Home Gambling Network, Inc., etal v. Chris Piche, etal, 2:05-cv-00610

Background

Patentee Home Gambling Network (HGN) owned U.S. Patent No. 5,800,268 (the "Method Patent") and granted Casinowebcam.com (CWC) a broad perpetual, exclusive, royalty-free license permitting CWC to sublicense its software; the license excluded no further approval for sublicenses and excluded certain games from the patent claim scope during prosecution.
Plaintiffs sued in 2006 for patent infringement and related claims, alleging CWC’s online "live webcam" casino and licensed software infringed the Method Patent by enabling sports betting, lottery, keno, and bingo.
Defendants moved for summary judgment twice; the Court ultimately granted summary judgment to Defendants in 2013, finding no infringement because at least one method step occurred outside the U.S., and because prosecution history disclaimers excluded non-interactive games from the patent; the Federal Circuit affirmed.
The Court previously found the case "exceptional" under 35 U.S.C. § 285 and that Defendants could recover fees/costs/double damages under the parties’ licensing agreement; the Court reserved the amounts pending further briefing.
After additional briefing and a hearing, the Court awarded Defendants $571,001.70 in attorneys’ fees, $17,882.83 in costs, and $772,534.26 in contract damages (doubled under the contract), totaling $1,361,418.79, but denied Defendants’ separate motion seeking sanctions against Plaintiffs’ counsel under 28 U.S.C. § 1927 and the court’s inherent power as untimely.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether fees under 35 U.S.C. § 285 must be segregated from fees recoverable under the licensing agreement	§ 285 shouldn’t cover non-patent fees; court must segregate patent vs. non-patent fees	Fees can cover non-patent work when patent and non-patent issues are intertwined; licensing agreement also allows fees/double damages	No segregation required: claims were "inextricably intertwined," so a single lodestar analysis under § 285 (with Brunzell review) sufficed
Appropriate method and amount for attorneys’ fees	Measure should be amounts actually paid by Defendants	Use lodestar (hours × reasonable rate) including appellate work; blended rates presented are reasonable	Used lodestar; reduced certain hours for block-billing and discovery-sanction-related work; lodestar enhancement denied; total fees $571,001.70
Recoverability and scope of contract "double damages" and other litigation-related damages	Double damages should be limited and not cover non-taxable litigation outlays	Contract permits recovery of attorney fees, court costs, and double damages—which can include non-§1920 litigation outlays agreed by parties	Contract interpreted under Nevada law to allow damages for litigation outlays; apportionment unnecessary; awarded $772,534.26 in doubled damages
Whether sanctions under 28 U.S.C. § 1927 / inherent power against Plaintiffs’ counsel are warranted and timely	Counsel acted in bad faith; sanctions appropriate	(Defendants sought full amount already requested under § 285 and added § 1927/inherent-power basis)	Motion denied as untimely (filed ~15 months after judgment) and Defendants offered no justification for delay

Key Cases Cited

Bywaters v. United States, 670 F.3d 1221 (Fed. Cir.) (Federal Circuit law governs § 285 procedure and approves lodestar use)
Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (Supreme Court) (sets forth virtues of lodestar and limits on enhancements)
Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (Supreme Court) (defines "exceptional" case standard under § 285)
Hensley v. Eckerhart, 461 U.S. 424 (Supreme Court) (lodestar method and guidance on billing detail)
Brunzell v. Golden Gate Nat’l Bank, 455 P.2d 31 (Nev. 1969) (factors for reviewing fee awards under Nevada law)
NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir.) (method-step location bars direct infringement of method patents)