Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_01-cv-20709/USCOURTS-cand-5_01-cv-20709-6/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:2201 Declaratory Judgement

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 This disposition is not designated for publication and may not be cited.

Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

**E-Filed 5/15/06**

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

DOLBY LABORATORIES, INC., et al.,

 Plaintiffs,

 v.

LUCENT TECHNOLOGIES, INC.,

 Defendant.

Case Number C 01-20709 JF

ORDER1 GRANTING IN PART AND

DENYING IN PART DOLBY’S

MOTION FOR ATTORNEYS’ FEES

[re: docket no. 700]

AND RELATED COUNTERCLAIMS

I. BACKGROUND

On May 31, 2001, Plaintiffs/Counter-Defendants Dolby Laboratories, Inc., and Dolby

Laboratories Licensing Corporation (collectively “Dolby”) filed suit against Defendant/

Counterclaimant Lucent Technologies Inc. and Counterclaimant Lucent Technologies Guardian I

LLC (collectively “Lucent”) seeking a declaratory judgment of invalidity and non-infringement

as to several of the claims of Lucent’s United States Patents No. 5,341,457 (“the ‘457 patent”)

and No. 5,627,938 (“the ‘938 patent”). On August 8, 2002, Lucent filed an Answer and

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 “Any attorney or other person admitted to conduct cases in any court of the United

States or any Territory thereof who so multiplies the proceedings in any case unreasonably and

vexatiously may be required by the court to satisfy personally the excess costs, expenses, and

attorneys' fees reasonably incurred because of such conduct.” 28 U.S.C. § 1927.

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

Counterclaims against Dolby, asserting counterclaims that Dolby infringed the ‘457 and ‘938

patents.

On April 22, 2005, the Court issued Orders granting Dolby’s motions for summary

judgment of non-infringement, of no inducement of infringement, and of no contributory

infringement of the ’457 and ’938 patents. On September 6, 2006, the Court granted Lucent’s

motion to dismiss without prejudice Dolby’s affirmative defenses and Dolby’s claims for

declaratory judgment that the ’457 and ’938 patents are invalid. On the same date, the Court

entered judgment in accordance with its Orders dated April 22, 2005 and September 6, 2005. On

September 27, 2005, the Court issued an order clarifying footnote 2 of the September 6, 2005

Order to make clear that Dolby’s motion for summary judgment of non-infringement of the ’457

and ’938 patents regarding Dolby’s cinema technology was granted. 

On September 27, 2005, Dolby filed a motion for attorneys’ fees. Lucent opposes the

motion. The Court heard oral argument on November 18, 2005.

II. LEGAL STANDARD

Dolby brought its motion for attorneys’ fees pursuant to 35 U.S.C. § 285, 28 U.S.C. §

1927, and Federal Rules of Civil Procedure 11 and 54. Federal Rule of Civil Procedure 54

“establishes a procedure for presenting claims for attorneys’ fees,” Fed. R. Civ. P. 54(d)(2)

Advisory Committee Notes 1993 Amendment. Federal Rule of Civil Procedure 11, 35 U.S.C. §

285, and 28 U.S.C. § 1927 provide substantive bases for awarding attorneys’ fees. However,

because Dolby does not state any reason for awarding fees pursuant to 28 U.S.C. § 1927,2 the

Court will not award any fees pursuant to this statute.

Pursuant to 35 U.S.C. § 285, “[t]he court in exceptional cases may award reasonable

attorney fees to the prevailing party.” The two-step inquiry for considering a request for

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

attorneys’ fees pursuant to 35 U.S.C. § 285 involves (1) “determinat[ion] whether there is clear

and convincing evidence that the case is ‘exceptional,’” and (2) “if so, whether an award of

attorney fees to the prevailing party is warranted.” Interspiro USA, Inc. v. Figgie Intern. Inc., 18

F.3d 927, 933 (Fed. Cir. 1994). The Court may deem a case “exceptional when there has been

some material inappropriate conduct related to the matter in litigation, such as willful

infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation,

vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions.” 

Brooks Furniture Mfg., Inc. v. Dutailier Intern., Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). 

“Absent misconduct in conduct of the litigation or in securing the patent, sanctions may be

imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and

(2) the litigation is objectively baseless.” Id. 

Additionally, as Dolby argues, sanctions may be imposed pursuant to Federal Rule of

Civil Procedure 11:

Defending against baseless claims of infringement subjects the alleged infringer to

undue costs—precisely the scenario Rule 11 contemplates. Performing a

pre-filing assessment of the basis of each infringement claim is, therefore,

extremely important. In bringing a claim of infringement, the patent holder, if

challenged, must be prepared to demonstrate to both the court and the alleged

infringer exactly why it believed before filing the claim that it had a reasonable

chance of proving infringement. Failure to do so should ordinarily result in the

district court expressing its broad discretion in favor of Rule 11 sanctions, at least

in the absence of a sound excuse or considerable mitigating circumstances.

