Hitkansut LLC v. United States ( 2019 )

In the United States Court of Federal Claims
No. 12-303C
(Filed: March 15, 2019)
********************************** )
HITKANSUT LLC, et al., ) Patent case; motion for award of
) attorneys’ fees and expenses pursuant to 28
Plaintiffs, ) U.S.C. § 1498(a); prevailing plaintiffs;
) jurisdiction; standing; patent owners’ fee
v. ) agreements with counsel; findings
) regarding justification for the
UNITED STATES, ) government’s position; reasonable
) attorneys’ fees, expense of expert
Defendant. ) witnesses, and costs
)
**********************************
John S. Artz, Dickinson Wright, PLLC, Troy, Michigan, for plaintiffs. With him on the
briefs were John A. Artz and Franklin M. Smith, Dickinson Wright, PLLC, Troy, Michigan.
Gary L. Hausken, Director, Commercial Litigation Branch, Civil Division,
United States Department of Justice, Washington, D.C., for defendant. With him on the brief
was Joseph H. Hunt, Assistant Attorney General, Civil Division, United States Department of
Justice, Washington, D.C.
OPINION AND ORDER
LETTOW, Senior Judge.
Plaintiffs Hitkansut LLC and Acceledyne Technologies, Ltd. LLC (collectively,
“Hitkansut”) brought suit against the United States (the “government”) for patent infringement.
After a lengthy litigation culminating in a post-trial decision, Hitkansut prevailed on the merits
and the court awarded it $200,000 plus interest as reasonable and entire compensation for the
infringement. See Hitkansut LLC v. United States, 130 Fed. Cl. 353, 391-95 (2017), aff’d, 721
Fed. Appx. 992 (Fed. Cir. 2018). The judgment was affirmed on appeal. 721 Fed. Appx. 992.1
Hitkansut now has moved for an award of approximately $4.51 million in attorneys’ fees and
expenses pursuant to 28 U.S.C. § 1498(a).
The government opposes an award. It (1) challenges this court’s jurisdiction to award
attorneys’ fees and costs separate from the underlying judgment for compensation, (2) contends
that the statute requires the request for fees and costs to be made by the patent owners, but this
request is in actuality being made by the owners’ attorneys, (3) maintains that its position in the
1 The judgment has not yet been paid, see Hr’g Tr. 68:3-7 (Feb. 15, 2019), and interest is
still running.
litigation was substantially justified and, (4) to the extent that Hitkansut merits award, urges that
Hitkansut’s request is unreasonable and must be reduced.
The court concludes that it has jurisdiction to consider Hitkansut’s motion for fees and
costs and also finds (1) that the fee request has been properly made by Hitkansut, (2) that
Hitkansut is eligible for an award of attorneys’ fees and costs as a prevailing plaintiff that meets
the statutory size criteria, and (3) that the government’s position was not substantially justified.
The court further finds that Hitkansut’s request is generally reasonable, but must be reduced to
elide some inappropriate and unallowable costs and excessive attorneys’ fees. Accordingly,
Hitkansut’s request for expenses and attorneys’ fees is granted in part and denied in part.
BACKGROUND
A. Infringement of Hitkansut’s Patent
Hitkansut owns a patent, United States Patent No. 7,175,722 (“the ’722 patent”), that
“describes a method of ‘changing physical properties of a structure using concurrent application
of multiple energy types . . . and methodologies for determining operational settings . . . .”’
Hitkansut, 130 Fed. Cl. at 360-61 (quoting the ’722 patent). While the patent application was
pending, in October 2003, Hitkansut entered into a three-year non-disclosure agreement with
Oak Ridge National Laboratory (“Oak Ridge”) and in accord with that agreement provided a
copy of the then-unpublished patent application to senior staff at Oak Ridge. Id. at 363. Some
of the research staff at Oak Ridge had been experimenting with a materials processing method
that involved treatment of metallic parts or materials through application of a high-strength
magnetic field. See id. at 364. After the disclosure by Hitkansut, however, the researchers at
Oak Ridge shifted to experiments involving “concurrent application of two energies, induction
heating and a high magnetic field.” Id. (emphasis in original).
Between March 2004 and March 2006, researchers at Oak Ridge applied for “multiple
patents for a materials processing method . . . termed thermomagnetic processing.” Hitkansut,
130 Fed. Cl. at 364-66. The court found that Oak Ridge “prepared various research reports,
received funding, authored multiple publications, and received awards” for its thermomagnetic
processing research, which was based upon unauthorized use of the ’722 patent. Id. at 366.
Hitkansut’s suit alleged that certain of the ’722 patent’s claims were infringed by Oak Ridge’s
thermomagnetic processing. Id. at 367. The court agreed, upholding the validity of the ’722
patent and finding that Oak Ridge’s thermomagnetic processing infringed three claims of the
’722 patent. Id. at 371-90.
The court awarded Hitkansut $200,000 as an up-front licensing fee plus interest dating
from February 2007, the date the ’722 patent was issued. Hitkansut, 130 Fed. Cl. at 391-94.
Hitkansut had also sought a royalty of $4.5 to $5.6 million based upon Oak Ridge’s having
received $45 million in private and public research funding for thermomagnetic processing. Id.
at 392. But because all monetary benefit to Oak Ridge had resulted from research funding and
not from commercialization, the court found royalties to be inappropriate. Id. at 392-94.
The court ordered final judgment to be entered with respect to “reasonable and entire
compensation for infringement,” i.e., $200,000 plus interest, invoking Rule 54(b) of the Rules of
2
the Court of Federal Claims (“RCFC”), and permitting Hitkansut “[i]n due course, [to] apply for
an award of reasonable costs and reasonable fees for expert witnesses and attorneys under 28
U.S.C. § 1498(a).” Hitkansut, 130 Fed. Cl. at 395.2 The court deferred such an application for
fees and expenses “until after any appellate process has been concluded or, alternatively, after
the time for taking an appeal has expired.” Id. At the parties’ request, the court clarified the
time for requesting attorneys’ fees and costs by stating that pursuant to RCFC 54(d)(2)(B), any
motion for fees and expenses had to be filed within 30 days of the conclusion of the appellate
process or when the time for taking an appeal expired. Order of February 28, 2017, ECF No.
236.
Both parties appealed the judgment. On May 9, 2018, the Court of Appeals for the
Federal Circuit affirmed this court’s decision, Hitkansut, 721 Fed. Appx. at 992, and the formal
mandate affirming this court’s decision was issued on August 3, 2018, see Mandate, ECF No.
241. Neither party petitioned the Supreme Court for certiorari, see Hr’g Tr. at 3:22 to 4:1, 4:12-
18 (Sept. 24, 2018), and Hitkansut filed its motion for fees and costs on October 24, 2018, Pls.’
Req. for Costs & Att’ys’ Fees Pursuant to 28 U.S.C. § 1498(a) (“Pls.’ Mot.”), ECF No. 243.
Hitkansut’s motion for fees and costs included documentation to substantiate its request
in the form of a declaration by Hitkansut’s lead counsel attesting to the reasonableness and
accuracy of the request and itemizing expenses. Pls.’ Mot. at 3; see also id. Attach A (Decl. of
John S. Artz in Support of [Pls.’ Mot.] (“Artz Decl.”)). The declaration consists of 18 exhibits
(“PX”) that provide professional information for the three primary attorneys representing
Hitkansut (PXs A-C), economic surveys conducted by the American Intellectual Property Law
Association (“AIPLA”) that showed attorneys’ fees in intellectual property litigation by area of
the country for 2013, 2015, and 2017 (PXs D-F), a summary and itemization of fees and
expenses (PXs G-N, R), and excepts from the trial transcripts and several interrogatory answers
provided by the government (PXs O-Q).3 The government responded in opposition on January
2 Rule 54(b) provides:
(b) Judgment on Multiple Claims or Involving Multiple Parties. When an
action presents more than one claim for relief—whether as a claim,
counterclaim, or third-party claim—or when multiple parties are involved,
the court may direct entry or a final judgment as to one or more, but fewer
than all, claims or parties only if the court expressly determines that there
is no just reason for delay. Otherwise, any order or other decision,
however designated, that adjudicates fewer than all the claims or the rights
and liabilities of fewer than all the parties does not end the action as to any
of the claims or parties and may be revised at any time before the entry of
a judgment adjudicating all the claims and all the parties’ rights and
liabilities.
RCFC 54(b) (emphasis added).
3 Hitkansut’s
exhibits will be referred to as “PX __ at A___,” reflecting the exhibit
number followed by the page number.
3
2, 2019, and included an appendix with 10 exhibits, two of which consisted of the attorneys’
retention agreements with Hitkansut, while the remaining eight contained resumes for attorneys
who appear in Hitkansut’s attorneys’ fee request. Resp. of the United States to Hitkansut’s Appl.
for Fees & Costs (“Def.’s Resp.”), ECF No. 248. 4 Following receipt of Hitkansut’s reply on
January 30, 2019, Pls.’ Reply in Support of its Appl. for Fees & Costs (“Pls.’ Reply”), ECF No.
251, the court held a hearing on February 15, 2019.
B. Costs and Fees Requested Pursuant to 28 U.S.C. § 1498(a)
Hitkansut seeks $4,507,062.56 through August 3, 2018, the end of the appellate process,
consisting of: (1) $3,241,353.00 in attorneys’ fees; (2) $823,196.92 in expert and consulting
expenses; and (3) $442,497.04 in litigation expenses exclusive of expert fees. PX H at A042-46
(attorneys’ fees); PXs J-L at A050-202 (expert fees); PXs. M-N at A204-320 (expenses).5
Hitkansut also stated that it seeks its fees and expenses in pursuing this motion, but such fees and
expenses were not listed, see Pls.’ Mot. at 19-20, nor have they subsequently been provided.
Hitkansut divides its attorneys’ fees and expenses into four broad numeric categories
representing litigation stages. Category 1 represents pre-trial activities, and runs from the start of
representation on January 27, 2011, through February 1, 2016. It is associated with five
enumerated attorney tasks: 1 (investigation, pleadings, initial disclosures), 3 (non-summary
judgment motions), 4 (discovery), 5 (claim construction), and 6 (motions for summary
judgment). See PX H at A042-45. Category 2 represents activities preparing for trial, at trial,
and during post-trial proceedings. See id. at A045-46. It runs from February 2, 2016, through
January 9, 2017, and is associated with attorney task 8. Category 3 covers activities on appeal.
See id. at A046. It runs from January 10, 2017, through August 3, 2018, and is associated with
attorney task 9.6 Category 4 covers post appeal activities, such as pursuing costs and fees, is
associated with task 10, and runs from August 4, 2018, until the present. Category 4 is barren.
4 The government’s response contains an appendix consisting of 10 undesignated but
consecutively paginated exhibits. The government’s exhibits will be referred to as “GA __,”
which reflects the page number of the appendix.
5 These values have been corrected. Hitkansut’s motion contains a summary of costs, see
Pls.’s Mot. at 3, and a breakdown of costs by category and expense type, id. at 13-20, but these
costs do not match and contain minor typographical errors. Calculation errors also appear in
some of the summary tables of the exhibits, see, e.g., PXs G, I, M, and in the itemization of
attorneys’ fees, see, e.g., PX H at A044 (Smith, Franklin), A045 (Artz, John S.), although the
cumulative errors appear to be less than 1% of the total costs sought.
6 Although Hitkansut states the appellate process ended on May 2, 2018, the Federal
Circuit issued its judgment on May 9, 2018. The discrepancy appears immaterial as no costs
appear during the seven-day interval. Some expenses are assigned to the period between May 9,
2018, and August 3, 2018, when the mandate issued from the appeals court. The court adopts
August 3, 2018, as the end of the appellate process.
