Court Opinion

ID: 4530914
Source: CourtListenerOpinion
Date Created: 2020-05-01 16:00:37.615936+00
Date Added: 2024-06-11T08:44:52.996479
License: Public Domain

Case: 19-1884    Document: 35     Page: 1   Filed: 05/01/2020

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

           HITKANSUT LLC, ACCELEDYNE
             TECHNOLOGIES, LTD, LLC,
                 Plaintiffs-Appellees

                             v.

                    UNITED STATES,
                   Defendant-Appellant
                  ______________________

                        2019-1884
                  ______________________

     Appeal from the United States Court of Federal Claims
 in No. 1:12-cv-00303-CFL, Senior Judge Charles F. Lettow.
                   ______________________

                   Decided: May 1, 2020
                  ______________________

    JOHN S. ARTZ, Dickinson Wright PLLC, Ann Arbor, MI,
 argued for plaintiffs-appellees.  Also represented by
 ROBERT AVERS; FRANK MICHAEL SMITH, Troy, MI.

     GARY LEE HAUSKEN, Commercial Litigation Branch,
 Civil Division, United States Department of Justice, Wash-
 ington, DC, argued for defendant-appellant. Also repre-
 sented by JOSEPH H. HUNT.
                   ______________________

    Before PROST, Chief Judge, CLEVENGER and MOORE,
                     Circuit Judges.
Case: 19-1884    Document: 35      Page: 2    Filed: 05/01/2020

 2                            HITKANSUT LLC   v. UNITED STATES

 PROST, Chief Judge.
      The United States appeals from a decision of the
 United States Court of Federal Claims (“Claims Court”)
 awarding attorneys’ fees and costs to Hitkansut LLC and
 Acceledyne Technologies, Ltd., LLC (collectively, “Hit-
 kansut”) under 28 U.S.C. § 1498(a). Section 1498(a) pro-
 vides for the award of attorneys’ fees when certain
 conditions are met, unless “the court finds that the position
 of the United States was substantially justified.” We agree
 with the United States that “the position of the United
 States” as used in this statutory provision refers to posi-
 tions taken by the United States during litigation and does
 not encompass pre-litigation conduct by government ac-
 tors. The Claims Court erred to the extent it interpreted
 “the position of the United States” to include pre-litigation
 conduct. However, because the examples of conduct cited
 by the Claims Court demonstrate that the position of the
 United States was not substantially justified even under
 this narrower definition, we affirm the award of fees.
                               I
     Hitkansut owns United States Patent No. 7,175,722
 (“the ’722 patent”), entitled “Methods and Apparatus for
 Stress Relief Using Multiple Energy Sources.” While the
 application that later issued as the ’722 patent was pend-
 ing, Hitkansut entered into a non-disclosure agreement
 with Oak Ridge National Laboratory (“ORNL”) and pro-
 vided ORNL with a copy of the then-unpublished patent
 application. As the Claims Court found, ORNL staff “pre-
 pared various research reports, received funding, authored
 multiple publications, and received awards” for research
 “which was based upon unauthorized use of the ’722 pa-
 tent.” Hitkansut LLC v. United States, 142 Fed. Cl. 341,
 346 (2019) (“Fees Decision”).
     Following the issuance of the ’722 patent, Hitkansut
 brought suit alleging infringement by the United States
 (acting through ORNL) pursuant to 28 U.S.C. § 1498. Id.
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 HITKANSUT LLC   v. UNITED STATES                             3