View Engineering, Inc. v. Robotic Vision Systems, Inc., 208 F.3d 981, 986 ( Fed. Cir. 2000); see

also, Epcon Gas Systems, Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1035 (Fed. Cir. 2002)

(noting that remedies pursuant to Federal Rule of Civil Procedure 11 are available when a party

“failed to perform an adequate investigation prior to filing the complaint”); Dolby’s Motion for

Attorneys’ Fees, p. 23.

III. DISCUSSION

Dolby seeks attorneys’ fees for a wide range of alleged misconduct, bad faith actions,

delays, and misrepresentations by Lucent during the four-year course of the instant litigation. 

The Court is sympathetic with Dolby’s position, particularly in light of certain aspects of

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

Lucent’s conduct in the course of discovery. However, considering as a whole the conduct of

both parties during the years of litigation, the Court, in its discretion, concludes that the majority

of Lucent’s conduct is not so “exceptional” as to merit the imposition of sanctions. The one

exception, discussed below, is Lucent’s assertion of counterclaims based on Dolby’s cinema

technology.

Dolby seeks attorneys’ fees for Lucent’s alleged “scare-the-customer-and-run” tactics

prior to litigation, delay during discovery and litigation, and misrepresentations. Conduct leading

up to contentious litigation is rarely the picture of civility, and Lucent’s aggressive

communications with Dolby’s customers are no exception. After litigation commenced, to the

extent that Lucent’s actions may have delayed litigation, these actions were by no means

exceptional. Lucent’s conduct during discovery occasionally did rise to the level of being

sanctionable—and Lucent has been sanctioned significantly for this misconduct. For example,

on December 15, 2004, Magistrate Judge Richard Seeborg issued an Order granting Dolby’s

motion to compel further testimony of Lucent, with the costs to be paid by Lucent. On January

28, 2005, Magistrate Judge Seeborg issued an Order (1) requiring Lucent to reimburse Dolby in

the amount of $29,083.43 for expenses incurred by Dolby in re-deposing Lucent's Rule 30(b)(6)

witnesses, and for the fees and costs incurred in filing the motion for sanctions, (2) requiring

Lucent to provide verified responses to specific questions, and (3) precluding Lucent from

offering specified evidence on summary judgment or at trial. On May 9, 2005, Magistrate Judge

Seeborg ordered Lucent to pay to Dolby the sum of $69,651.25 for the fees and costs incurred in

filing the motion for sanctions that resulted in the January 28, 2005 Order. This Court overruled

Lucent’s objection to Magistrate Judge Seeborg’s Orders. The Court sees no need to award

additional discovery-related sanctions, nor will this Court issue sanctions for Lucent’s alleged

misrepresentation to Judge Brewster of the United States District Court for the Southern District

of California, because the alleged misrepresentations did not occur in the instant litigation.

Dolby also argues that Lucent’s infringement claims with respect to the ’457 and ’938

patents, which failed to survive summary judgment, were brought in bad faith. However, the fact

that Lucent failed to present sufficient evidence to defeat summary judgment does mean that

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

Lucent’s claims necessarily were brought in bad faith. Dolby’s claim that Lucent has conceded

that the ‘938 patent is invalid over multiple prior art references is not supported by clear and

convincing evidence. Lucent’s statement filed in connection with its reissue application that the

‘938 patent was “partly inoperative or invalid by reason of a defective specification,” Fisher

Decl. Ex. 1, p. 1, does not constitute an admission. See, e.g., Orthokinetics, Inc. v. Safety Travel

Chairs, Inc., 806 F.2d 1565, 1577 (Fed. Cir. 1986) (holding that a statement in a reissue oath that

“‘the original patent to be wholly or partly inoperative or invalid’” was not a “‘binding

admission’ of anticipation”). A reissue oath or declaration 

must . . . state that . . . [t]he applicant believes the original patent to be wholly or

partly inoperative or invalid by reason of a defective specification or drawing, or

by reason of the patentee claiming more or less than the patentee had the right to

claim in the patent, stating at least one error being relied upon as the basis for

reissue.