4
Attorneys’ Fees and Costs Claimed by Litigation Stage* (through Aug 3, 2018)
Trial Prep,
Pre-Trial Trial, & Post Appeal Post Appeal Total
Litigation Stage
(Category 1) Trial (Category 3) (Category 4) Claimed**
(Category 2)
Date Range Jan 27, 2011 – Feb 2, 2016 – Jan 10, 2017 – Aug 4, 2018 –
Feb 1, 2016 Jan 9, 2017 Aug 3, 2018 Present
Attorneys’ Fees $ 1,894,511.00 $ 1,015,709.00 $ 331,131.00
$ 3,241,351.00
Task ID # 1, 3, 4, 5, 6 #8 #9 # 10
Expenses – “hard”
(incurred & paid, $ 53,891.99 $ 132,028.67 $ 24,666.61 $ 210,587.27
excluding experts)
Expenses – “soft”
$ 92,077.96 $ 82,167.51 $ 57,664.30 $ 231,909.77
(internal to firm)
Expert / Consulting
$ 28,584.94 $ 0.00 $ 0.00 $ 28,584.94
Dr. Cahill
Expert Dr. Wagoner $ 263,744.72 $ 255,670.70 $ 20,340.00 $ 539,755.42
Expert Mr. Epps $ 120,076.23 $ 134,780.33 $ 0.00 $ 254,856.56
Total* $ 2,452,883.84 $ 1,620,356.21 $ 433,801.91 $ 4,507,046.96
* As presented by Hitkansut and corrected for errors. See PX H at A042-46 (attorneys’ fees);
PXs J-L at A050-202 (expert fees); PXs M-N at A204-320 (expenses).
** Total excludes category 4 (i.e., costs after Aug 3, 2018).
STATUTORY AUTHORIZATION: 28 U.S.C. § 1498(a)
Section 1498(a) of Title 28 permits a patent holder to bring suit against the United States
for patent infringement. It reads in pertinent part:
“Whenever an invention described in and covered by a patent of
the United States is used or manufactured by or for the United
States without license of the owner thereof or lawful right to use or
manufacture the same, the owner’s remedy shall be by action
against the United States in the United States Court of Federal
Claims for the recovery of his reasonable and entire compensation
for such use and manufacture.”
28 U.S.C. § 1498(a).
Prior to 1996, “reasonable and entire compensation” had not been delineated by the
statute. E.g., 28 U.S.C. § 1498(a) (1994). Courts had interpreted it to mean “just compensation”
as “required by the Fifth Amendment for government takings by eminent domain.” H.R. Rep.
No. 104-373, at 2 (1995), 1996 U.S.C.C.A.N. 4173, 4174 (citing Waite v. United States, 282
U.S. 508, 509 (1931)). The Fifth Amendment, however, does not itself require the United States
to pay litigation expenses in eminent domain cases; “such fees and costs can only be authorized
5
by statute.” Id. (citing United States v. Bodcaw Co., 440 U.S. 202, 203 (1979)). Although
Congress had authorized “legal fees and costs in cases related to the taking of real property
[under] the ‘Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970,’
. . . [n]o such provision exist[ed] [prior to 1996] . . . in the case where the government is found
liable for taking a patent.” Id. (citing the Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970 (“Uniform Relocation Act”), 42 U.S.C. § 4654). Further, as of
1995 “[n]o [patent] owner ha[d] yet been able to recover any of its litigation costs under the
[Equal Access to Justice Act],” H.R. Rep. No. 104-373, at 2, 1996 U.S.C.C.A.N. at 4174, and
this court had held in 1993 that the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412, did
not apply to patent owners suing the government under 28 U.S.C. § 1498(a), see de Graffenried
v. United States, 29 Fed. Cl. 384, 386-88 (1993).
Endeavoring to “help small business, independent inventors and nonprofit organizations
recover the legal costs associated with defending their patents when the [f]ederal government is
found liable for taking and using them,” Congress amended 28 U.S.C. § 1498(a) in 1996 to
define “‘reasonable and entire compensation’ to include attorney’s fees and costs.” H.R. Rep.
No. 104-373, at 1-2, 6, 1996 U.S.C.C.A.N. at 4174-75, 4178; see also Pub. L. No. 108-308, 110
Stat. 3814 (1996) (amending 28 U.S.C. § 1498(a)). Attorneys’ fees and costs were made
available for patent owners who are either “independent inventor[s], a nonprofit organization, or
an entity that had no more than 500 employees at any time during the 5-year period preceding
[infringement by the United States].” 28 U.S.C. § 1498(a). While the original proposal in the
House of Representatives conditioned attorney’s fees and costs solely on finding the government
liable, see 140 Cong. Rec. 36,190 (1995) (statement of Rep. Moorhead), the bill as enacted after
a Senate amendment allowed the government to avoid paying attorney’s fees and costs if the
court found either that “the position of the United States was substantially justified or that special
circumstances make an award unjust,” 28 U.S.C. § 1498(a); see also 142 Cong. Rec. 27,243
(1996) (statement of Sen. Lott) (proposing amendment to H.R. 632). In its current form, 28
U.S.C. § 1498(a) now provides in pertinent part:
“Reasonable and entire compensation shall include the owner’s reasonable
costs, including reasonable fees for expert witnesses and attorneys, in
pursuing the action if the owner is an independent inventor, a nonprofit
organization, or an entity that had no more than 500 employees at any time
during the 5-year period preceding the use or manufacture of the patented
invention by or for the United States. Not[]withstanding the preceding
sentences, unless the action has been pending for more than 10 years from
the time of filing to the time that the owner applies for such costs and fees,
reasonable and entire compensation shall not include such costs and fees if
the court finds that the position of the United States was substantially
justified or that special circumstances make an award unjust.”
28 U.S.C. § 1498(a).
JURISDICTION & STANDING
A. Post-Appellate Jurisdiction over the Claim for Attorneys’ Fees and Expenses
6
In the post-trial opinion, this court directed “judgment pursuant to RCFC 54(b) respecting
the reasonable and entire compensation for infringement,” and allowed Hitkansut to apply for
costs and attorneys’ fees as allowed by 28 U.S.C. § 1498(a) after the appellate process ended.
Hitkansut, 130 Fed. Cl. at 395 (emphasis added). The government argues that this court lacks
jurisdiction to address Hitkansut’s motion because it is impermissible to bifurcate the
compensation awarded for infringement and an award of attorneys’ fees and costs. Though the
government acknowledges that the court may award fees and costs under 28 U.S.C. § 1498(a), it
contends that a proper interpretation of the statute “requires that fees be awarded prior to final
judgment because the fees and costs are included in the definition of the ‘reasonable
compensation’ to be awarded.” Def.’s Resp. at 5. As the government would have it, it has
waived its sovereign immunity for the patent owner’s fees and costs, but only to the extent such
fees and costs are awarded concurrently with compensation for use. In its view, reasonable and
entire compensation is a “singular award” that encompasses attorneys’ fees and costs, and does
not involve discrete claims or issues. Id. at 5. The government avers that once Hitkansut
appealed this court’s judgment, it “effectively waived any claim for fees as part of that
judgment.” Id. at 6 (emphasis in original).
Hitkansut responds that well-settled case law permits the court to award attorneys’ fees
and costs after resolution of the appeal. Pls.’ Reply at 4, 6. Hitkansut invokes RCFC 54, arguing
that the rule both “expressly permits the [c]ourt to separate claims where there is just reason to
do so” and “contemplates a motion for attorneys’ fees and costs being filed after the substantive
legal issues have been decided.” Id. at 4-5 (citing RCFC 54(d)(2)(A)) (emphasis removed).7
RCFC 54 so provides, and the question presented is whether the statute explicitly mandates a
contrary result.
Whether the court may act under 28 U.S.C. § 1498(a) to first award compensation for the
government’s unauthorized use and then award the owner’s costs in pursuing successfully an
infringement action presents an issue of first impression for the court. The statute provides that
“[r]easonable and entire compensation shall include the owner’s reasonable costs, including
reasonable fees for expert witnesses and attorneys, in pursuing the action . . . [unless] the court
finds that the position of the United States was substantially justified . . . .” 28 U.S.C. §
1498(a).8 Under this court’s rules, “[w]hen an action presents more than one claim for relief . . .
the court may direct entry of final judgment as to one or more, but fewer than all, claims or
7 Hitkansut also argues that the government expressly agreed to bifurcation. Pls.’ Reply at
5. While perhaps true, neither subject-matter jurisdiction nor sovereign immunity may be
waived by consent of the parties. See, e.g., United States v. Cotton, 535 U.S. 625, 630 (2002)
(“Subject-matter jurisdiction, because it involves a court’s power to hear a case, can never be
forfeited or waived.”).
8 28 U.S.C. § 1498(a) also requires that the patent owner be either “an independent
inventor, a nonprofit organization, or an entity that had no more than 500 employees at any time
during the 5-year period preceding [the infringement].” That Hitkansut meets this requirement is
undisputed.
7
parties only if the court expressly determines that there is no just reason for delay.” RCFC
54(b).9
The infringement claim and the claim for attorneys’ fees and costs in this case constitute
distinct claims. The second is necessarily dependent on final disposition of the first. Subsequent
litigation regarding attorneys’ fees and expenses cannot alter a judgment finding compensation
for infringement, as this case evidences. Deferral of attorneys’ fees and expenses does not
preclude appellate review of the underlying decision regarding infringement. To adopt the
government’s position would require the court to read into the term “reasonable and entire
compensation” an intent to inseparably merge two distinct claims. But such an intent cannot be
found. Neither the text of the statute, nor the legislative history of the 1996 amendment to
Section 1498(a), nor common practice endorsed by the Supreme Court and the Federal Circuit
regarding comparable fee-shifting statutes, requires such a result.
The statutory text does not expressly prohibit recognition of separate claims. 28 U.S.C. §
1498(a). The merger of the parts of the award into a single claim must then arise by implication,
from the language that “reasonable and entire compensation shall include the owner’s reasonable
costs.” That “reasonable and entire compensation” includes fees and costs speaks to the amount
owed and to what is compensable. It does not speak to timing. It does not imply that two
distinct evidentiary showings, one of which must proceed from, and is dependent upon, the other,
ought to be treated as one claim. The natural reading of the statute, that the court must award
attorneys’ fees and costs if the patent owner meets certain enumerated conditions, has factual
premises largely divorced from proofs of infringement.
The Uniform Relocation Act provides a useful parallel. It authorizes a court to award
attorneys’ fees and costs to a private plaintiff “in a proceeding” that grants compensation for the
government’s taking of property “as a part of such judgment or settlement.” 42 U.S.C. §
4654(c). Similarly to 28 U.S.C. § 1498(a), the Uniform Relocation Act provides compensation
for a takings claim under the Fifth Amendment. Courts have routinely awarded prevailing
plaintiffs attorneys’ fees and costs under the Uniform Relocation Act separate from final
judgments regarding damages. E.g., Arkansas Game & Fish Comm’n v. United States, 87 Fed.
Cl. 594, 647 (2009) (issuing judgment on compensation for a taking under RCFC 54(b), and
allowing plaintiff to apply for attorneys’ fees and costs after conclusion of the appellate process),
rev’d, 637 F.3d 1366 (Fed. Cir. 2011), rev’d and remanded, 568 U.S. 23 (2012), aff’d on
9 RCFC 54 also contemplates award of attorneys’ fees to be made by separate motion
“unless the substantive law requires those fees to be proved at trial as an element of damages.”
RCFC 54 (d)(2). Section 1498(a) does not require that attorneys’ fees and expenses constitute a
element of infringement. Instead, fees and expenses follow, and depend upon, a finding of
infringement and may be awarded to patent holders of Hitkansut’s size unless the United States
shows that its position was “substantially justified.” See 28 U.S.C. § 1498(a); Wright v. United
States, 56 Fed. Cl. 350, 352 (2003) (“The government bears the burden [under 28 U.S.C. § 1498]
of demonstrating that its position was substantially justified.”) (citing Doty v. United States, 71
F.3d 384, 385 (Fed. Cir. 1995) (construing “substantially justified” in the context of EAJA)).