 The Claims Court determined that certain claims of the
 ’722 patent were invalid but that claims 1, 6, and 11 of the
 ’722 patent were valid and infringed. Hitkansut LLC v.
 United States, 130 Fed. Cl. 353, 367, 395 (2017) (“Merits
 Decision”). Although Hitkansut originally sought a royalty
 between $4.5 million and $5.6 million, based on a percent-
 age of the relevant research funding obtained by ORNL,
 the Claims Court rejected this damages theory and instead
 awarded $200,000, plus interest, as the hypothetically ne-
 gotiated cost of an up-front licensing fee for the ’722 patent.
 Id. at 392–94. Reserving the issue of attorneys’ fees, the
 Claims Court entered judgment on the merits pursuant to
 Court of Federal Claims Rule 54(b), which this court af-
 firmed. Hitkansut LLC v. United States, 721 F. App’x 992
 (Fed. Cir. 2018).
     Following our affirmance of the merits, Hitkansut
 moved for an award of attorneys’ fees and expenses pursu-
 ant to 28 U.S.C. § 1498(a), which the Claims Court granted-
 in-part in the amount of $4,387,889.54. Fees Decision
 at 368. The United States timely appealed. We have juris-
 diction under 28 U.S.C. § 1295(a)(3).
                               II
     On appeal, the United States makes three challenges
 to the award of attorneys’ fees. First, it argues that the
 Claims Court erred in statutory interpretation by deter-
 mining that “the position of the United States”—which
 must be substantially justified under 28 U.S.C. § 1498(a)—
 includes not only the government’s litigation positions but
 also its pre-litigation conduct. Second, it argues that, re-
 gardless of statutory interpretation, the position of the
 United States in this case was substantially justified.
 Third, it argues that because Hitkansut’s damages award
 was lower than the maximum damages figure it initially
 sought, the Claims Court erred by not proportionally re-
 ducing its attorneys’ fees award. We address each argu-
 ment in turn.
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 4                            HITKANSUT LLC   v. UNITED STATES

     We review the Claims Court’s statutory interpretation
 de novo. Quaker State Oil Refining Corp. v. United States,
 994 F.2d 824, 827 (Fed. Cir. 1993). We review the Claims
 Court’s determination of whether the government’s posi-
 tion was substantially justified, as well as its determina-
 tion of the proper amount of attorneys’ fees, for an abuse of
 discretion. See Pierce v. Underwood, 487 U.S. 552, 559
 (1988); Biery v. United States., 818 F.3d 704, 710 (Fed. Cir.
 2016).
                               A
     Title 28, Section 1498 of the United States Code pro-
 vides that when the United States uses a patented inven-
 tion “without license . . . or lawful right,” the patent owner
 may bring suit to recover “his reasonable and entire com-
 pensation for such use.” 28 U.S.C. § 1498(a). The statute
 includes a fee-shifting provision, which states that when
 the patent owner is “an independent inventor, a nonprofit
 organization, or an entity that ha[s] no more than 500 em-
 ployees,” reasonable and entire compensation shall include
 “reasonable fees for expert witnesses and attorneys.” 1 Id.
 This fee-shifting provision does not apply, however, “if the
 court finds that the position of the United States was sub-
 stantially justified or that special circumstances make an
 award unjust.” Id.
     The Claims Court, at Hitkansut’s urging, concluded
 that “the position of the United States” as used in § 1498(a)
 includes “both the position taken by the United States in
 the civil action and the action or failure to act by the agency
 upon which the civil action is based.” Fees Decision at 357
 (internal quotation marks omitted). We agree with the
 United States, however, that this is overbroad. As ex-
 plained below, the “position of the United States” for the

     1   There is no dispute in this case that Hitkansut is
 an entity with fewer than 500 employees.
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 HITKANSUT LLC   v. UNITED STATES                             5

 purposes of § 1498(a) refers only to the positions taken by
 the United States in litigation and not to its prior actions
 or failures to act.
                               1
     Although we have never before interpreted this clause
 of § 1498(a), we have had prior occasion to interpret the
 phrase “the position of the United States.” The Equal Ac-
 cess to Justice Act (“EAJA”) similarly provides attorneys’
 fees in certain circumstances “unless the court finds that
 the position of the United States was substantially justi-
 fied.” 28 U.S.C. § 2412(d)(1)(A). Like § 1498(a) today,
 EAJA originally did not define “the position of the United
 States.” See Broad Ave. Laundry & Tailoring v. United
 States, 693 F.2d 1387, 1390 (Fed. Cir. 1982).
     Tasked with interpreting “the position of the United
 States” in EAJA, we concluded that “[a] fair and reasonable
 reading of those words is that the position referred to is
 that taken by the United States in the civil action in which
 the attorney’s fees were incurred.” Id. (internal quotation
 marks omitted). In other words, the position of the United
 States referred only to its litigation positions:
     It would strain the normal meaning of language to
     construe the statutory words to cover the position
     the United States took in the administrative pro-
     ceedings that led to the civil action in which the at-
     torney’s fees were incurred. The petitioner here
     seeks attorney’s fees and expenses only for services
     rendered in the proceedings before the Court of
     Claims, and it would be inappropriate to look at the
     position the United States took in other forums to
     determine whether to award fees for those services.
 Id. The Second, Fourth, and Tenth Circuits reached the
 same conclusion. See Boudin v. Thomas, 732 F.2d 1107,
 1115–16 (2d Cir. 1984) (“[W]e look only to the govern-
 ment’s position in the litigation . . . to determine whether
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 6                            HITKANSUT LLC   v. UNITED STATES