37 C.F.R. § 1.175(a) (emphasis added). Nor do Lucent’s supplemental responses to request

numbers 3, 5-7, and 15-30 include admissions that constitute clear and convincing evidence that

Lucent brought its claims in bad faith. Lucent did admit that claims 1 through 4 of the ‘938

patent are anticipated, “if the priority date of the ‘938 patent is 992 or later.” Declaration of

Jason S. Grauch in Support of Defendant Lucent Technologies Inc.’s Opposition to Dolby

Laboratories, Inc. and Dolby Laboratories Licensing Corporation’s Motion for Attorney’s Fees

(“Grauch Decl.”), Ex. P, pp. 17-20. However, Lucent also stated that the United States Patent

and Trademark Office (“USPTO”) “has determined that the ‘938 patent is entitled to an effective

filing date of December 30, 1988,” and that its admission was only “under the limited,

hypothetical, and nonexistent circumstances that the priority date of ‘938 patent is 1992 or later.” 

Id (emphasis added).

Dolby argues that Lucent engaged in inequitable conduct before the USPTO in filing its

reissue application for the ‘938 patent. Without reaching the merits of this argument, the Court

concludes that any possible inequitable conduct with respect to this reissue application is not an

appropriate basis for sanctions here. As Lucent notes in opposition, the USPTO has not yet

issued a patent as a result of the reissue application, and Lucent has not alleged any inequitable

conduct before the USPTO with respect to the two patents that were at issue in the instant

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 Lucent does not contradict this allegation in its opposition.

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

litigation. Dolby cites no case authority for the proposition that inequitable conduct before the

USPTO with respect to a patent not directly at issue in the litigation can be a basis for sanctions. 

The Court agrees with Dolby, however, that Lucent’s conduct with respect to its

counterclaims relating to Dolby’s cinema technology does warrant the imposition of sanctions. 

Lucent alleged in its “Amended and Supplemental Patent Local Rule 3-1 Disclosure of Asserted

Claims and Preliminary Infringement Contentions” that Dolby infringed the ’457 and ’938

patents with the following accused products: “Dolby’s and Dolby’s licensees’ cinema, consumer,

professional, and any other products that implement AC-3 technology and/or are made by the

AC-3 process—including products referred to as ‘Dolby Digital’ products.” Declaration of

Jeffrey M. Fisher in Support of Dolby’s Motion for Attorney’s Fees (“Fisher Decl.”), Ex. 00, p. 2

(emphasis added). However, Lucent accused Dolby’s customers of violating its patents with

respect only to Dolby’s consumer technology. See, e.g., Fisher Decl., Ex. WWW. Moreover,

Lucent never produced a claim chart comparing the cinema technology with its patent claims. 

See, e.g., Fisher Decl., Ex. YYY.

On November 11, 2004 and December 1, 2004, counsel for Dolby sent letters to Lucent’s

counsel requesting that Lucent withdraw its allegations of infringement against the cinema

technology. Fisher Decl., Exs. DDDD and EEEE. Lucent apparently failed to respond to either

letter.3 On January 28, 2005, Dolby moved for summary judgment with respect to its cinema

technology. Lucent never filed opposition to this motion. Lucent and Dolby communicated

about a possible stipulation to the dismissal of its claims related to the cinema technology, but no

stipulation resulted. Fischer Decl., Ex. GGGG. On September 27, 2005, the Court issued an

order clarifying the September 6, 2005 Order to make clear that Dolby’s motion for summary

judgment of non-infringement of the ’457 and ’938 patents regarding Dolby’s cinema technology

was granted.

Lucent acknowledges that it never produced a claim chart with respect to Dolby’s cinema

technology. Nonetheless, it argues that it brought its claims of infringement of the cinema

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

technology in good faith, asserting that it “relied on Dolby’s technical documents which stated

that it employed the same basic perceptual coding technique as Dolby’s AC-3 consumer

products.” Opposition, p. 6. However, the only “technical document” Lucent cites is a

description of “Dolby Digital” available on Dolby’s website, which states that the cinema

technology is “based on the same advanced perceptual coding technique, Dolby AC-3.” Grauch

Decl., Ex. H., p. 1 (emphasis added). The website also states: “Much like Dolby’s analog fil

sound formats, Dolby Digital in the cinema has provided a springboard for consumer formats.” 

Id, p. 2 (emphasis added).

Lucent also attempts to justify its pursuit of its cinema technology counterclaims on the

ground that Dolby delayed discovery on this issue. Dolby did not produce the algorithms used in

its cinema technology and a relevant witness for deposition until Magistrate Judge Seeborg

issued an Order on May 26, 2004, granting Lucent’s motion to compel this discovery. Lucent

claims that it concluded that it should dismiss the cinema technology counterclaims after it

became apparent that it would not have the deposition testimony of a second relevant witness,

which was delayed by Dolby and then barred by Magistrate Judge Seeborg’s Order of December

15, 2004 prohibiting all further depositions. Lucent contends that by this point, Dolby already

had filed its motion for summary judgment.