8
remand, 736 F.3d 1364, 1367 (Fed. Cir. 2013).10 Awards of attorneys’ fees and costs under
RCFC 54(b) in takings cases under the Uniform Relocation Act have occurred after proceedings
that, for example, spanned several trials and appeals, and ultimate briefing of fee and cost claims.
E.g., Otay Mesa Prop. L.P. v. United States, 124 Fed. Cl. 141, 148-49, 151-52 (2015), appeal
dismissed, Nos. 16-1438, 1478 (Fed. Cir. Mar. 21, 2016). The fee proceedings were dependent
upon the outcome of the litigation. See Otay Mesa Prop., L.P. v. United States, 111 Fed. Cl. 422
(2013), aff’d in part, vacated in part, and remanded, 779 F.3d 1315 (Fed. Cir. 2015), on remand,
125 Fed. Cl. 141 (2015); 127 Fed. Cl. 146 (2016).
Precedential common practice under similar fee-shifting statute further cuts against the
government’s proposed interpretation. EAJA cites “any civil action” when discussing fees and
costs, language “without any reference to separate parts of the litigation, such as discovery
requests, fees, or appeals,” and contemplates that “a fee award presumptively encompasses all
aspects of the civil action.” Commissioner, I.N.S. v. Jean, 496 U.S. 154, 158, 161, 166 (1990).
Obviously, fees and costs expended pursuing appeals cannot be awarded contemporaneous ly
with final judgment on the underlying claim. But since these subsequent litigation costs are
allowable under EAJA, it must be permissible to award attorneys’ fees and costs subsequent to,
and therefore separate from, a final award of damages. Jean implicitly endorses this practice,
because the district court decided the merits in 1982 and awarded attorneys’ fees and costs in
1986, which award included expenses incurred on appeal and preparing the application for fees
and costs. Jean, 496 U.S. 154 (1990), aff’g sub nom. Jean v. Nelson, 863 F.2d 759, 763-65 (11th
Cir. 1988) (discussing case history), aff’g sub nom. Louis v. Nelson, 646 F. Supp. 1300 (S.D. Fla.
1986) (awarding attorneys’ fees and costs).
The court finds the language of the Uniform Relocation Act and EAJA and the reasoning
in Jean to be instructive for 28 U.S.C. § 1498(a). Bolstering this conclusion is that both statues
are cited in the legislative history of 1996 amendment to 28 U.S.C. § 1498(a) that added the
provisions for attorneys’ fees and expenses. See H.R. Rep. No. 104-373, at 2, 1996
U.S.C.C.A.N. at 4174-75. Under 28 U.S.C. § 1498(a), the patent holder may be compensated for
costs “in pursuing the action,” 28 U.S.C. § 1498(a), referring to a single “action,” as do the
Uniform Relocation Act and EAJA. And similar to awarding costs and fees in those statutes, the
comparable language of 28 U.S.C. § 1498(a) indicates that the court may award fees and costs
for the entirety of the single action, to include expenses incurred on appeal and preparing the
application for fees and costs. But such an ability would be meaningless unless the court could
defer determining costs and fees until after the appellate process concluded. See also Jean, 496
10 Neither the Federal Circuit’s initial reversal of the trial court, nor the Supreme Court’s
reversal of the Federal Circuit, nor the Federal Circuit’s ultimate affirmance of the original
decision on remand took issue with issuing a final judgment respecting compensation separate
from any award of attorneys’ fees and costs. See Arkansas Game & Fish, 637 F.3d 1366, rev’d,
568 U.S. 23; aff’d on remand, 637 F.3d 1364. The decision and judgment for compensation was
entered on July 1, 2009. In due course, plaintiff applied for fees and costs in April 2014, which
were awarded pursuant to a settlement agreement. See Order of Final Judgment, Arkansas Game
& Fish Comm’n v. United States, No. 05-381L (Fed. Cl. Sept. 24, 2014), ECF No. 182.
9
U.S. at 161-62 (“EAJA – like other fee-shifting statutes – favors treating a case as an inclusive
whole.”) (citing Sullivan v. Hudson, 490 U.S. 877, 888 (1989)) (emphasis added).
The legislative history also evinces an intent to expand compensation to assist certain
patent owners in bringing potentially viable claims against the government. See H.R. Rep. No.
104-373, at 1-2, 1996 U.S.C.C.A.N. at 4173-74. The government’s attempt to impose a timing
constraint would have the opposite effect. Indeed, the government’s approach would not only
limit when litigation expenses could be requested, but would complicate proceedings before a
final judgment regarding infringement could be entered. But, courts have repeatedly held
expenses during appeal and in applying for fees as properly compensable under other
comparable fee-shifting statutes. E.g., Jean, 496 U.S. 154. The government points to no
evidence Congress intended a different result under 28 U.S.C. § 1498(a). 11
In this case also, the Federal Circuit affirmed the underlying decision in its entirety under
Fed. Cir. R. 36, which decision had included a plain statement deferring attorneys’ fees and costs
until the appellate process concluded. See 721 Fed. Appx. 992, aff’g 130 Fed. Cl. 353, 395.
In sum, the court finds nothing within the text of 28 U.S.C. § 1498(a), appearing either
expressly or arising inferentially from a natural reading, or among interpretations of similar
statutes, that deprives this court of the ability to make an award of fees and expenses separate
from an award of compensation regarding infringement. Accordingly, this court concludes that
it retains jurisdiction under the statute to adjudicate Hitkansut’s motion for fees and costs.
B. Standing—Real Party in Interest
The government also argues that the court cannot award attorneys’ fees and expenses
because 28 U.S.C. § 1498(a) “limits recovery to fees incurred by the owner,” and it further
contends that the nature of the fee arrangements between Hitkansut and its attorneys means
Hitkansut neither incurred any fees nor would “benefit[] from the fee award.” Def.’s Resp. at 3
(emphasis removed). In effect, the government argues that the attorneys are the real party in
interest: “Dickinson [Wright] has sole control over the request for costs and fees . . . and is
entitled to the entire award.” Id. at 2. Hitkansut defends the fee arrangement in the retention
agreements, arguing that it retains ownership rights in the ’722 patent despite the fee
11 Ironically, adopting the government’s position would entail a different type of
bifurcation of reasonable fees and costs. Instead of dividing reasonable costs into its constituent
parts, reasonable costs would be divided by litigation stage. Before the trial court, plaintiffs
would seek damages and attorneys’ fees and costs through judgment. But since all costs through
the fee application are properly recoverable, e.g., Jean, 496 U.S. 156, 161-62, plaintiffs would
then seek additional reasonable costs before the appellate court consisting of attorneys’ fees and
costs during appeal, and perhaps again before the Supreme Court, and perhaps again after
success upon remand, and so on. This scenario could “spawn a ‘Kafkaesque judicial nightmare’
of infinite litigation to recover fees for the last round of litigation,” against which the Supreme
Court has cautioned. Id. at 163 (citations omitted).
10
arrangement. Pls.’ Reply at 2-3.12 Further, Hitkansut notes that it is entitled to the recovery after
reimbursing its attorneys for costs and some fees, and thus the greater the award, the greater the
recovery that flows to Hitkansut. Id. at 3. At issue then, is what properly constitutes Hitkansut’s
costs under an arrangement where Hitkansut’s obligation to pay depends on the size of the
recovery and is, to some extent, disconnected from the actual value of the work performed by its
attorneys.
Hitkansut executed two retention agreements with Dickinson Wright. Under the first
agreement, Dickinson Wright agreed to represent Hitkansut regarding Oak Ridge’s alleged
infringement of the ’722 patent on a contingency basis where Dickinson Wright would obtain
50% of the net recovery after reimbursement for expenses. GA 1-3. In the event Hitkansut did
not prevail, Hitkansut would have no liability for any expenses or fees incurred by Dickinson
Wright. GA 1, 3. Hitkansut executed a second fee agreement with Dickinson Wright in March
2017 that covered the appeal. GA 5. By its explicit terms, the second agreement did not affect
the first agreement, but it did delineate how an ultimate recovery would be disbursed that
covered all stages of the litigation. GA 6. Hitkansut agreed to pay Dickinson Wright for all
expenses and attorneys’ fees incurred in handling the appeal, with attorneys’ fees to be
determined based upon Dickinson Wright’s standard hourly rate, although the appellate costs
would be paid from any recovery. GA 6. The agreement also gave Dickinson Wright the “right
to pursue reimbursement of attorneys’ fees and expenses with either [this court or the appellate
court]” and specified that Dickinson Wright was “solely entitled to any award of fees and
expenses.” GA 6. Dickinson Wright’s receipt of any attorneys’ fees awarded to Hitkansut
would not affect Dickinson Wright’s entitlement to its contingency fee. GA 7.
In sum, Hitkansut would have no financial obligation to Dickinson Wright in the event of
no recovery. GA 1, 3, 6. But if Hitkansut did recover—as it has—its recovery would be
distributed in the following order: first, Dickinson Wright would receive payment for expenses
but not attorneys’ fees incurred in the original litigation prior to appeal; next, from any remaining
recovery, Dickinson Wright would receive expenses and attorneys’ fees incurred pursuing the
appeal; and finally, Dickinson Wright and Hitkansut would split evenly any remaining recovery,
pursuant to their contingency agreement. GA 1, 3, 6-7. In short, Hitkansut’s share of the
recovery, assuming the reasonableness of Dickinson Wright’s expenses, would vary based on
whether this court awards attorneys’ fees and costs.
Contrary to the government’s argument, an award of pre-appeal expenses aside from
attorneys’ fees and all appellate fees and expenses would affect the size of Hitkansut’s recovery.
As circumstances played out, so long as the court awarded at least approximately $1.35 million
towards expenses and appellate attorneys’ fees, there would be a positive recovery for
Hitkansut.13 Hitkansut only recovers if awarded these fees and expenses. Because Hitkansut is
12 The court concurs that Hitkansut’s representation agreements did not transfer ownership
of the ’722 patent, but does not interpret the government’s contention as raising an argument to
the contrary.
13 Attorneys’ fees during appeal and total expenses are approximately $1.6 million. An
award of at least $1.35 million would have less than $250,000 in remaining costs. Hitkansut’s
11
legally obligated to pay these costs before it receives any of the award, it has incurred these costs
and it is thus proper for Hitkansut to seek them.
What remains, then, is the approximately $2.9 million in pre-appeal attorneys’ fees.
While this court has not previously construed what constitutes “the owner’s . . . costs” under 28
U.S.C. § 1498(a), interpretation of other fee-shifting statutes indicates that the contingency
arrangement should not bar recovery of Hitkansut’s pre-appeal attorneys’ fees. The Court of
Appeals for the Federal Circuit has found that “[g]enerally, ‘awards of attorneys’ fees where
otherwise authorized are not obviated by the fact that individual plaintif fs are not obligated to
compensate their counsel [because] an attorney-client relationship suffices to entitle prevailing
litigants to receive fee awards.’” Ed A. Wilson, Inc. v. General Servs. Admin., 126 F.3d 1406,
1409 (Fed. Cir. 1997) (quoting Rodriguez v. Taylor, 569 F.2d 1231, 1245 (3d Cir. 1977)).
Construction of three other fee-shifting statutes frequently at issue in the Federal Circuit
indicates that attorneys’ fees under 28 U.S.C. § 1498(a) should be recoverable notwithstanding a
contingency arrangement.
The Back Pay Act provides that a government employee who is wrongfully deprived pay
“is entitled, on correction of the personnel action, to receive . . . reasonable attorney fees . . .