 its actions were ‘substantially justified.’”); United States v.
 2,116 Boxes of Boned Beef, 726 F.2d 1481, 1487 (10th Cir.
 1984) (“[T]he position of the United States, for purposes of
 this Act, means the arguments relied upon by the govern-
 ment in litigation.”); Tyler Bus. Servs., Inc. v. NLRB, 695
 F.2d 73, 75–76 (4th Cir. 1982) (“We believe ‘position’ should
 be read to mean the government’s position as a party in
 prosecuting or defending the litigation.”). In 1985, how-
 ever, Congress amended EAJA to include a broader express
 definition of the term:
     “position of the United States” means, in addition
     to the position taken by the United States in the
     civil action, the action or failure to act by the
     agency upon which the civil action is based.
 28 U.S.C. § 2412(d)(2)(D); Pub. L. 99–80, 99 Stat. 183
 (1985).
     Eleven years after amending EAJA, Congress amended
 § 1498(a) to include the fee-shifting provision at issue here.
 Pub. L. 104–308, 110 Stat. 3814 (1996). While Congress
 elected to use the same “position of the United States” lan-
 guage from EAJA, it did not incorporate the later-added
 express definition of the term.
                               2
     Statutory interpretation begins with the ordinary
 meaning of the language chosen by Congress. Microsoft
 Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 101 (2011). “[W]here
 Congress uses a common-law term in a statute, we assume
 the term comes with a common law meaning, absent any-
 thing pointing another way.” Id. (internal quotation marks
 omitted). In evaluating the language of § 1498(a) we con-
 clude today, as we did in Broad Avenue Laundry, that the
 ordinary meaning of “the position of the United States” re-
 fers to the litigation positions taken by the United States
 in the civil action in which the attorneys’ fees were incurred
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 HITKANSUT LLC   v. UNITED STATES                            7

 and not any underlying government action or inaction. See
 Broad Ave. Laundry, 693 F.2d at 1390.
      Hitkansut argues, and the Claims Court concluded,
 that the existence of a broad express definition of the term
 in EAJA provides a reason to ignore the ordinary meaning
 of the language of § 1498(a). Fees Decision at 357–58; Ap-
 pellees’ Br. 9–10. We do not agree. If anything, the oppo-
 site is true. “We normally assume that, when Congress
 enacts statutes, it is aware of relevant judicial precedent.”
 Merck & Co., Inc. v. Reynolds, 559 U.S. 633, 648 (2010). We
 therefore assume that when Congress added the phrase
 “the position of the United States” to § 1498(a), it was
 aware that a majority of circuit courts to consider the issue
 had concluded that the ordinary meaning of that phrase
 referred only to litigation positions. With that knowledge,
 Congress nonetheless crafted § 1498(a) to refer to the “po-
 sitions of the United States” and elected not to provide an
 express definition of the term. That decision cannot rea-
 sonably be read as evidence of Congressional intent for
 § 1498(a) to mirror EAJA.
      Nor does anything in the legislative history indicate
 such an intent. It is true, as the Claims Court pointed out,
 that during the legislative process the Department of Jus-
 tice expressed the view that § 1498(a) should match EAJA
 for the purposes of “recovery of costs and attorneys’ fees.”
 See H.R. Rep. No. 104-373, at 7, 1996 U.S.C.C.A.N. 4173,
 4179. But the Department’s views were not expressly re-
 lated to the definition of “the position of the United States”
 and, notably, Congress declined to adopt many of the De-
 partment’s suggestions. For example, the Department also
 suggested that § 1498(a) include “limits on the net worth of
 individuals” who are eligible for attorneys’ fees. Id. While
 that limitation is present in EAJA, 28 U.S.C.
 § 2412(d)(2)(B), Congress declined to include it in
 § 1498(a). This undermines any suggestion that Congress
 intended to fully adopt the Department’s recommenda-
 tions. The decision not to include a definition of “the
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 8                            HITKANSUT LLC   v. UNITED STATES

