United States District Court, D. New Jersey
WILLIAM H. WALLS SENIOR UNITED STATES DISTRICT COURT JUDGE.
motion arises out of a patent dispute between Plaintiff
Howmedica Osteonics ("Howmedica") and Defendant
Zimmer and Centerpulse Orthopedics ("Zimmer").
After eleven years of litigation, all four of Plaintiff s
patents have been invalidated. Defendant Zimmer now moves for
attorney fees and costs, expert costs, and prejudgment
interest under 35 U.S.C. § 2S5. Zimmer seeks to recover
SI3, 496, 086.86 in fees, $513, 258.38 in costs, SI, 016,
599.29 in expert costs, and S5, 821, 225.69 in prejudgment
interest. Defendant's motion for fees and costs is
granted in part.
AND PROCEDURAL BACKGROUND
long and complicated facts of this case have been fully
recounted in the Court's previous opinions on
Defendant's motions for summary judgment, ECF Nos. 176,
247. In short, this case arises out of a patent dispute over
a series of related patents filed by Plaintiff Howmedica.
These patents disclose processes for irradiating and heating
polymers used in medical implants which are intended to
increase the usable life of the implants. Irradiating and
heating polymer is commonly used to sterilize and strengthen
polyethylene, but this process creates atoms and molecules
with unpaired electrons in their outermost electron shell
known as "free radicals." These free radicals can
cause oxidation and accelerated wear of the polymer if
exposed to oxygen. However, if the polymer is irradiated in
an inert atmosphere, the free radicals will become
"crosslinked" and the polymer will exhibit superior
wear characteristics. The patents at issue teach a process
for heating and irradiating ultra-high-molecular-weight
polyethylene (UHMWPE) in an inert atmosphere using specific
time and temperature combinations to maximize crosslinking
and decrease oxidation and wear.
Zimmer is a manufacturer and marketer of medical implant
products. In 2005, Plaintiff brought this action against
Defendant for the alleged infringement of four of
Howmedica's patents: U.S. Patent No. 6, 174, 934
("the '934 patent), U.S. Patent No. 6, 372, 814
("the '814 patent"), U.S. Patent No. 6, 664,
308 ("the '308 patent) and U.S. Patent No. 6, 818,
020 ("the '020 patent"). Compl., ECF No. 1.
13, 2007, this Court granted Defendant's motion for
partial summary judgment, finding the '934, '814, and
'308 patents invalid for indefiniteness because of their
failure to properly define a critical claim limitation, the
"Arrhenius limitation." ECF No. 176. On August 19,
2008, this Court granted Defendant's motion for partial
summary judgment, finding that Zimmer's products did not
infringe claims 7, 10, 11 and 12 of the '020 patent. ECF
No. 247. Upon Zimmer's request, the U.S. Patent and
Trademark Office ("PTO") conducted an inter partes
reexamination of the '020 patent and rejected all of the
'020 patent claims over prior art. The Patent Trial and
Appeal Board ("PTAB") affirmed in part and reversed
as to claims 7-12. Both Howmedica and Zimmer appealed this
decision to the Federal Circuit, which held that all of the
'020 claims were invalid due to prior art. Final judgment
was entered on July 27, 2016. Order, ECF No. 424. Defendant
Zimmer now moves for an award of fees, costs, expert costs
and prejudgment interest associated with its eleven-year
defense of this action.
U.S.C. § 285 authorizes the Court to award reasonable
attorney fees to the party prevailing in patent litigation in
an "exceptional case." To satisfy the statute,
Defendants must establish: (1) they are the prevailing party;
(2) the case is exceptional; and (3) the fees are reasonable.
Machinery Corp. of America v. Gullfiber AB, 774 F.2d
467, 471 (Fed. Cir. 1985). Defendants bear the burden to
establish the exceptional nature of the case by a
preponderance of the evidence. Octane Fitness, LLC v.
ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1758
'exceptional' case is simply one that stands out from
others with respect to the substantive strength of a
party's litigating positions (considering both the
governing law and the facts of the case) or the unreasonable
manner in which the case was litigated." Id. at
1756. Exceptionality is determined by courts "in the
case-by-case exercise of their discretion, considering the
totality of the circumstance." Id. An award of
fees may be justified where a case "present[s] either
subjective bad faith or exceptionally meritless claims,
" or where a party has engaged in misconduct, whether or
not that conduct is independently sanctionable. Id.
at 1757. In assessing the totality of the circumstances,
courts can consider "nonexclusive factors, "
including "frivolousness, motivation, objective
unreasonableness (both in the factual and legal components of
the case) and the need in particular circumstances to advance
considerations of compensation and deterrence."
Id. at 1756 n.6 (citing Fogerty v. Fantasy,
Inc., 510 U.S. 517, 534 n.19. (1994)). While "there
is no precise rule or formula" for determining if a case
is exceptional, Octane Fitness, 134 S.Ct. at 1756, "fee
awards are not to be used 'as a penalty for failure to
win a patent infringement suit.'" Gaymar Indus.,
Inc. v. Cincinnati Sub-Zero Prods., Inc., 790 F.3d 1369,
1373 (Fed. Civ. 2015) (citations omitted). Even if a district
court determines that a case is exceptional, it remains
within the court's discretion to deny a fee award based
on its familiarity with the matter and the interest of
justice. Icon Health & Fitness, Inc. v. Octane
Fitness, LLC, 576 Fed.Appx. 1002, 1005 (Fed Cir. 2014).
parties dispute the appropriate standard to assess Plaintiffs
conduct before the PTO. Defendants claim that the case may be
exceptional even if inequitable conduct is not proved by
clear and convincing evidence. Def.'s Br. at 19, n.5, ECF
No. 436. Plaintiffs argue that because inequitable conduct
must be proven by clear and convincing evidence to invalidate
a patent, the same standard applies when determining whether
a party's conduct before the PTO renders a case
"exceptional." Pl.'s Opp. at 6, ECF No. 445.
inequitable conduct before the PTO, the Court must find by
clear and convincing evidence that (1) the undisclosed
reference was material and (2) the party acted with the
specific intent to deceive the PTO. Therasense, Inc. v.
Becton, Dickinson, and Co., 649 F.3d 1276, 1290. To
satisfy the materiality standard, defendant must show that
the PTO would not have allowed the claim had it been aware of
the undisclosed reference. Id. at 1291. To satisfy
the intentionality prong, the moving party must demonstrate
that the applicant knew of the reference, knew it was
material, and made a deliberate decision to withhold it from
the PTO. Id. The intent to deceive may be inferred
from conduct, but only if it is "the single most
reasonable inference" that can be drawn from the
the Federal Circuit has not addressed the standard to apply
when considering conduct before the PTO for purposes of a fee
award, the Supreme Court in Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 134 S.Ct. 1749, 1758 (2014)
unequivocally held that the "preponderance of the
evidence" standard applies in motions for attorneys'
fees under section 285. The Court will apply the
"preponderance of the evidence" standard to the
Plaintiffs conduct before the PTO. See Diet Goal
Innovations LLC v. Chipotle Mexican Grill, Inc., No.
2;12-cv-00764, 2015 WL 1284669, at *5 (E.D. Tex. Mar. 20,
2015) (Bryson, J., sitting by designation) ("[T]he Court
will consider [evidence of inequitable conduct] as part of
the 'totality of the circumstances' inquiry required
by Octane, and the totality of the evidence .. . will be
weighed using the preponderance of the evidence
standard."); see also Novartis Corp. v. Webyention
Holdings LLC, No. CCB-11-3620, 2015 WL 6669158, at *4,
n. 5 (D. Md. Oct. 28, 2015) ("Regardless of whether [the
prevailing party] could establish that [the patent owner]
engaged in inequitable conduct before the PTO, this court
finds that [the patent owner's] actions at least justify
an inference of improper motivation or subjective bad faith,
both of which can be include a district court's totality
of the circumstances inquiry upon a showing of a
preponderance of the evidence."). But see Robbins
Co. v. Herrenhiect Tunneling Sys. USA, Inc., No.
5;13-cv-2113, 2015 WL 3454946, at *4 (N.D. Ohio May 29, 2015)
(applying clear and convincing standard to inequitable
conduct allegations in motion for attorneys' fees).
