Fastship, LLC v. United States

FASTSHIP, LLC, Plaintiff, v. UNITED STATES, Defendant.

No. 12-484C

United States Court of Federal Claims

June 27, 2019

CORRECTED

Patent case; motion for award of attorneys' fees and expenses pursuant to 28 U.S.C. § 1498(a); prevailing plaintiffs; jurisdiction; standing; real party in interest; litigation-financing agreement; patent owners' fee agreements with counsel; findings regarding justification for the government's position; reasonable attorneys' fees, expenses of expert witnesses, and costs

Mark L. Hogge, Dentons US LLP, Washington, D.C., for plaintiff. With him on the briefs and at trial were Rajesh C. Noronha, Dentons US LLP, Washington, D.C., and Donald E. Stout, Fitch, Even, Tabin & Flannery LLP, Washington, D.C.

Scott Bolden, Deputy Director, Intellectual Property Staff, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C. With him on the briefs were Joseph H. Hunt, Assistant Attorney General, Civil Division, and Gary L. Hausken, Director, Intellectual Property Staff, Civil Division, United States Department of Justice, Washington, D.C. Of Counsel was Andrew P. Zager, Department of the Navy, Washington, D.C.

OPINION AND ORDER

LETTOW, Senior Judge.

In 2012, Plaintiff FastShip, LLC ("FastShip") initiated litigation against the United States (the "government") for patent infringement by a class of littoral combats ships ("LCS").¹ After a trial, FastShip prevailed on the merits of its infringement claim respecting the first of these ships, LCS-1, USS Freedom, receiving an award of $6,449,585.82 as of September 6, 2006, plus interest from that date. See FastShip, LLC v. United States, 131 Fed. Cl. 592, 627-28 (2017) ("FastShip III"). The judgment was affirmed on appeal, with the amount of damages adjusted to correct a transcription error, resulting in an award for infringement of $7,117,271.82, plus interest for delay damages. FastShip, LLC v. United States, 892 F.3d 1298, 1310 (Fed. Cir. 2018) ("FastShip IV"). FastShip ultimately recovered $12.36 million for the infringement, including delay damages. See Pl. FastShip, LLC's Reply in Supp. of its Mot. for Attys' Fees &Related Expenses ("Pl.'s Reply") at 25, ECF No. 212. FastShip now moves for an award of attorneys' fees and related expenses pursuant to 28 U.S.C. § 1498(a) and submits a bill of costs pursuant to Rule 54(d) of the Rules of the Court of Federal Claims ("RCFC").

The government opposes an award of attorneys' fees and expenses. First, the government argues that due to a litigation financing agreement, FastShip is not a real party in interest and therefore lacks standing to bring the claim for attorneys' fees and costs. Second, the government contends that its position during the litigation was reasonable and substantially justified, precluding an award of attorneys' fees and costs under 28 U.S.C. § 1498(a). Third, the government argues that even if FastShip is entitled to an award of attorneys' fees and costs, the award requested is unreasonable and must be reduced. The court concludes that FastShip is and has been the real party at interest in this litigation, and thus it has standing to bring a claim for attorneys' fees and costs. The court also finds that the government's position during the litigation was not substantially justified. Finally, the court concludes that FastShip's request is generally reasonable but must be reduced to eliminate certain inappropriate and unallowable costs and excessive attorneys' fees. Accordingly, FastShip's request for expenses and attorneys' fees is granted in part and denied in part.

BACKGROUND

A. Infringement of FastShip's Patent, Trial, and Appeal

FastShip is the assignee of two patents, United States Patent Nos. 5,080,032 ("the '032 patent") and 5,231,946 ("the '946 patent"). FastShip III, 131 Fed. Cl. at 598. These two patents were originally filed by the inventor, David Giles, and are directed to and describe "a monohull fast sealift [] or semi-planing monohull [] ship . . . whose hull design in combination with a waterjet propulsion system permits, for ships of about 25,000 to 30,000 tons displacement . . . [travel at] speeds of up to 40 to 50 knots in high or adverse sea states." Id. at 598-99 (quoting the '032 patent, col. 1, lines 6-13; '946 patent, col.1, lines 10-17). Put differently, the patents are for ship designs that allow a large ship to travel at high speeds, despite difficult weather and sea conditions. After being originally filed in the United Kingdom, the '032 patent was issued by the United States Patent Office on January 14, 1992, and the '946 patent was issued on August 3, 1993. Id. at 599.

The conduct by the government that gave rise to this litigation started some years later. In the early 2000s the Navy began "exploring the concept that later became the LCS program . . . [,] seeking new ships that could be used for 'focused missions' at high speeds." FastShip III, 131 Fed. Cl. at 600 (internal citation omitted). After an initial study that laid out program performance parameters, the Navy issued a request for proposals for the LCS program in 2003. Id. The Navy's request did not specify a required hull design. Id.

