In reducing a $1.425 million award, the U.S. Court of Appeals for the Federal Circuit recently ruled (in a non-precedential opinion) that a district court erred in calculating both damages and attorneys’ fees. In re Electro-Mechanical Industries, Case Nos. 08-1530, 09-1137 (Fed. Cir., Dec. 22, 2009) (Moore J.).
Universal Support Systems LLC (Universal) originally brought suit against Electro-Mechanical Industries (EMI) for alleged infringement of its patent directed to a foot design for metal racks that hold telecommunications equipment. EMI subsequently filed for bankruptcy and sought to have the value of Universal’s patent infringement claim put at zero. The bankruptcy court referred the matter back to the district court for a determination as to liability and damages.
After a claim estimation hearing, the district court concluded that the patent was not invalid and found that six of the eight feet made by EMI infringed Universal’s asserted patent. The district court found that Universal was entitled to damages of $425,000, based upon an 11 percent reasonable royalty that was enhanced for willful infringement, effectively doubling the underlying $212,000 damages award. The district court also found the case to be so exceptional as to warrant enhancing the reasonable attorneys’ fees from $700,000 to $1 million.
On appeal, the Federal Circuit found that the district court erred in its damages calculation because there were no infringing sales of two of the six types of EMI feet designs, reducing the damages from $212,000 to $170,000. Although the feet infringed when they were manufactured, they were modified prior to sale and thus did not constitute infringing sales. Universal had offered no evidence of damages related to manufacture. The Federal Circuit did, however, uphold the district court’s finding of willfulness, entitling Universal to enhanced damages of $341,000. The Federal Circuit also found that the district court’s award of attorneys’ fees incorrectly included $200,000 in expert witness fees. According to the Court, absent a finding of fraud or abuse, the district court could not impose expert witness fees above the $40 per day attendance fee plus certain travel reimbursements. The Federal Circuit also rejected the district court’s enhancement of attorneys’ fees, finding that only an award of reasonable attorneys’ fees is allowed under the statute. The award was vacated and remanded to the district court for a new fee determination consistent with the Court’s opinion.
Practice Note: Absent a finding of fraud, expert witness fees are not recoverable beyond the nominal amount provided by statute. Also, even in exceptional cases, a district court cannot enhance an award of attorneys’ fees.