Court will use the inequitable conduct framework of
materiality and intent as a guide in considering Plaintiffs
conduct before the PTO, but the relevant inquiry in this
motion is only whether the case "stands out from others
with respect to the substantive strength of a party's
litigating positions (considering both the governing law and
the facts of the case) or the unreasonable manner in which
the case was litigated." Octane Fitness, 134 S.Ct. at
1756; see Novartis Corp., 2015 WL 6669158, at *4, n.
Defendant is the prevailing party.
parties do not dispute that Defendant is the prevailing
party, as all of the patents in suit have been invalidated,
and judgment accordingly entered. Order, ECF No. 424.
The case is exceptional.
argues that this case is exceptional because (1) Plaintiff
engaged in inequitable conduct before the PTO, (2) Plaintiff
engaged in litigation misconduct, and (3) Plaintiff breached
its disclosure duties before the PTO during reexamination.
Conduct Before the PTO during patent prosecution
argues that this case is exceptional because Plaintiff
engaged in inequitable conduct before the PTO. Def.s' Br.
at 18. Defendant claims that Plaintiff withheld test data
produced by their employee Dr. Wang, three publications by
Dr. Wang ("Wang Papers"), and Dr. Wang's
affiliation with Plaintiff at the time of his declaration.
Defendant also argues that a declaration by Dr. Deh-Chuan Sun
that Plaintiff submitted during the prosecution of an earlier
patent in the patent family constituted inequitable conduct
as "affirmatively egregious misconduct."
Id. at 21.
response, Plaintiff contends that it did not engage in
inequitable conduct. Pl.'s Opp. at 5. Plaintiff maintains
that it had no duty to disclose the omitted data because it
was inaccurate and inconclusive. Howmedica further argues
that Defendant cannot prove that any of Howmcdica's
agents acted with the specific intent to deceive the PTO.
Solubility and Swell Ratio Test Data During '934 Patent
the prosecution of the '934 patent, the PTO initially
rejected Howmedica's claims on the basis of a prior
reference, the Streicher reference. Two claims in the
'934 patent contained a limitation for "a solubility
of less than 74.7%." Rutsch Decl. Ex. 1, U.S. Patent No.
6, 174, 934 Bl (filed Jan. 23, 1998), ECF No. 429-1.
Solubility relates inversely to crosslinking; polyethylene
with high crosslinking will have correspondingly low
solubility. These claims were rejected by the examiner as
inherently disclosed by Streicher. Rutsch Decl. Ex. 18,
7/27/99 PTO Office Action Summary at 3, ECF No. 429-18.
the rejection, Howmedica employee Dr. Wang performed tests in
an attempt to demonstrate that the '934 material met the
"less than 74.7%" solubility limitation, and that
the Streicher reference did not. Wang's testing compared
the Streicher material, the patented '934 material, and a
control sample that was nitrogen-irradiated but not otherwise
treated. Rutsch Decl. Ex. 19, Ash Chopra, Interoffice
Memorandum, ECF No. 429-19; Rutsch Decl. Ex. 20, Swell Ratio/
Gel Content Data, ECF No. 433-1. The test provided two
relevant sets of data; a direct measure of the materials'
solubility, and a measure of the materials* "swell
ratio." Rutsch Decl. Ex. 20, Swell Ratio/ Gel Content
Data. Like solubility, "swell ratio" is inversely
related to crosslinking; highly crosslinked material will
have a low swell ratio. The test provided two results for
both gel content and swell ratio. The relevant results of the
solubility test showed gel content for all materials,
including Streicher, above__. Tins equates to
approximately__, solubility, far less than the 74.7% claimed
in the patent. The solubility data indicated that the
patented material was not measurably better than Streicher,
and that Streicher anticipated the claimed invention.
swell ratio data also indicated that the Streicher material
was highly crosslinked. The swell ratio measurements of the
patented invention were 3.76 and 3.81, averaging 3.785.
