Now that it is easier for prevailing parties in a patent litigation to recover attorney fees [see our previous post], how likely is that that fees paid under some form of non-hourly arrangement – for example flat fees, contingency, success fees or some other alternative fee arrangement (AFA) – can be recovered? The answer is that the court’s end-of-case determination of a reasonable hourly rate and fee, called the “lodestar,” trumps the amount paid under any AFA.
AFAs that exceed the lodestar likely cannot be recovered. In Kilopass v Sidense (ND Cal), Judge Illston found that Kilopass engaged in litigation misconduct and made exceptionally meritless infringement claims, and, therefore, awarded Sidense attorney fees totaling $5.3 million. (Kilopass has appealed.)
While the fees awarded to Sidense are significant, they appear to be less than half of the fees that Sidense actually paid its counsel under a contingency bonus arrangement. Sidense’s fee arrangement called for Sidense to pay 50% of its lawyer’s hourly billing on a monthly basis, with the remaining 50% held back until the end of the case. The payment of the holdback was tied to a performance based multiplier. Since the court granted summary judgment in Sidense’s favor and dismissed all claims, Sidense’s counsel was entitled to the maximum multiplier of 2.5x, effectively requiring Sidense to pay 175% of its lawyers’ standard rates. While the public record does not disclose the full amount of the contingency bonus, what can be inferred from the decision is that the fees paid by Sidense under the contingency arrangement exceeded $11 million (based on inferred standard rate fees of $6.5 million).