Straight Path IP Group, Inc. v. Cisco Systems, Inc.

Background

This order addressed attorney’s fees after earlier rulings in the patent cases. Straight Path asserted four patents against Apple and Cisco involving point-to-point Internet communication. The earlier litigation ended with summary judgment for the defendants after the court concluded that Straight Path’s narrow interpretation of the phrase “is connected,” which it had used to preserve the patents’ validity, precluded the broader infringement theory it asserted against Apple and Cisco.

The court later reaffirmed that Straight Path’s prosecution of the case was “exceptional” under 35 U.S.C. § 285. That statute allows a court to award reasonable attorney’s fees to the prevailing party in an exceptional patent case. The court appointed a special master to review Apple’s and Cisco’s fee requests and determine reasonable amounts.

Special Master’s Recommendations

The special master recommended $2,334,054 for Apple and $1,920,146 for Cisco. Apple received nearly all of its requested amount, with minor reductions for certain ambiguous or duplicative entries.

Cisco received only half of its request because its billing records did not comply with the court’s instructions. Cisco paid its lawyers a flat monthly fee rather than by the hour. The special master found that this arrangement could be reimbursed under Section 285, but that Cisco’s records did not clearly show the lawyers’ compensable work or separate this case from other work. The 50-percent reduction was intended to avoid requiring Straight Path to pay for unsupported work while compensating Cisco for fees it actually paid. The special master did not impose an additional reduction because he found the record problems resulted from the billing arrangement rather than bad faith.

Court’s Review and Rulings

The court reviewed the special master’s legal reasoning independently, while deferring to factual findings about staffing, billing practices, and the scope of the work unless there was a specific reasoning failure or other error.

The court rejected Straight Path’s argument that fees incurred before June 23, 2017, were outside the recoverable period. It held that the exceptional conduct was not limited to the Federal Circuit’s ruling on that date. The court also held that Apple and Cisco could recover fees for all defenses reasonably used against claims involving “is connected,” not just work directly addressing that claim-construction issue. Work on a different patent that did not contain the “is connected” language was not compensable, but the defendants could recover for a comprehensive defense, including trial preparation, against the claims the court found should not have been brought.

The court rejected Straight Path’s specific objections to Apple’s fees for prior-art review, invalidity contentions, and an opening invalidity report. It concluded that Straight Path had not identified a specific error in the special master’s reasoning and that the greater work required for invalidity defenses was consistent with the higher burden of proving invalidity.

The court also rejected Straight Path’s challenge to Cisco’s fee award. It held that Section 285 does not categorically bar reimbursement based on a flat-fee arrangement. The statute requires a reasonable result but does not require a particular fee-calculation method. Although the usual “lodestar” method multiplies reasonable hours by a reasonable hourly rate, the court stated that this method is not mandatory in every circumstance. The court found that Cisco’s submitted records supported at least $1,920,146 in compensable fees and declined to reduce the award further.

Disposition

The court adopted the special master’s recommended awards. It ordered Straight Path to pay Apple $2,334,054 and Cisco $1,920,146 in attorney’s fees. The parties were required to provide joint status updates every 30 days until they certified that the fees had been paid.

The court awarded no taxable costs because no bills for taxable costs had been submitted. It also awarded the special master $8,900 for 44.5 hours of work at $200 per hour. Straight Path was ordered to pay $4,450, while Apple and Cisco were each ordered to pay $2,225, within 14 days. The court retained jurisdiction to enforce the order and required status updates every seven days until the special master was fully reimbursed.