Id. The Streicher material had measurements of 4.20
and 3.11, averaging 3.655. Id. This indicated that
the Streicher material had a lower swell ratio, and therefore
higher crosslinking, than the claimed invention. The results
were therefore consistent with the examiner's finding
that Streicher inherently disclosed the '934 patent.
and Dr. Wang did not disclose the unfavorable data relating
to Streicher. Dr. Wang did not disclose any of the solubility
test results (labeled "Gel Content" above), or the
3.11 Swell Ratio test result. Deni Cert. Ex. I, Decl. of Dr.
Aiguo Wang ¶ 32, ECF No. 445-3. Instead, Dr. Wang
provided the average of the two swell ratio test results for
the patented material, 3.785, and then ran an additional
swell ratio test on the Streicher material. This additional
test produced a more favorable result of 3.96, which Wang
averaged with the original 4.20 result and presented this new
total-4.08- to the Examiner. Id. at¶ 18; Rutsch
Decl. Ex. 23, Aff. of Aiguo Wang, ECF No. 430-2. Contrary to
the initial test results, the results presented to the
examiner indicated that the patented material was, instead of
less, more crosslinked than the Streicher material.
Examiner responded that it did not find this attempt to
overcome Streicher to be persuasive. Rutsch Decl. Ex. 25,
2/15/00 PTO Office Action Summary at 2, ECF No. 430-4. The
Examiner stated that from the swell ratio testing it was not
clear (1) "whether the difference in average swell ratio
is a significant improvement (3.785 comparted to 4.08);"
or (2) whether the "difference results from the
[patented process] or from the difference in form of the
material." Id. at 3. Dr. Wang then submitted a
supplemental affidavit. He clarified that there was no
difference in the form of the materials. Rutsch Decl. Ex. 26,
Supp. Aff. of Aiguo Wang ¶ 1, ECF No. 430-5. He then
stated that the Streicher swell ratio (4.08) was "not
statistically different" from the average swell ratio of
the nitrogen-irradiated control sample (4.255.) Id.
¶ 7. Dr. Wang did not address the comparison of 3.785 to
4.08 that concerned the Examiner. The Examiner granted the
patent on the basis of Dr. Wang's representations. Rutsch
Decl. Ex. 28, Notice of Allowability at 2, ECF No. 430-7.
argues that Plaintiff committed inequitable conduct by
failing to disclose the solubility test data and the 3.11
swell ratio test result.
argues that nondisclosure of the solubility test data
constitutes inequitable conduct. Defendant claims that the
data is material because it "directly contradicted
Applicant's and Dr. Wang's arguments to distinguish
the Streicher. . . prior art references." Def.s' Br.
at 19. Defendant argues that the indistinguishable, __
results for all materials reflect that all of the tested
materials were so highly crosslinked that they could not
dissolve. Def.'s Reply, ECF No. 449 at 5. Defendant
argues that the intent to deceive is demonstrated because
Plaintiff was in possession of this data that it knew was
consistent with the examiner's concerns regarding
Streicher, and also demonstrated by Dr. Wang's failure to
respond to the examiner's concerns that the .295
improvement over Streicher was not "statistically
significant." Def.'s Br. at 19-20.
responds that the solubility data was inconclusive, and did
not need to be disclosed. Plaintiff argues that the test,
which measured the materials' solubility in xylene, was
an inappropriate method for measuring differences in
solubility. Pl.'s Opp. at 14. Plaintiff contends that
inaccuracy of the test is demonstrated by the reported gel
contents of-99% for the control sample, which is known to
have a lower gel content. Id.
Court cannot, on the basis of the evidence before it,
determine whether the results showing__gal demonstrated a
high level of crosslinking of all tested materials, or merely
reflected a poorly-designed test method. As the Defendants
have not demonstrated that the patent would have been denied
but-for the omission of the solubility data, the
"materiality" prong is not satisfied. See
Therasence, Inc., 649 F.3d at 1291.
Swell Ratio Data
argues that the omission of the 3.11 swell ratio data point
also constitutes inequitable conduct. Def.s' Br. at 20.
Defendant argues that the initial test confirmed that
Streicher was superior to the patented material, but that
Plaintiff discarded the test. Id.
answers that the 3.11 data point was discarded not to
manipulate the results, but merely because it was inaccurate.