[that] shall be awarded in accordance with the standards established under § 7701(g) of this
title.” 5 U.S.C. § 5596(b)(1)(A). Section 7701(g), in turn, requires, among other things, that the
fees awarded be “incurred” by the employee, 5 U.S.C. § 7701(g)(1), or be awarded “as part of
the costs,” 42 U.S.C. § 2000e-5 (cited by 5 U.S.C. § 7701(g)(2)). In approving an award of
attorneys’ fees to a legal services organization at market rates that exceeded actual cost, the
Federal Circuit held that to:
restrict ‘reasonable attorney fees incurred’ to ‘reasonable attorney fees
actually incurred’ constitutes precisely the type of legislative rewrite that
any court should avoid. It imposes a limitation which Congress neither
expressed nor intended. Congress has passed a variety of statutes that have
specifically referred to attorney fees as ‘incurred,’ see, e.g., 5 U.S.C. §
552(a)(4)(E) (Freedom of Information Act (“FOIA”)); 5 U.S.C. § 552a(g)
(Privacy Act of 1974); Fed. R. Civ. P. 37(a)(4), but the courts have neither
interpreted the ‘incurred’ term in these statutes to restrict or limit the
payment of fees to those actually incurred, nor prevented market-rate fees
from being awarded.
Raney v. Federal Bureau of Prisons, 222 F.3d 927, 934 (Fed. Cir. 2000) (emphasis in original).
Similarly, EAJA permits a court to “award reasonable fees and expenses of attorneys”
and “fees and expenses . . . incurred by that party . . . .” 28 U.S.C. § 2412(b), (d)(1)(A)
(emphasis added). The Federal Circuit held in Ed A. Wilson, Inc. that the plaintiff “incurred”
attorneys’ fees under EAJA despite its “insurer being responsible for paying them.” 126 F.3d at
1408-10. The court continued, “[i]t is well-settled that an award of attorney fees is not
award with interest is currently worth at least $400,000, leaving a recovery to split once
remaining costs are paid.
12
necessarily contingent upon an obligation to pay counsel. Generally, awards of attorneys’ fees
where otherwise authorized are not obviated by the fact that individual plaintiffs are not
obligated to compensate their counsel.” Id. at 1409. As the court had reasoned in an earlier case,
“any fee award is made to the ‘prevailing party,’ not the attorney [and thus the attorney cannot]
directly claim or be entitled to the award . . . . In this sense, [a plaintiff who must turn over any
fee award to the attorney per their agreement] incurs the attorney fees that may be awarded.”
Phillips v. General Servs. Admin., 924 F.2d 1577, 1582 (Fed. Cir. 1991).
In contrast to EAJA or the Back Pay Act, the attorneys’ fees provision of the Uniform
Relocation Act requires the court to “reimburse [the] plaintiff for his reasonable costs,
disbursements, and expenses . . . actually incurred because of such proceeding.” 42 U.S.C. §
4654(c). In Washington Metro. Area Transit Auth. v. United States, 57 Fed. Cl. 148, 152-53
(2003), this court held that the use of “reimburse” and “actually incurred” in the Uniform
Relocation Act distinguished that statute from the Back Pay Act as interpreted by the Federal
Circuit in Raney. Accordingly, the court restricted attorneys’ fees to those actually incurred by
the plaintiff. Id. This court has applied similar reasoning in other cases under the Uniform
Relocation Act. E.g., Lost Tree Vill. Corp. v. United States, 135 Fed. Cl. 92, 98-99 (2017)
(allowing reimbursement of fees actually paid by the plaintiff but rejecting a “success fee” that
was contractually recoverable only from the “government as part of the reasonable attorney’s
fees” owed to the plaintiff); but see Shelden v. United States, 41 Fed. Cl. 347, 357 (1998)
(construing the Uniform Relocation Act to be comparable to EAJA).
The text of 28 U.S.C. § 1498(a) speaks to plaintiff’s “costs.” Missing are terms like
“reimburse” and “actually incurred,” which distinguishes Section 1498(a), EAJA, and the Back
Pay Act from the Uniform Relocation Act. Parallel language counsels parallel interpretation.
Had Hitkansut agreed to pay pre-appeal attorneys’ fees based on an hourly rate and from any
recovery, as it did for attorneys’ fees incurred on appeal, Hitkansut would have actually incurred
these costs to the extent of its recovery. The government essentially asks the court to distinguish
this possible arrangement with Hitkansut’s actual arrangement. But if that was the rule,
attorneys hired on a straight hourly basis would recover their full fee up to
the market rate, but attorneys on retainers, attorneys with contingent fees,
and attorneys offering services under prepaid legal plans would recover
less. [The Federal Circuit] has not drawn such a distinction under the
Equal Access to Justice Act. See Phillips, 924 F.2d at 1582 & n. 4. There
is no reason to draw such a distinction in cases arising under the attorney
fee provisions of the Back Pay Act.
Raney, 222 F.3d at 935. Owing to statutory language comparable to the Back Pay Act and
EAJA, there is no reason to draw such a distinction in cases arising under the attorneys’ fee
provision of Section 1498(a).
Accepting the government’s argument would also dissuade litigation by the very class of
people the fee-shifting provision of 28 U.S.C. § 1498(a) exists to help. The text of the 1996
amendment to Section 1498(a) indicates for whom the benefit is intended: independent
inventors, nonprofit organizations, and small businesses. 28 U.S.C. § 1498(a); see also H.R.
Rep. No. 104-373, at 1, 1996 U.S.C.C.A.N. at 4173. This class is the least likely to be able to
13
“actually incur” litigation costs, especially when pitted against the resources of the federal
government. Depriving these plaintiffs of the ability to seek attorneys’ fees if they use a
contingency arrangement would hamper them from bringing claims and dissuade attorneys from
taking their cases. As the Federal Circuit noted in Raney when holding that attorneys’ fees were
awardable even if not actually incurred, “[w]hen Congress amended the Back Pay Act to provide
for fee awards more broadly, it sought to eliminate the strong financial disincentives for those
who would protect their employment from unjustified governmental action. In so doing, it
sought to deter the unreasonable exercise of governmental authority.” 222 F.3d at 935 (citations
omitted); see also Jean, 496 U.S. at 163 (EAJA exists to “eliminate for the average person the
financial disincentive to challenge unreasonable governmental actions.”). The same logic
applies here.
The cases advanced by the government are manifestly dissimilar, and in part contrary to
precedent in this circuit. In United States v. Paisley, 957 F.2d 1161 (4th Cir. 1992), five former
employees of Boeing who successfully defended themselves in a criminal prosecution sought
attorneys’ fees under EAJA. Boeing, however, agreed to indemnify them if required by state
law. Id. at 1163. The Court of Appeals for the Fourth Circuit concluded that the employees did
not incur attorneys’ fees because they had “a legally enforceable right to full indemnification” by
Boeing, “a solvent third party.” Id. at 1164. Correlatively, in Securities & Exchange
Commission v. Comserv Corp., 908 F.2d 1407, 1415 (8th Cir. 1990), a corporate officer was also
indemnified by a third party, and the court ruled that the officer was ineligible for an award of
fees under EAJA. In doing so, however, the court nonetheless noted that “EAJA awards should
be available where the burden of attorneys’ fees would have deterred the litigation challenging
the government’s actions.” Id. at 1415 (emphasis added). And in Unification Church v. I.N.S.,
762 F.2d 1077, 1082-83 (D.C. Cir. 1985), a suit where plaintiffs consisted of a church and its
members, the church paid the entire litigation expense. The D.C. Circuit ruled that the church
was the real party in interest and thus the members were ineligible to make a request for
attorneys’ fees.14 The church itself was found to be ineligible for fees because it had more than
500 employees. Id. at 1092.
None of these cases rested upon facts comparable to those of Hitkansut’s case. In
Paisley, Comserv, and Unification Church, attorneys’ fees were being paid by a third party.
Hitkansut will not be indemnified, unless the court contorts indemnification to mean Hitkansut’s
attorneys will absorb any costs not awarded. Adopting the government’s position based on these
cases would preclude award of attorneys’ fees under any attorney retention arrangement
contingent upon the result. The government’s reasoning reaches too far. It would make the
attorneys the real party in interest in such circumstances, and the attorneys would not get fully
paid, if paid at all, absent an award of fees unless the infringement award was sufficiently
sizable. But, this outcome would fundamentally undermine the statute, precluding from bringing
suit the very litigants intended to be benefitted by the 1996 statutory amendment. The patent
14 The Federal Circuit and other circuits have questioned the application of the real party
in interest doctrine of Unification Church. See, e.g., BASR P’ship v. United States, 915 F.3d
772, 781-83 (Fed. Cir. 2019).
14
owners most likely to use contingent arrangements are those with few resources to self-finance
their litigation, namely those specifically identified by the statute.
In sum, the court finds that under 28 U.S.C. § 1498(a), the patent owner’s costs consist of
attorneys’ fees that the owner may not be legally obligated to pay, such as those fees contingent
on the amount of recovery, when the fees were incurred by the owner’s attorney in representation
of the owner, or where the owner would be contractually obligated to pay such fees if awarded
by the court.
ANALYSIS
To recover attorneys’ fees and expenses under 28 U.S.C. § 1498(a), Hitkansut must first
succeed on proving infringement, i.e., be entitled to reasonable and entire compensation, and
must have “costs” in “pursuing the action.” 28 U.S.C. § 1498(a). This court previously granted
judgment in favor of Hitkansut, Hitkansut, 130 Fed. Cl. 353, and Hitkansut qualifies under the
size limits imposed by the statute. Further, as previously discussed, Hitkansut’s request for
attorneys’ fees and costs constitute “the owner’s . . . costs” as required by the statute.
Accordingly, Hitkansut is entitled to an award of its costs, to include “fees for expert witnesses
and attorneys” if “reasonable . . . in pursuing the action” unless “the position of the United States
was substantially justified or [] special circumstances make an award unjust.” 28 U.S.C. §
1498(a).
A. Was the Government’s Position Substantially Justified?15
1. Interpretation of “substantially justified.”
The government urges the court to import the definition of “substantially justified” from
EAJA, along with attendant judicial interpretations of the term. See Def.’s Resp. at 6-7,
Hitkansut implicitly concurs. See Pls.’ Mot. at 5, Pls.’ Reply at 6-7.
The statute does not define when the government’s position is substantially justified. The
bill amending 28 U.S.C. § 1498(a) in the House of Representatives was not conditioned upon
“the government’s litigation position [not being] substantially justified.” H.R. Rep. No. 104-373,
at 7, 1996 U.S.C.C.A.N. at 4179 (mentioning EAJA and the “substantially justified” standard).
The Department of Justice commented that the bill created “a more expansive award” than was
available to other claimants against the government. Id. The “substantially justified” standard
was added later via amendment of the bill by the Senate. See 142 Cong. Rec. 27,243 (1996)
(proposing the amendment that added the “substantially justified” standard). The Senate’s
amendment was adopted without discussion, but occurred subsequent to the House’s report and
addressed the Department of Justice’s concerns cited in that report.
Neither the Supreme Court nor the Court of Appeals for the Federal Circuit have
interpreted “substantially justified” in the context of 28 U.S.C. § 1498(a). This court, however,
15 The government also argues that special circumstances require denial of the award. The
context of their argument in this respect, however, involves the reasonableness of the request and
is thus addressed as part of the analysis of reasonableness.
15
has previously interpreted the term in a manner consistent with its use in EAJA, see Wright v.
United States, 56 Fed. Cl. 350, 352 (2003), a position supported by the limited legislative
history, H.R. Rep. No. 104-373, at 2-3, 7, 1996 U.S.C.C.A.N. at 4174-75, 4179; 142 Cong. Rec.
27,243. The court thus adopts EAJA’s interpretation of “substantially justified” for cases
proceeding under 28 U.S.C. § 1498(a).
Under EAJA, the government’s position is “substantially justified” when it is “justified in
substance or in the main – that is, justified to a degree that could satisfy a reasonable person,
[which is] no different from the ‘reasonable basis both in law and fact’ formulation.” Pierce v.
Underwood, 487 U.S. 552, 565 (1988) (internal quotation marks omitted) (citations omitted).