In View Engineering, Inc. v. Robotic Vision Systems, Inc., involving a similar factual

situation, the Federal Circuit upheld a district court’s imposition of sanctions pursuant to Federal

Rule of Civil Procedure 11. View Engineering, 208 F.3d 981, 984-87 (Fed. Cir. 2000). In that

case, the Defendant-Appellant, having not seen the accused product, based the filing of its

counterclaims on the personal knowledge of a Defendant-Appellant executive and on PlaintiffAppellee’s advertising and statements made to its customers. Id. at 985. In Q-Pharma, Inc. v.

Andrew Jergens Co., the Federal Circuit has held similarly: “In the context of patent

infringement actions, we have interpreted Rule 11 to require, at a minimum, that an attorney

interpret the asserted patent claims and compare the accused device with those claims before

filing a claim alleging infringement.” Q-Pharma, Inc., 360 F.3d 1295, 1300-01 (Fed. Cir. 2004).

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

iii. Estimated value of the fees sought

Lucent argues that Dolby’s motion should be denied on the ground that it does not

include an estimated value of the fees sought. Federal Rule of Civil Procedure 54(2)(B)

provides: “Unless otherwise provided by statute or order of the court, the motion . . . must state

the amount or provide a fair estimate of the amount sought” (emphasis added). It is true, as

Dolby’s counsel noted during oral argument, that “[t]he court may determine issues of liability 

for fees before receiving submissions bearing on issues of evaluation of services for which

liability is imposed by the court.” Fed. R. Civ. P. 54(2)(C). However, the Advisory Committee

Notes to Federal Rule of Civil Procedure 54 further explain:

The rule does not require that the motion be supported at the time of filing with

the evidentiary material bearing on the fees. This material must of course be

submitted in due course, according to such schedule as the court may direct in

light of the circumstances of the case. What is required is the filing of a motion

sufficient to alert the adversary and the court that there is a claim for fees, and the

amount of such fees (or a fair estimate).

. . . 

The court is explicitly authorized to make a determination of the liability for fees

before receiving submissions by the parties bearing on the amount of an award.

This option may be appropriate in actions in which the liability issue is doubtful

and the evaluation issues are numerous and complex.

Fed.R. Civ. P. 54 Advisory Committee Notes 1993 Amendment (emphasis added).

In the interest of deciding Dolby’s motion on the merits, the Court will not deny it for

failing to include an estimate of the fees sought, as is required by Federal Rule of Civil Procedure

54(2)(B). While it does not excuse Dolby’s failure to comply with Rule 54(2)(B), the Court

notes also that the length and complexity of the instant litigation would have made it difficult for

Dolby to provide even an estimate of its attorney’s fees. Cf. DeShiro v. Branch, 183 F.R.D. 281,

285 nn.2-3 (M.D. Fla. 1998).

IV. ORDER

Good cause therefore appearing, IT IS HEREBY ORDERED that the instant motion is

GRANTED IN PART and DENIED IN PART, as set forth above. 

IT IS FURTHER ORDERED that Dolby shall submit a detailed accounting of the

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

attorney’s fees it incurred as a result of Lucent’s conduct with respect to its counterclaims

relating to Dolby’s cinema technology not later than May 26, 2006. Lucent shall file any

opposition not later than June 2, 2006, and Dolby shall file any reply not later than June 9, 2006.

DATED: May 15, 2006

 

JEREMY FOGEL

United States District Judge

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Case No. C 01-20709 JF

ORDER GRANTING IN PART AND DENYING IN PART DOLBY'S MOTION FOR ATTORNEYS’ FEES

(JFLC1)

This Order has been served upon the following persons:

G. Seth Beal seth_beal@la.kirkland.com, david_shukan@la.kirkland.com;

maguillon@kirkland.com

John L. Cooper jcooper@fbm.com, brestivo@fbm.com; calendar@fbm.com

John M. Desmarais jdesmarais@kirkland.com

Jeffrey M. Fisher jfisher@fbm.com, renterig@fbm.com; calendar@fbm.com

Darrell A. Fruth dfruth@fbm.com, calendar@fbm.com; cschnurmacher@fbm.com

Jason Spencer Grauch jgrauch@kirkland.com,

Nan E. Joesten joestenn@fbm.com, calendar@fbm.com; ksmall@fbm.com

Alan S. Kellman akellman@kirkland.com, jmafale@kirkland.com

Andrew Leibnitz aleibnitz@ fbm.com, dwilliams@fbm.com

Andrew Leibnitz aleibnitz@fbm.com, dwilliams@fbm.com

Sangeetha M. Raghunathan sraghunathan@fbm.com

David Shukan dshukan@kirkland.com, akellman@kirkland.com 

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