Pl.'s Opp. at 8. Plaintiff submits Dr. Wang's
Declaration which says that the large variation between the
two data points-4.20 to 3.11-shows that one result was
inaccurate. Deni Cert. Ex. I, Wang Decl. ¶ 17. Dr. Wang
believed that the 3.11 value was inaccurate because it was
low as compared to the results of the other swell tests.
Id. at ¶ 18. He stated that he discarded the
3.11 test result because the third swell test showing 3.96
confirmed his belief that 3.11 was inaccurate. Id.
at ¶ 19.
with the record before it, the Court finds that the Defendant
has not proved that the patents would not have issued but for
the withheld data. Consequently, the Defendant has not
demonstrated that the omission was material. See Therasence,
Inc., 649 F.3d at 1291.
the Court does take note of the withheld data for purposes of
the totality-of-the-circumstances inquiry. Octane
Fitness, 134 S.Ct. at 1756; Novartis Corp., 2015 WL
6669157, at *4-5 & n.5 (analyzing conduct before the PTO
under totality of the circumstances inquiry and finding case
exceptional "[r]egardless of whether [the prevailing
party] could establish that [the patent owner] engaged in
inequitable conduct"). When faced with the
Examiner's observation that Streicher anticipated the
patent, Plaintiff ran tests producing four Streicher data
points; two solubility tests, and two swell ratio tests.
Rutsch Decl. Ex. 20, Swell Ratio/ Gel Content Data. When
these results were unfavorable, Plaintiff used the single
favorable data point, conducted another swell ratio test, and
presented the combined results to the examiner. Deni Cert.
Ex. I, Wang Decl. ¶¶ 17, 32. Even if some of Dr.
Wang's data were unusual, the decision to only present
the single favorable Streicher data point appears
disingenuous. It was also likely a violation of
Plaintiff's broad disclosure requirements before the PTO.
See 37 C.F.R. § 1.56(b)(2); Notice of Proposed
Rulemaking, 56 Fed. Reg. 37321, 37324 (Aug. 6,
Wang's declaration convinced the examiner to issue the
patents indicates that the data were highly relevant to the
ultimate patentability of the claims at issue, even if not
but-for material. See Rutsch Decl. Ex. 28, Notice of
Allowability at 2.
is also evidence of intent to deceive the PTO. Dr. Wang
failed to answer the examiner's questions about the swell
ratio data in his supplemental affidavit. See Rutsch Decl.
Ex. 26, Wang Supp. Aff. The Court rejects Plaintiffs argument
that Dr. Wang did not provide a comparison between Streicher
and the patented material because he was not asked. The
examiner had two concerns; the shape of the samples, and
whether the difference between Streicher and the patented
material was statistically significant. Rutsch Decl. Ex. 25,
2/15/00 PTO Office Action Summary at 3. In allowing the
claims, the examiner again focused on these two issues; the
shape of the samples, and the statistical difference between
the swell ratio tests. Rutsch Decl. Ex. 28, Notice of
Allowability at 2. Dr. Wang's supplemental affidavit
directly responded to the first concern but did not answer
the second, and instead provided a different statistical
comparison. Rutsch Decl. Ex. 26. Wang Supp. Aff.
this did not constitute inequitable conduct, the Court finds
that the selective disclosure of data and evasive responses
provided to the Examiner are evidence of bad faith leading to
a finding that this is an exceptional case. See Novartis
Corp., 2015 WL 6669158, at 4 n.5 ("Regardless of whether
[the prevailing party] could establish that [the patent
owner] engaged in inequitable conduct before the PTO, this
court finds that [the patent owner's] actions at least
justify an inference of improper motivation or subjective bad
faith, both of which can be included in the district
court's totality of the circumstances inquiry upon a
showing of a preponderance of the evidence. Octane Fitness,
134 S.Ct. at 1756 n.6, 1757.").
Wang had a critical role in obtaining Plaintiffs patents,
submitting numerous declarations to the PTO during the
initial patent application process. At the time of the patent
application, Dr. Wang was employed by Stryker Technologies
Corporation ("Stryker"). Howmedica Osteonics
Corporation was, and is, a subdivision of Stryker, and
Stryker owned the patent applications at issue. However, Dr.
Wang's declarations to the PTO only said that he ...