The court’s inquiry must “focus[] on the governmenta l misconduct giving rise to the litigation,”
Jean, 496 U.S. at 165, and must examine “the entirety of the government’s conduct and make a
judgment call whether the government’s overall position had a reasonable basis in both law and
fact,” Chiu v. United States, 948 F.2d 711, 715 (Fed. Cir. 1991) (footnotes omitted). “The
government bears the burden of demonstrating that its position was substantially justified.”
Wright, 56 Fed. Cl. at 352 (citing Doty v. United States, 71 F.3d 384, 385 (Fed. Cir. 1995)).
2. Pre-suit conduct & defining “the position of the United States.”
The government objects to Hitkansut’s recitation of the facts of Oak Ridge’s pre-
litigation conduct as “irrelevant.” Def.’s Resp. at 13-14. Despite citing to EAJA to define
“substantially justified,” the government rejects importation of EAJA’s definition of “position of
the United States,” which would incorporate pre-litigation conduct. See id. at 13-14. Instead, it
insists that “the position of the United States” under 28 U.S.C. § 1498(a) refers only to “the
position [taken] in litigation, not the pre-litigation conduct that led to the suit.” Id. at 14.
Hitkansut argues to the contrary, citing the court’s prior adoption of EAJA’s definition. Pls.’
Reply at 7.
EAJA defines the “position of the United States” as 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.” 28 U.S.C. § 2412(d)(2)(D); see also Jean, 496 U.S. at 158-59. Unlike
EAJA, 28 U.S.C. § 1498(a) does not expressly define “the position of the United States.” Strong
reasons exist, however, to reject the government’s argument and consider the government’s
conduct holistically, to include its pre-litigation conduct, when evaluating its position.
The text of 28 U.S.C. § 1498(a) refers to a single “position of the United States.” The
statute makes no distinction between the pre-litigation position and the position taken once
litigation commences. There is nothing inherent in the phrase that would confine its scope to
only the position taken by the Department of Justice during litigation or only to the position
taken by the government after a certain point.
Reference to “the position of the United States” describes what must be “substantially
justified.” Accordingly, courts have routinely held that reference to the “position of the United
States” requires a threshold determination regarding substantial justification encompassing the
government’s entire conduct. E.g., Jean, 496 U.S. at 158-60; Doty, 71 F.3d at 386. The
“substantially justified” standard requires the government’s overall position to have a
“reasonable basis both in law and fact.” Pierce, 487 U.S. at 565 (emphasis added) (citations
16
omitted). The government, however, asks the court to strike, or severely circumscribe, “and
fact” from that inquiry by ignoring pre-litigation conduct. But pre-litigation conduct is far from
irrelevant under the “substantially justified” inquiry. Notably, that inquiry “properly focuses on
the governmental misconduct giving rise to the litigation.” Jean, 496 U.S. at 165 (emphasis
added).
As a practical matter, the court cannot determine whether the government’s position
during litigation was justified without examining the underlying facts relating to the
government’s conduct. A reasonable basis requires more than conceptual arguments germane to
the subject matter; arguments must also hue to the facts. That a litigation position may be
reasonable in the abstract, i.e., has a reasonable basis in law, does not mean that the litigation
position as applied to a specific case remains reasonable when contradicted or unsupported by
the factual record. That is as true in infringement litigation under Section 1498(a), as it is in
most litigation. The acts of infringement necessarily occur pre-litigation.
Further, the addition of the “substantially justified” qualifier to the amendment to 28
U.S.C. § 1498(a) occurred after the Department of Justice commented to Congress that the
attorneys’ fees and cost provision as proposed in the House of Representatives expanded the
government’s liability beyond EAJA due to the absence of the “substantially justified” clause.
See H.R. Rep. No. 104-373, at 7, 1996 U.S.C.C.A.N. at 4179 (citing the Department of Justice’s
views) (“There is no sound reason for adopting a different rule in the case of patent claims
against the government from the EAJA rule on recovery of costs and attorneys’ fees in other
claims against the government.”). Ensuring that use of the phrase “the position of the United
States” in Section 1498(a) aligns closely to EAJA’s usage comports with this legislative history.
Compare 28 U.S.C. § 1498(a) (“Reasonable and entire compensation shall include the owner’s
reasonable costs . . . [but] shall not include such costs and fees if the court finds that the position
of the United States was substantially justified or that special circumstances make an award
unjust.”) (emphasis added), with EAJA, 28 U.S.C. § 2412(d)(1)(A) (“[A] court shall award to a
prevailing party other than the United States fees and other expenses [and costs] . . . unless the
court finds that the position of the United States was substantially justified or that special
circumstances make an award unjust.”) (emphasis added).
Accordingly, the court finds that to evaluate whether “the position of the United States
was substantially justified” requires the court to examine all facts surrounding the conduct of the
United States that are material to infringement of Hitkansut’s patent, regardless of when the
conduct occurred.
3. Whether the government’s position was substantially justified.
Hitkansut challenges whether the government’s position was substantially justified by
providing examples of actions taken by the government that were found to be without merit. The
most prominent example involves Oak Ridge’s pre-litigation conduct, where Oak Ridge learned
of Hitkansut’s invention under a confidentiality agreement and then proceeded to breach the
agreement and infringe the invention after discovering the advantages afforded by the invention.
Pls.’ Mot at 6-8. Further, once litigation commenced, Hitkansut contends that the government
“maintained its unreasonable non-infringement positions [contrary to] the claim construction
process.” Id. at 8-9. Hitkansut also asserts that Oak Ridge failed to timely disclose adverse
17
material information, such as a patent application that describes thermomagnetic processing in
terms that contradicted its trial position and the work by another Oak Ridge researcher who spent
half of the research funding expended on thermomagnetic processing. Id. at 10-11. Finally, as
Hitkansut would have it, the government asserted positions to invalidate the ’722 patent that
were contrary to testimony of its own experts. Id. at 10.
The government responds that because its infringing conduct is a ‘“rightful exercise of
the power of eminent domain,’ . . . it would be incongruous to hold the Government liable for
attorneys’ fees based on pre-litigation conduct that was authorized by [the] very statute that
grants those fees.” Def.’s Resp. at 14 (quoting Leesona, Inc. v. United States, 599 F.2d 958, 967
(Ct. Cl. 1979 (en banc)). In addressing specific instances raised by Hitkansut, the government
cites decisions and orders by the court that adopted or accepted its positions and contends that
those results demonstrate the reasonableness of its position, irrespective of the ultimate outcome
or particular unreasonable stances. Id. at 8-11. For example, the government cites the court’s
rejection of four of the seven claims of the ‘722 patent upon which Hitkansut sued, its bar of
discovery into several classified projects, and its denial of a royalty based on research funding,
which reduced the government’s liability by more than 95%. Id. at 8-11, 22. Additionally, the
government reiterates that specific instances of Oak Ridge’s pre-litigation conduct cannot be part
of the overall reasonableness landscape. Id. at 13-14.
As a preliminary matter, the court agrees with the government that the government can be
found liable for infringement and still advance a substantially justified position. Holding
otherwise would render the “substantially justified” clause superfluous, as infringement is
already a prerequisite for reasonable and entire compensation. 28 U.S.C. § 1498(a); see also
Pierce, 487 U.S. at 569 (“Conceivably, the [g]overnment . . . could take a position that is
substantially justified, yet lose.”); ACE Constructors, Inc. v. United States, 81 Fed. Cl. 161, 165
(2009) (same). Thus, the relevant inquiry is whether the government has demonstrated that the
positions it took during the case, including those taken by Oak Ridge beforehand, were such that
a reasonable person could conclude that its position was supportable. See Pierce, 487 U.S. at
565 (Substantially justified means “justified to a degree that could satisfy a reasonable person.”).
And that inquiry “properly focuses on the governmental misconduct giving rise to the litigation.”
Jean, 496 U.S. at 165.
Oak Ridge’s conduct towards Hitkansut impairs the government’s attempt to argue that
no infringement occurred or that the patent was invalid. Government researchers did not merely
develop thermomagnetic processing only to discover it infringed upon Hitkansut’s patent.
Instead, Oak Ridge had for years studied processing of metals in a magnetic field. Hitkansut,
130 Fed. Cl. at 364. Hitkansut then disclosed to Oak Ridge under a non-disclosure agreement its
patent-pending process of applying two energies concurrently to improve the properties of
metallic parts. Id. at 363. Promptly after the disclosure, Oak Ridge shifted its metal-treating
research to a process involving the concurrent application of induction heating and a high
magnetic field. Id. at 364-65. Oak Ridge researchers took sole credit for this process, publishing
papers and submitting patent applications, id. at 365-66, while deciding not to provide additional
contracts or funding to Hitkansut, id. at 364. Despite thermomagnetic processing involving “a
large oscillatory electromagnetic force,” id. at 364-65 (quoting one invention disclosure); see
also, e.g., Trial Tr. 493:16-19 (May 25, 2016) (deposition of Oak Ridge employee Dr. Wilgen,
read into the record at trial), the government represented the opposite, see e.g., PX P at A342-43
18
(setting out the government’s response to Hitkansut’s interrogatories). The government also
advanced arguments inconsistent with the court’s claim construction. E.g., Hitkansut, 130 Fed.
Cl. at 375, 377, 378. In sum, the government’s position that no infringement occurred lacks
substantial justification in light of Oak Ridge’s decision to substantially alter its research to align
with Hitkansut’s patented process promptly after learning of that process, then using Hitkansut’s
process to Oak Ridge’s benefit without compensating Hitkansut, and issuing papers and filing
patent applications making no reference to Hitkansut’s patent.
Oak Ridge attempted to invalidate the ’722 patent as covering patent-ineligible subject
matter, being obvious, and failing the enablement requirement. Hitkansut, 130 Fed. Cl. at 378-
79, 382, 389. Raising these issues certainly was legitimate, but the government’s specific
arguments lacked substantial justification because they were unsupported by the facts. The
government failed to demonstrate either of the two parts of the test for patent-eligible subject
matter explicated in Alice Corp. Pty. v. CLS Bank Int’l, 573 U.S. 208 (2014). See Hitkansut,
130 Fed. Cl. at 378-82 (finding that Hitkansut never attempted to patent an abstract mathematical
relationship, while its process, though described mathematically, set out a novel method).
Arguments directed towards showing obviousness failed to “address an essential element of each
of the three asserted claims” or to “demonstrate any motivation to combine the . . . prior art.” Id.
at 384, 386. The government’s witnesses acknowledged that the ’722 patent generated
“unexpected” results accomplished through an unconventional use of a relationship. E.g., id. at
365, 387-88. Further, despite years of prior research in metal processing, Oak Ridge’s progress
“changed drastically” only after it “copied [the] ’722 method.” Id. at 388. The enablement
argument failed because although the ’722 patent contained errors, even the government’s expert
witness conceded that “a person 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. at 390. The court also noted that despite arguing invalidity, part
of Oak Ridge’s infringing conduct involved filing its own patent applications. Id. at 365.
The government nonetheless avers that several “reported opinions on the merits [and]
unreported opinions on procedural issues” show the reasonableness of the government’s
positions. Def.’s Resp. at 8. The government overstates the materiality of its success on many
of these points.16 It did prevail in its argument against including research funding in the royalty
base, and that result substantially constrained the compensation owed to Hitkansut. This stance
likely saved the government more than $3.5 million. 17 But, because the court is to consider the
totality of the circumstances in conducting this inquiry, the government’s position may not be
substantially justified even though it may have taken certain reasonable stances during the
dispute. Here, the primary issue was infringement. Consideration of research funding, though
important to determination of compensation, was secondary to infringement as a subset of
damages. That the government blocked Hitkansut’s attempt to expand the government’s liability
16 Forexample, while the government succeeded in invalidating four of the seven
contested patent claims, the remaining claims sufficed to establish a basis for the alleged
infringement.
17 This
amount is based on the possible application of an 8% royalty rate to the
approximately $45 million Oak Ridge received in research fees related to thermomagnetic
processing.
