taxable costs

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Trend is patent litigation loser pays fees or costs - but not this time (courtesy Google Images)
Trend is patent litigation loser pays fees or costs – but not this time (courtesy Google Images)

The significant filing fees spent by an accused infringer on a successful American Invents Act (AIA) review are not taxable as costs in the underlying district court patent litigation, according to the January 5, 2016 decision [pdf] in Credit Acceptance Corp v. Westlake Services.

In Credit Acceptance, the district court refused to tax as costs the $73,200 in filing fees paid by the accused infringer and prevailing party Westlake to the U.S. Patent and Trademark Office in successfully challenging Credit Acceptance’s patent in an AIA review.  Although the ruling goes against the general shift of both the Courts and Congress to increasing the financial risks of bringing unsuccessful patent litigation (this in service of the underlying policy of reducing the number of frivolous patent litigations), it appears to have been correctly decided.

Credit Acceptance tracks what has become a fairly typical fact pattern.  The owner of a patent claiming a business method or a software innovation brings suit for patent infringement in federal court.  In response, the accused infringer seeks AIA review by the Patent Trial and Appeal Board (PTAB) of the validity or patentability of the claimed invention.  The court stays the litigation pending administrative review.  The PTAB sustains the challenge, compelling the party asserting patent infringement to voluntarily dismiss the lawsuit with prejudice.  As observed in Credit Acceptance, there is strong case precedent for finding that under these circumstances the accused infringer is the prevailing party.
Continue Reading Loser Does Not Pay for AIA Costs

E-discovery costs incurred by the prevailing party – easily running into the hundreds of thousands of dollars in complex commercial and IP litigations – may be compensable under 28 U.S.C. § 1920(4).

I say ESI costs "may be compensable" advisedly. Not all of them are. Most importantly, the likelihood of recovering tens if not hundreds of thousands of dollars of ESI costs depends in significant part upon  the billing descriptions used by your vendor (or your firm’s in-house e-discovery group).

By specifying at the beginning of the case the billing format for ESI costs, you greatly increase the amount of these costs you will recover at the end of the case.

ESI costs deemed not compensable: 

The vendor’s primary responsibility was collecting data (e.g., by imaging hard drives) and de-duplication of electronically-stored information so that it could be reviewed in-house by Aliph and produced in discovery. Tasks on the bills include the following: pick-up and imaging of computer; local email extraction; network email merge and de-dupe (eliminating duplicates); normalize, prep, index, and search email; extract, de-archive, hash, filter, de-dupe, normalize, index, and search user files; and computer media.

Plantronics v. Aliph, 2012 WL 3822129, at *17 (N.D. Cal. 2012) (citations omitted) (refusing to tax third party vendor costs of $100,948.17).

Other ESI costs deemed not compensable:

The problem with Google’s e-discovery bill of costs is that many of item-line descriptions seemingly bill for “intellectual effort” such as organizing, searching, and analyzing the discovery documents. Most egregious are attempts to bill costs for “conferencing,” “prepare for and participate in kickoff call,” and communications with co-workers, other vendors, and clients.

Oracle v. Google, 2012 WL 3822129, at *3 (N.D. Cal. 2012 ) (citations omitted) (refusing to award $2.9 million of ESI costs).

But compare – ESI costs deemed compensable:

Cost of assembling, ordering, tagging, and QA for document release to Kelora. Includes the creation of metadata load files as requested by Kelora and image “placeholders” for documents and ESI that the requesting party asked to receive in native format. $ 43,500.00

Cost of feeding assembled documents into an image printer for the creation of image copies of those documents to the requesting party. The cost includes imaging, de-blanking, bates stamping, assignment of protective orders and confidentiality designations, insertion of slip sheets, and native file place holders, image quality QA and final export to production media. $ 22,450.00

[Cost of] isolating and presenting eBay source code on a secure and locked down machine in anticipation of inspection by the requesting party.  $ 1,800.00

eBay v. Kelora Systems, 2013 WL 1402736, at *6 (N.D. Cal 2013).

So why are costs taxed on some of these ESI vendor invoices and not the other? There are several reasons, each of which highlights the importance of being smarter about the manner in which ESI providers bill for their services. Let’s break this down.Continue Reading Awarding e-Discovery Costs to Prevailing Party: Billing Descriptions Dictate What is Recoverable