During the initial phase of the LCS procurement, FastShip met with two government contractors, Lockheed Martin and Gibbs & Cox, to "discuss FastShip's potential contributions to the team." FastShip III, 131 Fed. Cl. at 601. Representatives for Lockheed Martin and Gibbs & Cox told FastShip it was "unlikely" for the parties to engage in a direct arrangement for hull design, but that it was possible to add FastShip "to the team for 'certain design aspects.'" Id. (citation omitted). About a month later, FastShip and the two government contractors "signed aterm sheet related to FastShip's potential participation on the LCS team" that provided for "information sharing between the LCS team and FastShip, subject to [] non-disclosure and confidentiality agreements." Id. at 601-02. Despite this agreement, FastShip was sidelined as the design for the ship evolved through the procurement process and construction proceeded, with the first ship, the LCS-1, being launched on September 23, 2006. Id. at 603. The completed LCS-1 featured a semi-planing monohull. Id. at 602-03.

FastShip filed an administrative claim with the Navy in 2008, contending that the LCS program infringed upon their patents and demanding compensation. FastShip LLC v. United States, 122 Fed. Cl. 71, 77 (2015) ("FastShip II"). The Navy replied two years later, stating it had investigated the claim and believed the LCS program did not infringe FastShip's patent. Id. The government denied any compensation. Id. After receiving the Navy's response, FastShip sent another letter "reiterat[ing] the 'allegations of patent infringement,'" before filing its complaint with this court on August 1, 2012. Id.

The parties submitted briefs on claim construction of the patents at issue in August and September of 2013 and held a technical primer for the court on August 27, 2013. FastShip, LLC v. United States, 114 Fed. Cl. 499, 503-04 (2013) ("FastShip I"). The court then held a Markman hearing on September 13, 2013 before issuing an opinion construing eight of the claim terms on October 9, 2013. Id. at 504. The case thereafter proceeded with discovery until the government moved for summary judgment respecting LCS-3 and subsequent Freedom class ships. FastShip II, 122 Fed. Cl. at 77.²

The court granted the government's motion with regard to LCS-3 and the subsequent ships in the Freedom class, finding that these ships "were not 'manufactured' by or for the government within the meaning of 28 U.S.C. § 1498 prior to the expiration of the patents in suit." FastShip II, 122 Fed. Cl. at 72, 86. This decision left only LCS-1 as the basis for FastShip's infringement claim. FastShip III, 131 Fed. Cl. at 607.

The court conducted a site visit at the constructing shipyard, visited the Carderock Naval Test Basin, and then held a ten-day trial from October 3, 2016 to October 17, 2016. FastShip III, 131 Fed. Cl. at 607. After post-trial briefing and closing argument, the court issued its decision on April 28, 2017. See generally id. at 592. The court found that the claims from the '032 and '946 patents were valid and directly infringed by the government in its construction of the LCS-1. Id. at 618. It awarded FastShip $6,449,585.82 in damages as of September 23, 2006, the launch date of LCS-1. Id. at 627. The court also held that FastShip was entitled to interest for the delayed compensation from the launch date and could apply for "reasonable costs and reasonable fees for witnesses and attorneys under 28 U.S.C. § 1498(a) . . . within 30 days after any appellate process has been concluded." Id. at 627-28.

An appeal followed. See Fastship IV, 892 F.3d 1298. In its decision, the Federal Circuit affirmed the decision of this court to find infringement by the LCS-1, affirmed a grant of summary judgment that LCS-3 was not "manufactured" within the meaning of 28 U.S.C. §1498(a) before the expiration of the patents-in-suit, and modified the damage amount due to a transcription error. See id. at 1310. The Federal Circuit also held that "[e]ach party shall bear its own costs" for the appeal. Id. at 1311.

B. Costs and Fees Requested Pursuant to 28 U.S.C. § 1498(a)

After prevailing on the appeal, FastShip filed a motion for attorneys' fees and related expenses ("Pl.'s Mot."), ECF No. 190, and a bill of costs ("Pl.'s Bill of Costs"), ECF No. 191, on October 4, 2018. Both the motion for attorneys' fees and related expenses and the bill of costs have 30 attachments, 29 of which are identical. Compare Pl.'s Mot. with Pl.'s Bill of Costs. The first, and only different, attachments are memoranda in support of FastShip's motion for attorneys' fees and related expenses, ECF No. 190-1 ("Pl.'s Br."), and bill of costs, ECF No. 191-1 ("Pl.'s Cost Br."). The second attachment, identical in both motions, is a declaration by ...