19
by raising an issue of first impression regarding the basis for royalties does not alter whether the
government was substantially justified in arguing that no infringement occurred or that the patent
was invalid.
B. Entitlement to Fees & Costs
1. Hitkansut’s submission of records.
The government argues that Hitkansut’s presentation of attorneys’ fees and expenses
“does not permit an evaluation.” Def.’s Resp. at 33-34. Hitkansut defends its submissions as
highly detailed, consisting of both raw data and summaries. Pls.’ Reply at 17-18. While 28
U.S.C. § 1498(a) does not specify what a plaintiff must provide to justify their request for fees
and costs, the plaintiff ultimately bears the burden of proving the fees owed. See Hensley v.
Eckerhart, 461 U.S. 424, 437 (1983) (“[T]he fee applicant bears the burden of establishing
entitlement to an award.”). Accordingly, the plaintiff should present records “in a manner that
will enable a reviewing court to identify distinct claims.” See id. at 437 (EAJA standard).
Hitkansut has provided highly detailed records, including an itemization of all attorney
hours and the value of that time, an itemization of all expenses, invoices for all experts, and
summary tables. See, e.g., PXs G, H at A039-46. The extensive details may make sorting
through each entry a cumbersome process, but such is to be expected given six years of litigation
involving more than 12,600 hours. The court was also able to understand the basis of the request
despite the extensiveness of the records and the presence of a limited number of mathematical or
typographic errors. In its analysis “the court need not engage in a tediously detailed analysis of
every hour billed, assigning time to different issues,” Dalles Irrigation Dist. v. United States, 91
Fed. Cl. 689, 704 (2010), especially where, as in this case, only infringement and compensation
were at issue. The court thus finds Hitkansut’s submissions sufficient to meet its burden.
One aspect of Hitkansut’s submission is flawed, however. Hitkansut has indicated it
plans to submit another fee request for its post-appeals work, namely its fee request. Pls.’ Mot.
at 20. While all reasonably incurred fees are recoverable, Jean, 496 U.S. at 156, 161-62,
Hitkansut has not timely filed its supplement. The court cannot entertain multiple, successive fee
requests. Otherwise, the fee process would be neverending. In effect, Hitkansut has waived the
right to seek reimbursement of fees in preparing the fee application because none of those fees or
expenses were included in its application or have since been provided. See Jean, 496 U.S. at 163
(warning against a ‘“nightmare’ of infinite litigation to recover fees”); Bratcher v. United States,
138 Fed. Cl. 543, 547 (2018) (holding that owners prevailing in a taking claim waived right to
reimbursement of fees incurred after cut-off date owners used in an initial application).
2. Attorneys’ fees.
Hitkansut’s claim for $3,241,351.00 in attorneys’ fees represents 12,604.4 hours of work
performed as follows: 7,726 hours pre-trial (Category 1) totaling $1,894,511.00; 3,779.2 hours
20
related to trial (Category 2) totaling $1,105,709.00; and 1,099.2 hours during appeal (Category 3)
totaling $331,131.00. See PX H at A041-46.18
Thirty- five Dickinson Wright employees were involved with the case, though nine
attorneys and one “specialist” account for 97.5% of the fees and nearly 97% of the hours. See
PX H. Hitkansut provided biographical information for the top three attorneys by fees sought:
Franklin Smith, John A. Artz, and John S. Artz. See PXs A-C (biographies). These three
represent nearly 75% of the attorneys’ fees sought. See PX H. Franklin Smith is an associate
attorney who graduated from law school in 2013 and billed $1,017,797.50 for 4,369.4 hours at
hourly rates ranging from $210 to $285, and an average rate of $233. PXs C, H, R.19 John A.
Artz is a member of Dickinson Wright with 50 years of legal experience and who practices in the
intellectual property field. PX B. He billed $916,740.00 for 3,333.6 hours at a consistent hourly
rate of $275. PX R at A602. John S. Artz is a member of Dickinson Wright with 25 years of
legal experience involving intellectual property. PX A. He billed $485,605.50 for 1,029.1 hours
at hourly rates ranging from $395 to $545, and an average rate of $472. See PX H. The
remaining seven of the top 10 employees were billed at hourly rates ranging from $115 to $280.
See PX H.
The government argues that Hitkansut’s requested attorneys’ fees are excessive. For
John S. Artz, the government contends that some of his hourly rates exceed acceptable lodestars,
which should be based on the prevailing mean rates for intellectual property lawyers practicing
in the Detroit, Michigan, area and as reflected in the economic surveys conducted by the AIPLA.
Def.’s Mot. at 30-31. The government argues that Hitkansut’s presentation fails to justify certain
rates and does not allow for easy evaluation of the rates and hours claimed. Id. at 33-35. The
government also objects to fees involving two previous unsuccessful lawsuits brought in district
courts, and the fees incurred on appeal. Id. at 35-37. The government further contends any fee
award must be scaled down significantly due to the court’s rejection of including research
funding in the royalty base. Id. at 38-39. In that respect, the government proposes a reduction of
95% based on Hitkansut’s receipt of 5% of the compensation it sought. Id. at 38-39.
Hitkansut defends the rates sought by John S. Artz, arguing that he has charged his
standard rate, which “represents the opportunity cost of what the firm turned away in order to
take [Hitkansut’s case].” Pls.’ Reply at 14. Hitkansut accepts the AIPLA surveys and use of a
localized rate, see Hr’g Tr. 20:14-24 (Feb. 15, 2019); PXs D-F (AIPLA surveys provided by
18 PX R, a detailed itemization of attorney hours, shows 12,721.1 hours at $3,290,782.50.
PX R at A603. The difference is attributable to eight employees not listed in PX H and an
additional 43.3 hours among five attorneys that appears in PX R. Compare PX H, with PX R at
A601-03. Hitkansut represents that the eight employees appearing in PX R and not PX H were
omitted intentionally and affirms the $3,241,351.00 requested in is motion and supported by PX
H, Hr’g Tr. 22:6-22 (Feb. 15, 2019), as corrected for minor typographical errors. The
government’s objection to fees for these eight attorneys, see Def.’s Resp. at 24-26, 31-33, thus is
moot.
19 Mr.
Smith was also billed at $115 to $120 per hour for the first 11 hours of Task 1
work. See PX H at A042.
21
Hitkansut), and notes that John S. Artz’s maximum rate is below the 90th percentile for partners
in the applicable geographic area as reflected by the AIPLA surveys and that his credentials and
experience merit a rate higher than the median. Pls.’ Reply at 15; Hr’g Tr. 21:9-23 (Feb. 15,
2019). Hitkansut also argues that it achieved success by prevailing on the only infringement
claim it asserted and rebutted the government’s attempt to invalidate the patent. Pls.’ Reply at
20.
The statute expressly permits recovery of “reasonable fees for . . . attorneys.” 28 U.S.C.
§ 1498(a). The “most useful starting point . . . is the number of hours reasonably expended on
the litigation multiplied by a reasonable hourly rate.” Hubbard v. United States, 480 F.3d 1327,
1332 (Fed. Cir. 2007) (quoting Hensley, 461 U.S. at 433). A reasonable rate is one “adequate to
attract competent counsel” while avoiding “windfalls to attorneys.” Biery v. United States, 818
F.3d 704, 710 (Fed. Cir. 2016) (quoting Hensley, 461 U.S. at 444). Reasonable attorneys’ fees
for all stages of the litigation are recoverable. E.g., Jean, 496 U.S. at 156, 161-62 (“[A] fee
award presumptively encompasses all aspects of the civil action.”). With these starting points,
the court “must then consider [several factors regarding] whether to increase or decrease the fee,
of which ‘the most critical factor is the degree of success obtained.’” Hubbard, 480 F.3d at 1332
(quoting Hensley, 461 U.S. at 436). The court has applied these standards to fee-shifting
provisions of the Civil Rights Act, EAJA, and the Uniform Relocation Act, e.g., id. F.3d at 1333
(discussing the Civil Rights Act and EAJA); Biery, 818 F.3d at 712 (Uniform Relocation Act);
Lost Tree, 135 Fed. Cl. at 96 (Uniform Relocation Act), and thus finds that this approach should
apply to fees sought under 28 U.S.C.§ 1498(a) as well.
As previously discussed, the court finds Hitkansut’s highly detailed itemization of
attorney hours and tasks sufficient to support the hours expended. Regarding a reasonable
hourly rate, the court concurs with the parties that the AIPLA surveys provide an appropriate
starting point for hourly rates and that the “Other Central” category, which encompasses Detroit,
Michigan, is the appropriate reference point. See, e.g., PX E at A025 (defining the “Other
Central” area).20 Litigation of intellectual property is sufficiently specialized to justify using
rates applicable to that specific field. Between 2012 and 2016, during which the greater part of
the litigation occurred, the average hourly billing rates for partners in the intellectual property
field in the “Other Central” area ranged from $376 (in 2012) to $398 (in 2016). See PXs D-F.
Median rates ranged from $355 (in 2012) to $378 (in 2016) while rates for the third quartile
ranged from $440 (in 2012) to $458 (in 2014). See PXs D-F. Mean and median associate rates
ranged from $254 to $283 (mean) and $243 to $260 (median) during the same period. See PXs
D-F.
The court finds that an hourly rate up to $458 reflecting the third quartile, is reasonable
for John S. Artz, given his patent litigation experience. See PX A. He is the only partner whose
20 The Federal Circuit has recognized that where attorneys perform the majority of their
work outside of Washington, D.C., local rates may be appropriate. See, e.g., Biery, 818 F.3d at
712-14 (affirming use of St. Louis rates when awarding attorneys’ fees for attorneys who worked
primarily in St. Louis, in a case under the Uniform Relocation Act); Avera v. Secretary of Health
& Human Servs., 515 F.3d 1343, 1349-50 (Fed. Cir. 2008) (allowing, but not mandating, use of a
local rate in a case under the Vaccine Act).
22
hourly rate exceeds the mean rate urged by the government. The court further finds that the
median rate for associates of $260 is reasonable, given the patent litigation experience attained
by Franklin Smith, see PX C, the only associate whose hourly rate exceeds the median rate.
These rates appear appropriate to attract counsel competent to handle highly-technical patent
litigation against the resources of the federal government, especially considering that fewer than
10% of attorney hours exceeded these caps, and then only slightly.
Hitkansut may recover reasonable fees for paralegals at prevailing market rates if
sufficiently documented. Dalles Irrigation Dist., 91 Fed. Cl. at 708 (citing Richilin Sec. Serv.
Co. v. Chertoff, 553 U.S. 571 (2008)). Hitkansut has provided detailed invoices for its
paralegals, “specialists,” and an “intellectual property intern” (collectively, “legal support staff”).
See PXs H, R. Hourly rates ranged from $150 to $215 over 545.7 hours, totaling $87,113. See
PXs H, R. As with attorneys, rates prevailing in the community should apply. Hitkansut,
however, has not provided prevailing local market rates for its legal support staff as it has for
attorneys. Some legal support staff were billed at rates slightly below associates, and those rates
appear to align with rates for Washington, D.C. rather than Detroit. See, e.g., Campbell v.
United States, 138 Fed. Cl. 65, 74-78 (2018) (showing rates for paralegals claimed at $210 per
hour, though noting that the Laffey Matrix and Kavanaugh Matrix suggested rates between $154
to $187 for 2013 to 2017).
Because the work and hours of the legal support staff appear reasonable, the court rejects
the government’s argument that Hitkansut’s failure to justify a rate requires denial of an award.
Rather, the rates requested can be adjusted to ensure that a reasonable rate prevails. Recently,
the District Court for the Eastern District of Michigan has found hourly rates for paralegal
services up to $100 to be reasonable in EAJA cases, though these matters often involved social
security claims and attorneys outside of Detroit. See Brusch v. Colvin, No. 15-13972, 2017 WL
1279228, at *3 (E.D. Mich. Apr. 6, 2017) ($100 for a Chicago paralegal); Rheen v.
