Senior Judge Found That Litigation Funding Did Not Divest Plaintiff From Fee Recovery And That AIPLA Survey Of Hourly Rates Was Most Relevant Starting Point For Gauging Rates.
Because litigation funding is becoming an increasingly used tool to allow plaintiffs to prosecute complex civil cases, we post on FastShip LLC v. U.S., No. 12-484C (U.S. Court of Federal Claims June 27, 2019), authored by Senior Judge Charles F. Lettow.
In this case, plaintiff FastShip sued the U.S. for patent infringement under 28 U.S.C. § 1498(a), which allows the patent owner to sue the U.S. under specified conditions for infringing a patent without a license. Plaintiff eventually won almost $6.5 million in damages, which actually became larger after an appeal and other activities. Plaintiff financed expenses partly through the use of a litigation funding entity (around $600,000). Plaintiff then moved to recover almost $7 million in attorney’s fees, almost $1.75 million in expert fees, and $2.43 million in costs (mainly electronic discovery and specialized computer display expenses).
The basis for fee entitlement was section 1498(a), which was amended in 1996, to allow recovery of an owner’s reasonable fees for attorneys and expert witnesses if the owner is an independent investor, a nonprofit organization, or an entity having less than 500 employees in a five-year period (which FastShip was), which costs are automatic if the action was pending for more than 10 years or if the court finds that the U.S.’s position was not substantially justified. Under this fee-shifting provision, Senior Judge Lettow awarded FastShip $6,178,288.29 in attorney’s fees and related costs (mainly expert fees, with $5,713,339.60 being the attorney’s fees component) and $1,229,679.07 in costs.
In doing so, he determined as follows:
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- FastShip was a real party allowed to recover fees and costs, with its utilization of litigation funding not making that entity the one who had to recover costs, reasoning that litigation funding in this instance allowed the plaintiff to take on the government in a daunting case fought hard on both sides;
- Prelitigation administration activities do not count for calculating the 10-year automatic fee/costs time frame;
- Based on pre-litigation positions and several mistaken litigation activities such as stubbornly relying on experts ultimately contradicting the U.S.’s positions, the government was not substantially justified in its defense of the case;
- FastShip did not have to be successful on all subsidiary claims to be entitled to a fees and costs award;
- The American Intellectual Property Law Association’s (AIPLA’s) hourly rate survey was found to be the most relevant and persuasive for patent attorney hourly rates; and
- FastShip could not recover supplemental costs ad infinitum from each subsequent filing such that an omnibus supplemental request at the end was denied.
In a footnote, Senior Judge Lettow did observe that the Third, Fourth, Fifth, Sixth, Tenth, and Eleventh Circuits have rules requiring the disclosure of litigation financing agreements with third parties that have a financial interest in the outcome, although nothing in these rules ban or disfavor litigation financing agreements.
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