The district court appointed a special master to resolve the amount of attorney’s fees to which Defendants, including Cisco, were entitled. As the special master noted, the fees claimed by Cisco were paid under an alternative flat monthly fee arrangement with its counsel, which in recent years, have increased as law firms have begun offering alternatives to the traditional hourly billing model.

In analyzing the fee request, the special master explained that “[t]here are advantages to such models, but also risks in circumstances like this where the scope and reasonableness of fees are subject to judicial review. This report concludes that such alternative fee arrangements, whether flat fee or otherwise, may be compensable under Section 285, but that prevailing parties must be required to satisfy appropriate reasonableness standards to ensure fairness and to protect against potential abuse.”

To evaluate whether it would be appropriate to include such arrangements in determining a fee award, the special master noted that “prudential and reasonableness concerns arise when assessing the quantum of these fees to be awarded in a fee-shifting environment. For example, flat-rate billing structures could compensate counsel at an unreasonable rate, much like a large contingency fee, which Cisco acknowledges would not be recoverable in at least an extreme case. Flat-fee arrangements also potentially sweep in fees unrelated to the fee-shifting at issue, such as the exceptional conduct here. And opportunity for mischief exists, such as in cases involving manifestly unequal resources, or where counsel enjoys multiple lines of engagement with the same client that might allow mixing and matching among different matters and the shifting of fees as part of an unwritten understanding between attorney and client.”

The district court had previously ordered “the parties to create detailed billing records specifying the tasks, the hours and the rates of counsel. At the hearing on February 5, 2020, and in the Interim Report on February 10, Cisco was asked to construct hourly records and to provide project-based billing as the Court had ordered to determine the reasonableness of Cisco’s alternative fee arrangements.” Cisco did not provide the requested records.

Plaintiff objected to the fees on this basis and the special master found that the objection had merit. “Instead of the process ordered by the Court, Cisco asks that its fees be compared to recovery in other patent cases and/or evaluated based on the alleged profitability of various law firms. These approaches fail to adequately test the reasonableness of the fees Cisco is seeking.”

The special master also noted that a spreadsheet provided by Cisco did not comply with the Court’s order, which required a “detailed declaration, organized by discrete projects, breaking down all attorney and paralegal time sought to be recovered. For each project, there must be a detailed description of the work, giving the date, hours expended, attorney name, and task for each work entry, in chronological order. ” The special master explained that Cisco also submitted another spreadsheet purporting to contain total fees for various. “But this spreadsheet did not have any details about how those numbers were derived, such as which attorneys billed on the project, or how much time they spent. That spreadsheet also did not comply with the Court’s Order.”

Nonetheless, the special master did award some of the fees to Cisco. “In the absence of better information, an award of 50% of Cisco’s documented flat fees is recommended, in the sum total of $1,920,146. While imperfect, such award reasonably compensates Cisco, eliminates redundancy and limits the risk of fee stuffing or matter-swapping that can be associated with the kind of flat-fee arrangements employed with its counsel. It is also reasonably close to the amount claimed by Apple and more than 1/3 of what Plaintiff claims it spent litigating the three separate actions involving the same patents.”

Straight Path IP Group, Inc. v. Cisco Systems, Inc., Case No. C 16-03463 WHA (N.D. Cal. March 4, 2020)