Commissioner of Social Security, No. 14-11124, 2016 WL 3135762 (E.D. Mich. Apr. 21, 2016)
($75 for a Michigan paralegal). This court has found rates ranging between $150 and $190 per
hour to be reasonable for the applicable period for the St. Louis market in Uniform Relocation
Act cases, e.g., Whispell Foreign Cars, Inc. v. United States, 139 Fed. Cl. 386, 400-01 (2018)
($150 for 2015-16); Campbell, 138 Fed. Cl. at 75 ($175 to $190); Bratcher v. United States, 136
Fed. Cl. 786, 800 (2018) ($150 for 2015-16); Greenwood v. United States, 131 Fed. Cl. 231, 241
(2017) ($150 to $175 for paralegal work performed after 2011), and the AIPLA places St. Louis
and Detroit into comparable metropolitan areas, e.g., PX F at A032. The Laffey Matrix prepared
by the United States Attorney’s Office for the District of Columbia suggests hourly paralegal
compensatory rates of $154 to $164 for D.C.-based work between 2015 and 2018, while the
alternate Kavanaugh Matrix suggests rates between $175 and $187.21 Based on the lower cost of
legal services in Detroit than Washington, as reflected by the AIPLA surveys, and taking into
21 The Laffey Matrix is available at https://www.justice.gov/usao-
dc/file/796471/download. The Kavanaugh Matrix adjusts the Laffey Matrix based on changes to
the Legal Services Index of the Consumer Price Index. Biery, 818 F.3d at 713. The Court of
Appeals for the Federal Circuit has affirmed fee awards using either matrix as part of the court’s
discretion, so long as the court “consider[s] all the relevant facts are circumstances” and justifies
its award decision. Id. at 714.
23
account approved rates in St. Louis, which falls in the same geographic region as Detroit per the
AIPLA surveys, the court adopts $150 as a reasonable rate for services of Hitkansut’s legal
support staff.
Of the $1,894,511.00 requested for pre-trial activities (Category 1), attorneys’ fees
incurred before Hitkansut filed its complaint in this court amounted to $75,831.00. See PX R at
A394-401.22 The court finds that these fees are not reasonably related to the case in this court.
The pertinent time was expended in pursuing two failed suits, one in the District Court for the
Eastern District of Michigan and the other in this court filed when the case in the Eastern District
of Michigan remained pending. See Hitkansut LLC, et al. v. UT Battelle LLC, No. 2:11-cv-
15598 (E.D. Mich. 2011); Hitkansut LLC, et al., v. United States, No. 12-163 (Fed. Cl. 2012).
Both actions were voluntarily dismissed because jurisdiction was lacking. See Def.’s Resp. at
35.
Of the remaining Category 1 fees, 141.4 partner hours, 7.1 associate hours, and 160.2
legal support staff hours exceed the hourly lodestar rates, and accordingly must be reduced by
$6,703.80 in fees. Of the $1,015,709.00 requested for trial preparation, trial, and post-trial
activities (Category 2), 377.8 partner hours, 48.1 associate hours, and 385.5 legal support staff
hours exceed the hourly lodestar rates, and must be reduced by $14,648.10 in fees. Of the
$331,131.00 requested for appellate activities (Category 3), 136.8 partner hours and 306.6
associate hours exceed the hourly lodestar rates, and must be reduced by $13,803.10 in fees.23
Examining whether to reduce the award based on the measure of success, the
“mechanical mathematical analysis” proposed by the government to reduce fees by 95% “is
inconsistent with the nuanced approach” the trial court should take. Hubbard, 480 F.3d at 1334
(rejecting the government’s argument that fees and costs awarded should be 0.06% of those
requested when damages awarded were 0.06% of those sought); see also Hubbard v. United
States, 80 Fed. Cl. 282 (2008) (awarding, on remand, approximately $90,000 in fees and costs
where $400 in damages were awarded), aff’d, 315 Fed. Appx. 307 (Fed. Cir. 2009) (per curiam).
In this instance also, the compensation awarded warrants no reduction of the award. Hitkansut
brought and succeeded on its only claim, that of infringement of the ’722 patent, and
successfully defended the validity of its patent against the government’s challenges. Though
Hitkansut only prevailed on three of seven asserted claims of the patent, there is a difference
between use of “claim” in the context of the litigation and the patent. Infringement of three
claims of the patent results in the same legal outcome as infringement of one or seven claims.
22 Thisamount excludes time of seven attorneys and an IP specialist for whom fees are
not requested. See PX R at A391-A401; Hr’g Tr. 22:6-22 (Feb. 15, 2019).
23 The court is cognizant that it may not award interest without express statutory
permission. E.g., Hubbard, 480 F.3d at 1334. No such permission exists under 28 U.S.C. §
1498(a). But because Hitkansut requests hourly rates generally below the lodestars deemed
applicable by the court for attorneys and the court adopts an hourly rate for legal support staff at
the low end of the common range, it is unnecessary to identify distinct rates for each year of
litigation to avoid running afoul of the no-interest rule.
24
The government did successfully argue that Oak Ridge’s research funding could not give
rise to royalties, effectively reducing Hitkansut’s award by 95%. But this dispute did not
represent 95% of the case. Rather, infringement represented the primary issue. The status of
research funding represented a subset of the damages aspect of the infringement claim.
Arguments focused on the status of research funding did not present a distinct claim nor was the
issue sufficiently significant to warrant identifying and eliminating costs associated with that
subset. See Hensley, 461 U.S. at 440 (“Where the plaintiff has failed to prevail on a claim that is
distinct in all respects from his successful claim, the hours spent on the unsuccessful claim
should be excluded.”); Biery, 818 F.3d at 712 (“When multiple claims are brought in a single
litigation and involve common questions of law, it may be difficult, if not impossible, to separate
out the hours expended on each claim . . . . [But a] fee award is subject to a court’s discretion
and a court ‘may attempt to identify specific hours that should be eliminated, or it may simply
reduce the award to account for the limited success.’”) (quoting Hensley, 461 U.S. at 436-37)
(emphasis added). Further, success or failure on the multiple procedural issues are subsumed
into the overall outcome of the case. Cf. Hensley, 461 U.S. at 440 (“Where a lawsuit consists of
related claims, a plaintiff who has won substantial relief should not have his attorney’s fee
reduced simply because the district court did not adopt each contention raised.”). Here,
Hitkansut obtained more than nominal compensation. The up-front licensing fee of $200,000
that was awarded considerably exceeds what would be deemed nominal damages, even in a
patent litigation. Compare id. at 432-36 (taking degree of success into account along with a
range of other factors to determine a reasonable fee), with Farrar v. Hobby, 506 U.S. 103, 115
(1992) (ruling on a reasonable fee when “a plaintiff recovers only nominal damages because of
his failure to prove an essential element of his claim for monetary relief”).
Additionally, the court rejects the government’s argument that the appeals court is the
proper court to determine attorneys’ fees for the appeal. Def.’s Mot. 37 (arguing that the appeals
court “is the appropriate court to determine whether the position of the United States was
‘substantially justified’ or whether ‘special circumstances make an award unjust’”) (citation
omitted). The Supreme Court implicitly rejected this position in Jean. The appeals court does
not make a separate determination regarding substantial justification. “[A] fee award
presumptively encompasses all aspects of the civil action,” “favors treating a case as an inclusive
whole,” and “only one threshold determination [of substantial justification] for the entire civil
action is to be made.” Jean, 496 U.S. at 159-62. And, “it is appropriate to allow the [trial] court
discretion to determine the amount of the fee award, given its ‘superior understanding of the
litigation . . . .’” Jean, 496 U.S. at 161 (quoting Hensley, 461 U.S. at 437). While “[n]o costs
were taxed in [the] appeal,” Notice of Entry of Judgment Without Opinion (May 9, 2018), ECF
No. 239, taxable costs do not encompass attorneys’ fees. See 28 U.S.C. § 1920(1); see also Fed.
Cir. R. 39 (Practice Notes). Thus, the Federal Circuit’s judgment of affirmance does not
preclude award of attorneys’ fees incurred during appeal.
Accordingly, the court awards $3,130,365.00 in attorneys’ fees to Hitkansut, representing
$1,811,976.20 for pre-trial work (Category 1), $1,001,060.90 for trial preparation, trial, and post-
trial work (Category 2), $317,327.90 for appellate work (Category 3), and $0.00 for post-
appellate work (Category 4).
3. Expert witness expenses.
25
Hitkansut requests $823,196.92 for the expenses of three experts, Dr. Cahill, Dr.
Wagoner, and Mr. Epps. See PX I at A048; PXs J-L. Hitkansut provided itemized invoices for
services rendered by each, PXs J-L, and has already paid these experts for their services, see PX
N. The government has not raised specific objections to the request for expert fees.
Hitkansut employed Dr. Cahill from September 2013 through August 2014 to assist pre-
trial with technical aspects of the patent. Pls.’ Mot. at 14; PX J. Dr. Cahill was a department
head and the Donald B. Willett Professor of Engineering, Professor of Materials Science and
Engineering at the University of Illinois at Urbana-Champaign. Hitkansut v. United States, 115
Fed. Cl. 719, 722 n.5 (2014). Dr. Cahill billed $28,584.94 for consulting services at $495 per
hour, actual travel expenses, and travel time at $247.50 per hour. See PXs I, J.
Hitkansut employed Dr. Wagoner from August 2014 through September 2017 to assist
during all litigation stages with technical aspects of the patent, to include testifying as
Hitkansut’s technical expert during trial. See PX K; see also, e.g., Hitkansut, 130 Fed. Cl. at 372
& nn.18, 19. Dr. Wagoner was a professor emeritus of materials science and engineering at the
Ohio State University, and had been chair of the materials science and engineering department.
Hitkansut, 130 Fed. Cl. at 372 n.19. Dr. Wagoner billed $539,755.42 for consulting services at
$450 per hour and for actual travel expenses. See PXs I, K.
Hitkansut employed Mr. Epps of Epps Forensic Consulting PLLC to consult on damages
from May 2015 through September 2016. See PX L. Mr. Epps has a bachelor’s degree in
business and accounting from California State University and a master’s degree in education
from the University of Phoenix. Hitkansut, 130 Fed. Cl. at 391-92 & n.31. He was accepted as
an expert in forensic accounting and testified at trial regarding damages. Id. Epps Forensic
Consulting billed $254,856.56 for consulting services provided by eight employees at rates
ranging from $155 to $425 and for actual travel expenses. PXs I, L.
“Reasonable and entire compensation . . . includ[es] reasonable fees for expert
witnesses.” 28 U.S.C. § 1498(a). The court finds the expert fees to be reasonable, considering
they were incurred in arm’s length transactions, cf. Lost Tree, 135 Fed. Cl. at 96 (citing Florida
Rock Indus., Inc. v. United States, 9 Cl. Ct. 285, 290 (1985)) (“Fees incurred and paid by a client
at an agreed rate are presumptively reasonable.”), and given the qualifications and purpose of the
experts.24 Dr. Wagoner, Hitkansut’s primary expert witness who incurred two-thirds of the
expert expenses, had strong credentials and was crucial to Hitkansut’s case. “[R]easonable costs
. . . in pursuing the action” includes costs incurred during all stages of the litigation through the
submission of the request for attorneys’ fees and costs, see Jean, 496 U.S. at 161-62, and thus
encompasses the cost of experts during the appellate process as well.
24 Unlike EAJA, 28 U.S.C. § 1498(a) neither contains an express term limiting expert
compensation nor uses a term regarding expert compensation that would counsel that any
limitation should be imported from EAJA. Compare 28 U.S.C. § 1498(a), with id. § 2412.
Correlatively, the Uniform Relocation Act permits reimbursement of “reasonable . . . appraisal,
and engineering fees, actually incurred.” 42 U.S.C. § 4654(c).
