the suit, and it serves as a deterrent to 

improperly bringing clearly unwarranted patent infringement lawsuits. Id. 

Plaintiffs object to almost all of the time and non-taxable cost entries for which 

QuicKutz seeks reimbursement.1

 They have identified their objections by reference to 

fifteen categories of objections. 

Under Objection No. 1, Plaintiffs object to fees requested for preparation of 

QuicKutz’s fee motion and memorandum because QuicKutz has not cited legal authority 

showing its entitlement to reimbursement for fees incurred preparing a fee application. 

Preparation of the fee application is part of legal services rendered in defense of 

Plaintiff’s patent infringement litigation. QuicKutz is entitled to reimbursement for those 

services under § 285 for the reasons stated above. 

Under Objection No. 8, Plaintiffs object to almost every time entry, contending 

that the entry does not comply with LRCiv 54.2(e)(1) and (2) because it fails to show the 

time devoted to each individual unrelated task per day and does not adequately describe 

the services rendered. Many of the entries to which Plaintiffs object adequately describe 

a service rendered that is combined with a conference, email, or telephone call described 

as “re same.” Other entries objected to describe a series of plainly related tasks. 

QuicKutz’s fee request will not be reduced on the basis of Objection No. 8. 

Under Objection No. 15, Plaintiffs object to fees paid by Lifestyle Crafts LLC for 

legal services rendered on behalf of QuicKutz. In determining the amount of an award 

under § 285, courts are not limited to reimbursement of only those amounts actually paid 

by the injured named party. Automated Business Co., 202 F.3d at 1356. Attorney fees 

 1

 QuicKutz asserts that “Plaintiffs argue that 97.65% of the time incurred by 

QuicKutz in defending this action is objectionable” and “Plaintiffs have lodged in their 

opposition 2,126 distinct objections in response to 1,003 specific time entries.” (Doc. 

251 at 5.) The Court has not confirmed the specific counts. 

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may be awarded even if an unnamed party assumed the legal expenses for a named party. 

Id. 

On June 25, 2010, substantially all of the assets of QuicKutz were sold to Lifestyle 

Crafts. In December 2011, Lifestyle Crafts began paying QuicKutz’s legal expenses 

associated with defending this lawsuit, and those payments by Lifestyle Crafts were 

offset against the payments QuicKutz was entitled to receive for its assets. One firm that 

represented QuicKutz in this case invoiced Lifestyle Crafts for services it provided on 

behalf of QuicKutz in this case and for services provided on behalf of Lifestyle Crafts in 

Caron et al. v. Lifestyle Crafts LLC, No. CV-12-00124-PHX-NVW, in a combined 

invoice. Counsel for the firm has submitted a declaration stating that he reviewed each 

time entry and allocated each entry as appropriate between QuicKutz and Lifestyle 

Crafts; he also provided a spreadsheet showing how each time entry has been allocated. 

There is no reason to believe the allocation was not made in good faith. Further, because 

Plaintiffs have had opportunity to review QuicKutz’s fee application concurrently with 

Lifestyle Crafts’ fee application, there is little risk that both QuicKutz and Lifestyle 

Crafts will be reimbursed for the same expense. Therefore, QuicKutz’s fee request will 

not be reduced on the basis of Objection No. 15. 

Plaintiffs’ Objection No. 14 is that certain time entries relate solely to the Lifestyle 

Crafts case, and those entries were allocated entirely to Lifestyle Crafts fees, not to 

QuicKutz’s fees. It appears that Plaintiffs are not objecting to the entries, but merely 

drawing attention to the items related solely to the Lifestyle Crafts action to be sure they 

are not included in QuicKutz’s fee request. 

Under Objection No. 5, Plaintiffs object to about 70 time entries on the ground 

that the entry “[u]nreasonably splits time for tasks that are undifferentiated between the 

instant action and the Lifestyle Crafts action, which tasks also are not properly itemized.” 

Four entries to which Plaintiffs raise Objection No. 5 are allocated entirely to QuicKutz. 

Others appear to be reasonably allocated in proportion to which tasks were performed on 

behalf of QuicKutz and which were performed on behalf of Lifestyle Crafts. Moreover, 

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as a practical matter, whether a portion of an item is included in the fee award against 

Plaintiffs in favor of QuicKutz or in the fee award against Plaintiffs in favor of Lifestyle 

Crafts should make little difference to Plaintiffs. QuicKutz’s fee request will not be 

reduced on the basis of Objection No. 5. 

The Court has considered Plaintiffs’ other objections and finds them to be 

unpersuasive. Therefore, objections numbered 2, 3, 4, 6, 7, 9, 10, 11, 12, and 13 are 

rejected. 

D. QuicKutz Has Waived Reimbursement of Taxable Costs. 

LRCiv 54.1(e) identifies taxable items2

 that may be recovered by filing a bill of 

costs within fourteen days after the entry of final judgment, which QuicKutz did not do. 

These taxable items are not reimbursable under LRCiv 54.2, which applies to attorney 

fees and related non-taxable expenses. Thus, QuicKutz is not entitled to reimbursement 

for court fees ($230.00) paid by Stoel Rives, LLP or for non-taxable costs ($2,068.40)3

paid by Phillips, Ryther Winchester. Nor is it entitled to the cost of its attorneys’ pro hac 

vice applications ($100.00). Also, QuicKutz is not entitled to what is identified as a cost 

in the amount of $5,000.00 by Hill Johnson & Schmutz and described only as “legal 

fees.” Therefore, QuicKutz will be awarded non-taxable costs in the amount of 

$21,479.33, which is $7,168.40 less than the amount requested. QuicKutz’s total 

attorney fee award, which includes non-taxable costs, will be reduced $7,168.40 from the 

amount requested. 

 2

 Taxable items include Clerk’s fees and service fees, the cost of original 

transcripts for trial, deposition costs, witness fees and expenses, the cost of certain paper 

copies and photographs, interpreter fees, docket fees, and fees paid to the state court clerk 

in removed cases. 

3

 The fee application includes payments by Phillips, Ryther Winchester for service 

of process fees ($321.19), deposition costs ($1,664.76), and deposition transcript cost 

($82.45). 

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IT IS THEREFORE ORDERED that QuicKutz’s Motion for Exceptional Case 

Finding and Award of Attorney Fees and Expenses (Doc. 215) is granted in the amount 

of $442,620.33. 

IT IS FURTHER ORDERED that the Clerk enter judgment in favor of QuicKutz 

Inc., in the amount of $442,620.33, plus interest thereon at the rate of 0.17% per annum 

from the date of judgment until paid. 

Dated this 4th day of March, 2013. 

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