United States District Court, D. New Jersey
SUSAN D. WIGENTON, District Judge.
This matter comes before the Court by way of Motion of Defendant Sigmapharm Laboratories, Inc. ("Sigmapharm" or "Defendant") for Attorney's Fees Pursuant to 35 U.S.C. § 285 and Federal Rule of Civil Procedure 54. (Dkt. No. 207). Plaintiff Gilead Sciences, Inc. ("Gilead") opposes this Motion. (Dkt. No. 210). This matter was decided without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Defendant's Motion for Attorney's Fees is DENIED.
I. BACKGROUND AND PROCEDURAL HISTORY
This case involved a Hatch-Waxman patent infringement action relating to a chemical compound called adefovir dipivoxil ("AD"), which is an active pharmaceutical ingredient used in the treatment of hepatitis B. A.D. is protected by two United States patents assigned or licensed to Gilead, namely U.S. Patent No. 5, 663, 159 ("the '159 patent") and U.S. Patent No. 6, 451, 340 ("the '340 patent"). Gilead sells A.D. tablets under the brand name HEPSERA®. These patents were approved on September 20, 2002 by the U.S. Food and Drug Administration ("FDA"). In June 2010, Sigmapharm submitted an Abbreviated New Drug Application ("ANDA") No. 202051, seeking approval from the FDA to manufacture and sell a generic version of Gilead's HESPERA® 10-milligram tablets. On September 24, 2010, Gilead filed its Complaint, alleging infringement of the '159 patent and the '340 patent (collectively "Patents-In-Suit"), as well as invalidity based on prior art. (Dkt. No. 1, Compl.). Gilead asserts, inter alia, that Sigmapharm's proposed A.D. product will infringe the Patents-In-Suit. On December 1, 2011, this Court held a Markman Hearing in this matter, and subsequently on May 31, 2012, the Court issued its opinion regarding the related claim constructions. On December 11, 2012, Gilead filed its Amended Complaint. (Dkt. No. 141.) On December 20, 2012, Gilead filed a Motion to Dismiss Defendant's Sixth Counterclaim and to Strike Defendant's Sixth Affirmative Defense Directed to Inequitable Conduct. (Dkt. No. 148.) On March 1, 2013, this Court denied Gilead's Motion to Dismiss without prejudice subject to the right to renew as an in limine motion prior to trial or as otherwise directed by the Court. (Dkt. No. 163.)
On or about March 15, 2013, Gilead executed and provided Sigmapharm with an unconditional and irrevocable covenant not to sue for infringement of the Patents-In-Suit. This covenant permits Sigmapharm to manufacture, produce, and sell the exact same proposed ANDA product under the same conditions set forth in Sigmapharm's original ANDA. On March 22, 2013, Gilead submitted its final Motion to Dismiss the current action, requesting that all claims be dismissed with prejudice, including any claims for attorney's fees from Sigmapharm. (Dkt. No. 170). On October 8, 2013, this Court ordered dismissal with prejudice for all claims and counterclaims, but permitted Sigmapharm to file a motion for attorney's fees under 35 U.S.C. § 285. (Dkt. No. 206).
Subsequently, on October 23, 2013, Sigmapharm filed the instant motion for attorney's fees claiming that this case is "exceptional" within the meaning of 35 U.S.C. § 285. (Dkt. No. 208). Sigmapharm argues that the case is "exceptional" because Gilead filed a patent infringement suit on patents and claims that it knew to be invalid and/or unenforceable, and because it continued litigation even after it was clear it could not succeed. Gilead, on the other hand, contends that it had a legitimate basis for asserting and maintaining its infringement claims for both patents, and that these patents were both valid and enforceable at the time the litigation was instituted and that they remain valid and enforceable today.
II. LEGAL STANDARD
The general rule, known as the "American Rule, " is that "each party bears its own costs." Refac Int'l, Inc. v. IBM Corp., et al., 710 F.Supp. 569, 570 (D.N.J. 1989); Machinery Corp. of Am. v. Gullfiber AB, 774 F.2d 467, 471 (Fed. Cir. 1985). A statutory exception to this rule can be found in 35 U.S.C. § 285, which provides: "[t]he court in exceptional cases may award reasonable attorneys' fees to the prevailing party." This provision "is normally invoked only at the end of litigation." SL Waber, Inc. v. Am. Power Conversion Corp., 135 F.Supp.2d 521, 527 (D.N.J. 1999). "The legislative history of § 285 indicates that Congress intended, even after trial, that it be used sparingly, since it represents a departure from the usual rule that counsel fees are not awardable to the prevailing party in an action at law, and the broad policy against allowing costs to be erected as an undue barrier to litigation." Id . Moreover, it "is limited to circumstances in which the award of fees is necessary to prevent a gross injustice.'" Aspex Eyewear Inc. v. Clariti Eyewear, Inc., 605 F.3d 1305, 1314 (Fed. Cir. 2010) (citation omitted).
Overall, it is within the discretion of the court to award fees and expenses. See Machinery Corp. of Am., 774 F.2d at 471. "Only after the prevailing party has established the exceptional nature of the case by clear and convincing evidence should the district court decide whether or not to make the award." Id . However, even if the Court finds the case to be exceptional, it still may decline to award fees based on the totality of the circumstances. See ADM Corp. v. Speedmaster Packing Corp., 525 F.2d 662, 664 (3d Cir. 1975).
Federal Rule of Civil Procedure 54(d) permits the parties to request and recover attorneys' fees after showing entitlement to such an award.
A. Whether Sigmapharm is a "Prevailing Party"
First, the court must determine whether the party seeking fees and expenses is the "prevailing party." Defendants who obtain a voluntary dismissal with prejudice are considered prevailing parties. See Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027, 1035 (Fed. Cir. 2006); Newell v. Nagl Mfg. Co., No. 04-1875, 2007 WL 2033838, at *5 (D.N.J. July 11, 2007) (Wigenton, J.) (citation omitted). Gilead even concedes that "Sigmapharm may technically be considered the prevailing ...