26
No costs were taxed in the appeal, and the court has carefully avoided inclusion of any
such costs at this post-appeal stage. Many of the statutorily taxable costs are inapplicable to
appeals because they relate to trial proceedings, such as “fees and disbursements for . . .
witnesses.” See 28 U.S.C. § 1920(1); see also Fed. Cir. R. 39 (Practice Notes). Taxable witness
fees are further defined to cover attendance at trial and attendant travel time, meals, and the
actual transportation expense. See 28 U.S.C. § 1821. None of the expert witness fees incurred
by Hitkansut during appeal fall into those categories, see, e.g., PX J at A153, A156, and thus are
not precluded from award.
Accordingly, the court awards $823,196.92 in expert fees, representing $412,405.89 for
pre-trial work (Category 1), $390,451.03 for trial preparation, trial, and post-trial work (Category
2), and $20,340.00 for work during the appellate stage (Category 3).
4. Other (non-expert) expenses & costs.
Hitkansut claims $442,497.04 in expenses exclusive of expert witnesses through August
3, 2018, divided into “hard” and “soft” expenses. Hard expenses totaling $210,587.27 were
those “paid by the firm,” while soft expenses totaling $231,909.77 were those “incurred by the
firm but not paid out.” PX N; Artz. Decl. ¶ 6. 25 Hard expenses reflect $53,891.99, $132,028.67,
and $24,666.61 incurred in Categories 1 through 3, respectively. See PX M.26 Hard expenses
include, among other things, travel costs, court fees, delivery services, transcripts and certified
copies of official records, and third-party document reproduction services. PX N at A206-17.
Soft expenses reflect $92,077.96, $82,167.51, and $57,644.30 in Categories 1 through 3,
respectively. See PX M. Soft expenses include, among other things, internal reproduction of
documents, computerized legal research, telephone charges, and data hosting. PX N at A218-
A320. The court adopts $442,497.04 as the starting point for expenses through August 3, 2018.
The government argues that $817.73 in expenses predate the complaint in this court and
must be excised because they were not incurred in pursuit of this case. Def.’s Mot. at 36. The
government also contends that expenses from appeal are not permitted because costs were not
taxed on appeal. Id. at 37.
Hitkansut’s expenses are awardable if reasonably related to the case and not otherwise
barred. See 28 U.S.C. § 1498(a). Hitkansut incurred expenses totaling $3,554.98 prior to
commencing litigation in this court, such as filing fees in another court, and those pre-suit
25 Hitkansut’s
itemization of soft costs totals $235,167.77 from December 2, 2011,
through September 30, 2018, see PX N at A320. Hitkansut’s request of $231,909.77, however,
omits expenses for August and September 2018 that appear on the invoice.
26 Hitkansut’s invoice of hard expenses reflects $28,415 more than requested between
Categories 1 and 2. Compare PX M at A204 (summary showing $210,587.27), with PX N at
A217 (invoice showing $239,003.17 after $823,196.92 in expert expenses is removed from the
total of $1,062,200.09). Since the discrepancy is neither explained nor readily apparent, the
court adopts the lower number as requested by Hitkansut.
27
expenses are not reasonably related to the litigation.27 Further, no costs were taxed in the appeal.
Hitkansut incurred expenses totaling $4,614.55 on appeal that are not assignable per the Federal
Circuit’s judgment. See 28 U.S.C. § 1920(1)-(5); see also Fed. Cir. R. 39 (Practice Notes).
Other expenses are not covered by the definition of “cost” for the purpose of whether they are
taxable, and thus are not subject to the Federal Circuit’s decision.
Among non-expert hard expenses are costs associated with attorney travel, including
transportation, lodging, and meals. The court finds these compensable under 28 U.S.C. §
1498(a) if supported by sufficient documentation and reasonably related. See, e.g., Dalles
Irrigation Dist., 91 Fed. Cl. at 710 (finding attorney travel compensable under EAJA).
Hitkansut’s itemized expenses suffice. See PX R.
Accordingly, the court awards $434,327.62 in non-expert expenses and costs, consisting
of $142,414.97 in pre-trial expenses (Category 1), $214,196.18 in trial preparation, trial, and
post-trial expenses (Category 2), $77,716.45 in expenses during the appeal process (Category 3),
and $0.00 in post-appellate expenses.
5. General reasonableness & special circumstances.
Lastly, the government argues that Hitkansut’s request must be reduced because it is
unreasonable for costs to exceed the value of the claim. Def.’s Mot. at 37-40. Essentially, the
government seeks to cap any award at $200,000 plus interest from February 2007. Id. at 40.
Hitkansut avers that no case law supports this proposition, Pls.’ Reply at 20, and that value lies in
vindication of its ownership rights, its reputation, and the patent’s validity, see Hr’g Tr. at 67:5-
23 (Feb. 15, 2019).
The court recognizes that an award of attorney fees and costs of several million dollars is
significant. Hitkansut’s claim, however, was vigorously contested by the government, involved
highly-technical subject matter, spanned six years, and proceeded through a lengthy appeal.
Hitkansut also faced an opponent with vast resources whose calculus regarding settlement and
the value of precedent differs from that of a private litigant.
The fee shifting provision contains no explicit cap on the owner’s reasonable costs.
Instead, it provides that “[r]easonable and entire compensation shall include the owner’s
reasonable costs, including reasonable fees for expert witnesses and attorneys, in pursuing the
action.” 28 U.S.C. § 1498(a). The government reads an unstated cap into the statute through the
term “reasonable.” As the government sees it, it is unreasonable to spend millions to obtain a
judgment of $200,000 plus interest. See Def.’s Mot. at 39.
Precedent uniformly contravenes the government use of “reasonable” in the context of a
fee-shifting statute. Under both the Uniform Relocation Act and EAJA, it is not uncommon for
awarded attorneys’ fees and costs to exceed damages. E.g., Biery, 818 F.3d 704 (affirming
award under the Uniform Relocation Act of more than $700,000 in fees and costs on damages of
27 Ineligible
expenses include the $817.73 in hard costs challenged by the government and
an additional $2,737.25 in soft costs. PX N at A218.
28
$270,000), aff’g, No. 07-693L, 2014 WL 12540517 (Fed. Cl. Jan. 24, 2014); Hubbard, 80 Fed.
Cl. 282 (awarding $90,000 in fees and costs under EAJA for on damages of $400), aff’d, 315
Fed. Appx. 307 (per curiam); see also Dalles Irrigation Dist., 91 Fed. Cl. 689 (awarding
$210,000 in fees and costs under EAJA where $173,000 was awarded in damages); Shelden, 41
Fed. Cl. 347 (awarding $600,000 in fees and costs under the Uniform Relocation Act where
$200,000 was awarded in damages). Fee awards exceeding damages occur despite EAJA’s
explicit caps on hourly rates for experts and attorneys. 28 U.S.C. § 2412(d)(2). But these caps
do not preclude fees and expenses from exceeding damages because EAJA imposes a ceiling on
hourly rates, not a ceiling on total compensation. Awards under the Uniform Relocation Act, a
takings statute like 28 U.S.C. § 1498(a), omit any caps. See 42 U.S.C. § 4654(c). Accordingly,
“reasonable” in this context examines whether costs were necessary to the litigation and incurred
at prevailing market rates, and not whether costs would have made litigation unprofitable in the
absence of a fee-shifting provision.
Accepting the government’s argument would contravene the statutory purpose. Fee-
shifting provisions like 28 U.S.C. § 1498(a) exist precisely to accommodate suits where the cost
to bring the suit could not be recovered from the damages awarded, i.e., suits where a
meritorious plaintiff could not afford to bring the suit because the damages recoverable, however
real, are insufficient to attract attorneys. See H.R. Rep. No. 104-373, at 1, 6-7, 1996
U.S.C.C.A.N. at 4173, 4178-9 (“The purpose of [the amendment] is to help small business,
independent inventors and nonprofit organizations recover the legal costs associated with
defending their patents when the Federal government is found liable for taking and using them.”)
(emphasis added); see also H.R. Rep. No. 96-1418, at 1, 12, 1980 U.S.C.C.A.N. 4984, 4984,
4991 (identifying EAJA’s purpose as “reduc[ing] the deterrents and disparity” that arise
“because of the expense involved in securing the vindication of their rights [against the
government],” and finding that “[w]hen there is an opportunity to recover costs, a party does not
have to choose between acquiescing to an unreasonable government order or prevailing to his
financial detriment”). “The [g]overnment’s general interest in protecting the federal fisc is
subordinate to the specific statutory goals of encouraging private parties to vindicate their rights
and ‘curbing excessive regulation and the unreasonable exercise of [g]overnment authority.’”
Jean, 496 U.S. at 163-65 (citation omitted). Forcing a potentially meritorious patent owner to
choose between surrender and a Pyrrhic victory creates precisely the Catch-22 situation that
Congress and courts have specifically rejected under other fee-shifting statutes.
Finally, the government’s analysis of reasonableness rests on several improper
assumptions. The government emphasizes the final results, not the potential value at the time
Hitkansut made its litigation decisions. Hitkansut may have recovered only $200,000 plus
interest, but sought up to $5.6 million based on the research-funding issue of first impression.
What matters for rationality is Hitkansut’s potential value: its possible recovery multiplied by the
probability of success, perhaps adjusted for aversion to risk, and less anticipated legal costs. See,
e.g., Steven Shavell, Suit, Settlement, & Trial: A Theoretical Analysis Under Alternative
Methods for the Allocation of Legal Costs, 11 J. Legal Stud. 55, 56-59 (1982).28
28 Asimilar question, if it were based on valid assumptions, could be asked of the
government, which likely spent far more than $200,000 to defend this case.
29
This simple proposition is further complicated here by several considerations not
addressed by the government. The odds of success are difficult to calculate for an issue of first
impression. Prior expenditures that cannot be recovered, i.e., sunk costs, should be given no
consideration in whether to proceed with further costs to obtain the expected result. Litigation
proceeds in discrete stages: pre-complaint investigation, complaint, initial discovery, extended
discovery, expert discovery, pre-trial motions to dismiss or for judgment, trial, post-trial motions,
appeal. Each stage imposes discrete costs, could change the expected value, results in previous
costs being sunk, and thus requires a new decision at every stage whether to proceed by
assuming whether future costs are likely to exceed the expected value. 29 An additional point of
complexity arises from fee-shifting provisions like 28 U.S.C. § 1498(a). In such cases, litigation
costs may not actually be sunk, and thus must, like the expected recovery, also be adjusted for
the probability of success. See, e.g., Shavell, supra, at 60. Irrespective of an economic analysis,
28 U.S.C. § 1498(a), like other fee-shifting statutes, contemplates awards of attorneys’ fees and
costs in excess of damages precisely to allow vindication of rights by those with limited means.
CONCLUSION
For the foregoing reasons, Hitkansut’s motion for attorneys’ fees and costs under 28
U.S.C. § 1498(a) is GRANTED in part and DENIED in part. Hitkansut is awarded attorneys’
fees and costs as delineated above. The clerk shall enter final judgment for Hitkansut for the
total amount of $4,387,889.54.
It is so ORDERED.
s/ Charles F. Lettow
Charles F. Lettow
Senior Judge
29 It is rational for a plaintiff to spend more than the expected value of the case so long as
any cost in proceeding is below the expected value. For example, assuming undisputed damages
of $100,000 and liability as the only issue, if a plaintiff believed it had a 50% chance of winning,
the expected value of the case is $50,000. Therefore, it would be rational to spend up to $50,000
in litigation costs.
Assume the hypothetical plaintiff succeeds at trial at a cost of $35,000. Defendant
appeals. Plaintiff assesses chances of prevailing on appeal at 75%. The expected value is now
$75,000 at this stage. It would be rational to litigate further so long as litigation costs in this
round are below $75,000. Thus, plaintiff may spend $110,000 to recover $100,000; $35,000
from the first trial and $75,000 from the second. Of course, an astute plaintiff can consider the
total probability of success from the outset, which combine to a 37.5% overall success rate, but
could still end up spending more than the ultimate recovery.
.
30