FlowRider Surf, Ltd. v. Pac. Surf Designs, Inc.

FLOWRIDER SURF, LTD.,a Canadian corporation; and SURF WAVES, LTD.,a company incorporated in the United Kingdom, Plaintiffs, v. PACIFIC SURF DESIGNS, INC.,a Delaware corporation, Defendant.

Case No.: 3:15-cv-01879-BEN-BLM

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

September 30, 2020

ORDER DENYING PLAINTIFFS'

(1) EX PARTE MOTION FOR LEAVE TO FILE A SUR-REPLY TO DEFENDANT'S REPLY IN SUPPORT OF DEFENDANT'S RENEWED MOTION FOR ATTORNEY'S FEES

(2) MOTION TO RE-TAX COSTS

[ECF No. 294, 296]

Presently before the Court are Plaintiffs' (1) Ex Parte Motion for Leave to File a Sur-Reply to Defendant's Reply in Support of Their Renewed Motion for Attorneys' Fees, ECF No. 294, and (2) Motion to Re-tax Costs, ECF No. 296. The Court DENIES Plaintiffs' (1) Ex Parte Motion for Leave to File a Sur-Reply to Defendant's Reply in Support of Their Renewed Motion for Attorneys' Fees as moot, and (2) Motion to Re-tax Costs.

On August 24, 2015, Plaintiffs commenced this patent infringement action alleging PSD willfully infringed the '589 and '016 Patents. See generally, ECF No. 1. On May 26, 2017, this Court (1) granted Defendant's motion to dismiss Flowrider's '589 Patent claim for lack of subject matter jurisdiction; (2) denied Flowrider's motion to substitute parties; (3) dismissed FlowRider as well as the '589 Patent Claim for lack of standing without prejudice; and (4) stayed the rest of the case while '016 Patent underwent inter partes review with the Patent Trial and Appeal Board of the U.S. Patent Office ("PTAB"). ECF No. 222. On January 19, 2018, Defendant notified the Court of the PTAB January 17, 2018 Final Written Decision in the inter partes review of the '016 Patent, in which the PTAB found all asserted claims of the '016 Patent unpatentable. ECF No. 230. On May 7, 2018, based on the PTAB decision, judgment was entered against Plaintiffs, and provided that "Plaintiff's patent is unenforceable and judgment is entered for Defendant for the entire action." ECF No. 240.

On May 22, 2018, Defendant filed a Bill of Costs, seeking $30,634.31 in costs against Plaintiffs. On August 13, 2019, a hearing for taxation of costs was held. On October 22, 2019, John Morrill, Clerk of the Court, issued an Order Taxing Costs, taxing $19,844.16 in favor of Defendant and against Plaintiffs. ECF No. 295. On October 29, 2019, Plaintiffs filed a Motion to Re-tax Costs.

I. LEGAL STANDARD

"A review of the decision of the clerk in the taxation of costs may be taken to the court on motion to re-tax by any party in accordance with Rule 54(d), Fed. R. Civ. P., and Civil Local Rule 7.1." S.D. Cal. Civ. R. 54.1(h). "'Under the well-established Rule 54(d)(1) case law, the district court is charged with making a de novo review of the clerk's determination of the costs issue.'" Jardin v. DATAllegro, Inc., No. 08-CV-1462-IEG WVG, 2011 WL 4835742, at *1 (S.D. Cal. Oct. 12, 2011) (quoting In re Paoli R.R. Yard PCB Litig., 221 F.3d 449, 461 (3d Cir. 2000)). Rule 54(d) creates a presumption favoring an award of costs to the prevailing party. See, e.g., Marx v. Gen. Revenue Corp., 568 U.S. 371, 375-76 (2013) ("describing the 'venerable' presumption that prevailing parties are entitled to costs); see also Oracle USA, Inc. v. Rimini St., Inc., 879 F.3d 948, 966 (9thCir.), cert. granted, 139 S. Ct. 52, (2018), and rev'd in part, 139 S. Ct. 873 (2019) (noting that Marx remains binding precedent on the Ninth Circuit). "The fact that a party does not prevail on all of its claims does not, however, preclude it from being the prevailing party for purposes of awarding costs under Rule 54(d)." Kemin Foods, L.C. v. Pigmentos Vegetales Del Centro S.A. de C.V., 464 F.3d 1339, 1347-48 (Fed. Cir. 2006); see also Hashimoto v. Dalton, 118 F.3d 671, 677 (9th Cir. 1997) (providing that "[a] litigant need not prevail on every issue, or even on the 'central issue' in the case, to be considered the prevailing party").

The losing party carries the burden of overcoming the presumption favoring an award of costs to the prevailing party by affirmatively showing a valid reason that the prevailing party is not entitled to costs. Save Our Valley v. Sound Transit, 335 F.3d 932, 944-45 (9th Cir. 2003). In reviewing costs assessments, district courts consider (1) whether the costs are allowable and (2) whether the amount assessed for each item is reasonable. Majeske v. City of Chicago, 218 F.3d 816, 824 (7th Cir. 2000); see also Yumi Ito v. Tokio Marine & Fire Ins. Co., LTD., No. CV036835JFWJTLX, 2007 WL 9735847, at *1 (C.D. Cal. Mar. 22, 2007) (citing to Majeske for the same proposition). District courts also consider whether the award of costs is just.