 position of the United States,” in spite of the Department’s
 recommendation, is further evidence that Congress in-
 tended the common-law definition of the term, not EAJA’s
 express definition.
     Accordingly, we hold that “the position of the United
 States” as used in § 1498(a) refers to the litigation positions
 taken by the United States in the civil action in which the
 attorneys’ fees were incurred.
     Hitkansut argues that this statutory interpretation
 cannot be correct because it would “preclude a trial court
 from considering whether the [g]overnment’s position dur-
 ing the litigation is supportable based on the unique facts
 and context underlying the litigation.” See Appellees’
 Br. 21. That concern is misguided. We hold today that “the
 position of the United States” refers only to its litigation
 positions. But nothing in our holding prevents the Claims
 Court from looking to the facts of an individual case, in-
 cluding facts that occurred pre-litigation, when deciding
 whether those litigation positions were substantially justi-
 fied.
      As the Supreme Court has explained, the “substan-
 tially justified” test asks whether a position is “justified in
 substance or in the main—that is, justified to a degree that
 would satisfy a reasonable person.” Comm’r, I.N.S. v. Jean,
 496 U.S. 154, 158 n.6 (1990) (quoting Pierce v. Underwood,
 487 U.S. 552, 565–566 (1988)). That requires the position
 to have a “reasonable basis both in law and fact.” Id. (em-
 phasis added). The Claims Court explained this point well:
     As a practical matter, the court cannot determine
     whether the government’s position during litiga-
     tion was justified without examining the underly-
     ing facts relating to the government’s conduct. A
     reasonable basis requires more than conceptual ar-
     guments germane to the subject matter; arguments
     must also hue to the facts. That a litigation posi-
     tion may be reasonable in the abstract, i.e., has a
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 HITKANSUT LLC   v. UNITED STATES                             9

     reasonable basis in law, does not mean that the lit-
     igation position as applied to a specific case re-
     mains    reasonable     when     contradicted    or
     unsupported by the factual record.
 Fees Decision at 357. We agree with the Claims Court that,
 although “the position of the United States” refers to liti-
 gation positions, those positions “lack[] substantial justifi-
 cation” when they are “unsupported by the facts.” Id. at
 359.
                               B
      Applying our interpretation of § 1498(a), we determine
 that although the Claims Court relied on an overbroad def-
 inition of “the positions of the United States,” its analysis
 demonstrates that the position of the United States was
 not substantially justified even under a correct definition
 of that term. Therefore, we conclude that the Claims Court
 did not abuse its discretion in awarding attorneys’ fees.
      The “position of the United States” in this case includes
 its invalidity and non-infringement positions, as well as its
 discovery responses and other positions expressed during
 litigation. It does not include the act of infringement itself,
 the purported breach of contract, or any other underlying
 governmental actions. To the extent the Claims Court con-
 cluded that ORNL “breach[ing] the [non-disclosure] agree-
 ment and infring[ing] the invention” were positions of the
 United States that needed to be substantially justified,
 Fees Decision at 358, that was error, and we do not rely on
 these statements.
     Relying solely on the Claims Court’s statements re-
 garding litigation positions, however, the record before us
 nonetheless reflects that the position of the United States
 was not substantially justified. As the Claims Court found,
 the United States maintained non-infringement positions
 that were factually inconsistent with the actions ORNL
 took after having learned of the ’722 patent. Id. at 359. For
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 10                           HITKANSUT LLC   v. UNITED STATES

