Commercial Litigation and Arbitration

Award of Expert Witness Fees as Inherent Power Sanction Where Bad Faith Litigant’s Proffer Excluded — Inherent Power vs. 35 U.S.C. § 285

Marctec, LLC v. Johnson & Johnson, 2012 U.S. App. LEXIS 8 (Fed. Cir. Jan. 3, 2012):

A district court has inherent authority "to impose sanctions in the form of reasonable expert fees in excess of what is provided for by statute." Takeda Chem. Indus., Ltd. v. Mylan Labs., Inc., 549 F.3d 1381, 1391 (Fed. Cir. 2008). Use of this inherent authority is reserved for cases where the district court makes a "finding of fraud or bad faith whereby the 'very temple of justice has been defiled.'" Amsted Indus. Inc. v. Buckeye Steel Castings Co., 23 F.3d 374, 378 (Fed. Cir. 1994) (quoting Chambers v. NASCO, Inc., 501 U.S. 32, 46 (1991)). Accordingly, not every case that qualifies as exceptional under § 285 will also qualify for sanctions under the court's inherent power. Id. We review a district court's decision to award expert fees under its inherent authority for an abuse of discretion. Takeda, 549 F.3d at 1391.

In its order awarding fees, the district court found that: (1) "[e]xpert fees are recoverable in patent cases where, as here, there was bad faith, such as the filing of a frivolous action"; and (2) "[b]ecause of MarcTec's bad faith in bringing and pressing this suit when it had no basis for asserting infringement, Cordis is awarded its expert fees of $809,788.02 in the exercise of this Court's inherent power." Exceptional Case Order, 2010 U.S. Dist. LEXIS 15789, at *30.

On appeal, MarcTec argues that the district court abused its discretion in awarding expert fees because: (1) it "was not even accused of committing or attempting fraud on the court or abusing the judicial process, or otherwise defiling the judicial system"; and (2) the district court did not find that § 285 was inadequate to "remedy MarcTec's alleged misconduct." Appellant's Br. 50. In response, Cordis argues that the sums it expended on experts were only necessary because MarcTec "pressed forward after receiving documentary evidence that refuted its allegations, and because MarcTec had its experts proffer junk science, including a bogus theory about supposed temperature changes that were not capable of being detected and an unrealistic test having no relation to the accused product." Appellee's Br. 29. We agree with Cordis.

Although, as a general matter, it is a better practice for a district court to analyze expert witness fees separately and to explain why an award of attorney fees under § 285 is insufficient to sanction the patentee, we find that the circumstances in this case justify the district court's decision granting expert witness fees. See Takeda, 549 F.3d at 1392 (Bryson, J., concurring) ("Where, as here, the district court's award of attorney fees under section 285 and expert witness fees under its inherent authority are predicated on the same conduct, the district court must offer a reasoned explanation for why the award of attorney fees and expenses under section 285 is not a sufficient sanction for the conduct in question."). This is particularly true given that: (1) Cordis was forced to incur expert witness expenses to rebut MarcTec's unreliable and irrelevant expert testimony which was excluded under Daubert; and (2) the amount Cordis was required to expend on experts was not compensable under § 285. Because MarcTec's vexatious conduct and bad faith increased the cost of litigation in ways that are not compensated under § 285, we find that the district court did not abuse its discretion in awarding expert fees to Cordis.

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