II. DISCUSSION

Plaintiffs have moved the Court for two forms of relief. First, Plaintiffs filed an Ex Parte Motion for Leave to File a Sur-Reply to Defendant's Reply in Support of Their Renewed Motion for Attorneys' Fees. ECF No. 294. Given the Court has ruled on Defendant's Renewed Motion for Attorneys' Fees, the issue is moot.

Second, Plaintiffs move to re-tax costs, arguing that (1) prevailing party status is determined by federal circuit law, not the local rules, ECF No. 296-1 at 1:25-27; (2) Defendant is not the prevailing party on the '589 Patent given a defendant is not considered the prevailing party when dismissal without prejudice is the result of lack of subject matter jurisdiction, id. at 2:13-17; and (3) Defendant has not demonstrated an entitlement to costsfor the '016 Patent, including but not limited to the depositions and file wrappers, id. at 3:8-18. Defendant responds that (1) Defendant is the prevailing party in the action under federal common law, ECF No. 299 at 2:18-25, and (2) costs were properly taxable under 28 U.S.C. § 1919 and Local Rule 54.1, id. at 4:13-15 and 5:6-8. Upon careful consideration of the numerous briefs, objections, and responses exchanged in this case, the Court affirms the Clerk's order taxing costs and denies Plaintiffs' Motion to Re-tax Costs.

Plaintiffs also argue that "[w]hether a party is prevailing within the meaning of Rule 54 is a matter of Federal Circuit law." While "[w]hether a party is prevailing within the meaning of Rule 54 is a matter of Federal Circuit law[,] . . . [t]he district court's actual decision regarding an award of costs, however, is reviewed under the law of the regional circuit." Power Mosfet Techs., L.L.C. v. Siemens AG, 378 F.3d 1396, 1407 (Fed. Cir. 2004). In other words, this Court's decision regarding awarding costs is reviewed under regional Ninth Circuit law. Id. at 1407. Regardless, this Court concludes that under both Federal Circuit and Ninth Circuit law, the Clerk properly taxed costs. Thus, while Plaintiffs argue that "the costs clerk determined taxable costs based solely on the application of Local Rule 54.1 without regard to Federal Rule of Civil Procedure 54 or the Federal Circuit's binding interpretation of it," ECF No. 296-1 at 2:7-12, the Court concludes that the Clerk properly taxed costs under both Federal and Ninth Circuit law.

1. This Court Properly Determined Defendant is the Prevailing Party Even if the Dismissal Was for Lack of Standing or Jurisdiction.

Plaintiffs rely on cases from 2001, 2002, 2003, 2014, and 2017 to argue that a defendant is not considered a prevailing party when dismissed without prejudice due to a lack of subject matter jurisdiction. ECF No. 296-1 at 2:13-26. Defendant correctly notes that the majority of the cases relied on by Plaintiffs were either clarified or overruled entirely by later cases. ECF No. 299 at 3:3-5.

District "courts [have] the discretion to award costs to prevailing parties," and "Rule 54(d)(1) codifies a venerable presumption that prevailing parties are entitled to costs." Marx, 568 U.S. at 377; see also Fed. R. Civ. P. 54(d)(1) (providing that courts award costs,other than attorney's fees, should be awarded to the prevailing party in a case "[u]nless a federal statute, these rules, or a court order provides otherwise"). Generally, when a court dismisses a case, the defendant qualifies as the prevailing party for purposes of recovering costs under Rule 54 of the Federal Rules of Civil Procedure ("Rule 54"). See, e.g., Raniere v. Microsoft Corp., 887 F.3d 1298, 1300-09 (Fed. Cir. 2018) (affirming the district court's award of costs after the plaintiff's lawsuit for patent infringement was dismissed for lack of standing); Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395 (1990), partially superseded by statute on other grounds ("district courts may award costs after an action is dismissed for want of jurisdiction"); Power Mosfet Techs., L.L.C. v. Siemens AG, 378 F.3d 1396, 1416-17 (Fed. Cir. 2004) (holding that "IR, which had all claims against it dismissed with prejudice, is therefore a prevailing party" but affirming the district court's denial of costs because the court did not abuse its discretion, and "the district court still retains discretion over the award of costs under Rule 54"); Sequa Corp. v. Cooper, 245 F.3d 1036, 1037 (8th Cir. 2001) (concluding that a voluntary dismissal without prejudice under Rule 41(a)(1)(i) does not deprive a District Court of its authority to award costs).

While courts previously evaluated the basis for the dismissal in deciding whether to award costs, such authority has largely been overruled. See, e.g., Raniere, 887 F.3d at 1306 (providing that "[e]ven if the district court's decision to dismiss with prejudice for lack of standing is not based on the substantive merits of a plaintiff's case, . . a merits decision is not required"). Thus, even though "a dismissal for lack of standing is generally to be without prejudice because it is not an adjudication on the merits," courts will still award the defendant costs as a prevailing party in such a case. See id. at 1304 (citing Univ. of Pittsburgh v. Varian Med. Sys., Inc., 569 F.3d 1328, 1332 (Fed. Cir. 2009)). Here, this Court dismissed the claims related to the '589 Patent without prejudice after it...