 example, ORNL provided interrogatory responses that
 were contrary to both documentary evidence and the depo-
 sition testimony of its employees. Id. at 359. Its obvious-
 ness arguments “failed to address an essential element of
 each of the three asserted claims or to demonstrate any mo-
 tivation to combine the prior art.” Id. (internal quotation
 marks omitted). And its enablement argument was contra-
 dicted by its own expert witness, who conceded that “a per-
 son of ordinary skill in the art could account for the errors
 in the patent without undue experimentation and perform
 all necessary calculations within approximately one hour.”
 Id. In light of these findings, each of which relates to the
 positions of the United States under a correct interpreta-
 tion of that term, the Claims Court did not abuse its dis-
 cretion in concluding that the government’s position was
 not substantially justified.
                              C
      Separately from its statutory interpretation argument,
 the United States argues that the Claims Court erred by
 failing to further reduce the attorneys’ fees awarded to Hit-
 kansut. It contends that because Hitkansut originally
 sought $5.6 million in damages, but was awarded only
 $200,000, Hitkansut achieved only “limited success” in its
 lawsuit, and the Claims Court erred by declining to reduce
 its fee award accordingly. Appellant’s Br. 37–38. We dis-
 agree. The Claims Court has “broad discretion” to deter-
 mine the amount of a fee award. See Biery, 818 F.3d at 714
 (citing Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)).
 None of the cases cited by the government require the
 Claims Court to reduce a fee award where the plaintiff suc-
 ceeded on its sole claim and recovered the maximum
 amount of damages allowable by law.
      The United States cites Hensley and Farrar v. Hobby,
 506 U.S. 103, 114 (1992), for the proposition that “the most
 critical factor in determining the reasonableness of a fee
 award is the degree of success obtained,” and therefore “fee
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 HITKANSUT LLC   v. UNITED STATES                                11

 awards must be scaled to approximate the results ob-
 tained.” Appellant’s Br. 38 (citations omitted). Neither
 Hensley nor Farrar, however, mandates a reduction in fees
 in this case.
      Hensley concerns reduction of awards where “a plain-
 tiff has achieved only partial or limited success” due to pre-
 vailing on less than all of its causes of action. 461 U.S. at
 436, 440. In such a case, “the hours spent on the unsuc-
 cessful claim should be excluded in considering the amount
 of a reasonable fee.” Id. at 440. In this case, however, Hit-
 kansut brought exactly one claim—infringement of the ’722
 patent—and prevailed on it. The fact that it obtained less
 monetary relief than it may have hoped does not mean that
 it obtained “limited success” as the term is used in Hensley.
       The United States’ reliance on Farrar is similarly
 founded on a quotation taken out of context. Farrar states
 that “where recovery of private damages is the purpose of
 . . . litigation, a district court, in fixing fees, is obligated to
 give primary consideration to the amount of damages
 awarded as compared to the amount sought.”
 506 U.S. at 114–15. That statement, however, referred to
 a plaintiff who obtained only nominal damages. As the Su-
 preme Court explained, “[a] plaintiff who seeks compensa-
 tory damages but receives no more than nominal damages”
 often “should receive no attorney’s fees at all.” Id. at 115.
 This was true in Farrar because “[i]n a civil rights suit for
 damages . . . the awarding of nominal damages also high-
 lights the plaintiff’s failure to prove actual, compensable in-
 jury.” Id. (emphasis added). Because damages awarded
 under 42 U.S.C. § 1983, the statute at issue in Farrar,
 “must always be designed to compensate injuries,” the
 Court held that a plaintiff who has not proven compensable
 injuries may not be entitled to attorneys’ fees. Id.
     Unlike the plaintiff in Farrar, Hitkansut did not “fail[]
 to prove actual, compensable injury.” At trial, it proved
 compensable injury based on expert testimony from both
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 12                           HITKANSUT LLC     v. UNITED STATES

 parties that the United States would have paid $200,000
 for a one-time license to the ’722 patent in a hypothetical
 negotiation. Merits Decision at 391–92. This was not a
 “technical, insignificant victory.” Farrar, 506 U.S. at 113
 (internal quotation marks omitted). Therefore, the portion
 of Farrar relied upon by the United States, which is based
 on a plaintiff’s failure to prove actual injury, is inapplica-
 ble.
     Accordingly, because Hitkansut succeeded on its sole
 claim, and proved a material amount of actual, compensa-
 ble damages, the Claims Court did not abuse its discretion
 by declining to further reduce its award of attorneys’ fees.
                              III
     We have considered the parties’ remaining arguments
 and find them unpersuasive. For the foregoing reasons, we
 conclude that “the position of the United States” as used in
 § 1498(a) refers to the litigation positions taken by the
 United States in the civil action in which the attorneys’ fees
 were incurred. We also conclude that the Claims Court did
 not abuse its discretion in finding that the position of the
 United States was not substantially justified in this case
 and did not abuse its discretion by declining to further re-
 duce its award of attorneys’ fees. Accordingly, the Claims
 Court’s award of attorneys’ fees is affirmed.
                         AFFIRMED
                            COSTS
      The parties shall bear their own costs.