Securus Technologies Inc v. Global Tellink Corporation
16-1470
Fed. Cir.Jan 26, 2017Background
- Securus settled a 2009 suit with PCS, agreeing not to sue “PCS or its affiliates” for any Securus patent infringement until September 18, 2014.
- In 2010 GTL acquired PCS via stock purchase, making PCS a wholly owned subsidiary of GTL.
- Securus sued GTL for patent infringement in 2013; GTL invoked the 2009 covenant as an affirmative defense and counterclaimed for breach of the covenant, seeking attorney fees it incurred defending the suit.
- The district court granted summary judgment to GTL on infringement, holding GTL was an "affiliate" of PCS under Texas law and thus protected by the covenant.
- The district court granted summary judgment to Securus on GTL’s fee-damages counterclaim, holding Texas law requires expert testimony (or an attorney designated as an expert) to prove attorney fees were reasonable and necessary, and GTL failed to timely designate such an expert.
- The court of appeals affirmed both rulings: (1) GTL qualifies as PCS’s affiliate and (2) GTL forfeited its claim for attorney-fee damages by failing to designate an expert.
Issues
| Issue | Securus' Argument | GTL's Argument | Held |
|---|---|---|---|
| Whether GTL is an “affiliate” of PCS for purposes of the 2009 covenant not to sue | "Affiliate" should not include a parent corporation; the contract’s separate listing of "subsidiaries" and "parent corporations" shows "affiliate" is narrower | GTL is an affiliate by common ownership/control as PCS’s parent | Court: "Affiliate" under Texas law (and Black’s) includes parent, subsidiary, sibling — GTL is an affiliate, covenant bars suit |
| Whether expert testimony (or designating an attorney as an expert) is required to recover attorney fees as damages for breach of the covenant | Expert testimony required to prove fees are reasonable and necessary; failure to designate an expert precludes recovery | Argued expert designation not required; fee records and corporate witness testimony suffice; on appeal, conceded expert testimony required but contended the testifying attorney need not be designated as an expert | Court: Texas precedent requires expert testimony (an attorney testifying on reasonableness is treated as an expert) and timely expert designation; GTL failed to designate and thus forfeited fee damages |
Key Cases Cited
- McLane Foodservice, Inc. v. Table Rock Rests., L.L.C., 736 F.3d 375 (5th Cir. 2013) (interpreting "affiliate" under Texas law to include parent corporations)
- Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 381 S.W.3d 465 (Tex. 2012) (noting common understanding that "affiliate" includes parent corporations)
- E.F. Hutton & Co. v. Youngblood, 741 S.W.2d 363 (Tex. 1987) (attorney testimony on fees considered expert testimony)
- American Home Assurance Co. v. United Space Alliance, LLC, 378 F.3d 482 (5th Cir. 2004) (distinguishing fee recovery under Tex. Civ. Prac. & Rem. Code § 38.001 from attorney-fee damages and holding fees sought as damages must be reasonable and necessary)
- Taurus IP, LLC v. DaimlerChrysler Corp., 726 F.3d 1306 (Fed. Cir. 2013) (addressed necessity of expert testimony for statutory fee awards but did not decide expert requirement for attorney-fee damages)