“EDTX Assesses $2.35 Million in Costs After TCL's Federal Circuit Win”
In April 2020, the Federal Circuit overturned a $110 million judgment against TCL by invalidating Ericsson's patent under § 101. Ericsson Inc. v. TCL Commc'n Tech. Holdings Ltd., 955 F.3d 1317 (Fed. Cir. 2020). Upon returning to the Eastern District of Texas, TCL recovered an additional $2.35 million in costs incurred before both courts. Ericsson Inc. v. TCL Commc'n Tech. Holdings Ltd, No. 2:15-cv-00011-RSP, Dkt. No. 519 (E.D. Tex. Jun. 23, 2020). Magistrate Judge Payne, writing for the district court, considered the various costs to determine the amount TCL should recover after its successful appeal.
Costs Incurred Before the District Court
The parties agreed that TCL was entitled to recover most transcript, witness, and copying fees, but Ericsson objected to TCL's request for $7,123.75 associated with TCL's video depositions of its own witnesses. Ericsson argued that, absent exceptional circumstances, TCL cannot play deposition videos of its own witnesses at trial, so TCL should not recover costs incurred taking those video depositions. If the deposition could not be used, according to Ericsson, it is not “reasonably necessary” within the meaning of Federal Rule of Civil Procedure 54(d)(1).
TCL disagreed, arguing that when the depositions were taken, it was unclear whether the deposed TCL witnesses would be able to physically appear for trial (because many were not U.S. residents). So, depositions were reasonably necessary to preserve their testimony.
The Court found that TCL's anticipation of the deponents' absence from trial established that the depositions were reasonably necessary and awarded TCL the disputed deposition costs.
Costs Incurred on Appeal
The district court next considered TCL's request to recover nearly $3 million in costs associated with a bond TCL obtained to secure the judgement during the appeal period.
The Court first had to decide whether to apply Federal Circuit law or Fifth Circuit law. TCL argued that under Fifth Circuit law, appellate costs awarded under Federal Rule of Appellate Procedure 39(e) are mandatory. Ericsson argued that under Federal Circuit law, the district court has discretion in assessing appellate costs.
The Federal Circuit applies the law of the regional circuit from which an appeal is taken to procedural issues and applies its own law to substantive issues unique to patent law. Where a procedural issue implicates the “Federal Circuit's exclusive statutory mandate or its functions as an appellate court,” the Federal Circuit has applied its own law to the procedural issue. The district court found that the issue of appellate costs is not unique to patent law and does not implicate the Federal Circuit's statutory mandate, so Fifth Circuit law should apply. And under Fifth Circuit law, the assessment of appellate costs under Rule 39(e) is mandatory.
The district court next considered which costs should be awarded, noting that it must award all “reasonably necessary” appellate costs listed in Rule 39(e), and none that are not. TCL argued that its supersedeas bond premiums were reasonably necessary because Ericsson had requested that TCL post the bond over TCL's protest. TCL also argued that it was required to incur additional corporate guarantor fees and financing costs. Ericsson responded that TCL's payment of the supersedeas bond premium was not “reasonably necessary” because TCL could have made other guarantees to Ericsson or used less costly financing to guarantee its judgment, and that the corporate guarantor fees and financing costs requested by TCL were not permitted.
The district court determined that supersedeas bond premiums are encompassed within “premiums paid for a bond” under Rule 39(e)(3), but that TCL could not recover its guarantor fees or financing costs because those categories are not listed in Rule 39(e). In determining whether TCL's supersedeas bond premiums were “reasonably necessary,” the court explored the reason for TCL's bond. After the court entered a $110 million judgment, TCL requested a stay of execution of that judgement pending appeal without having to post a supersedeas bond. TCL argued that, as part of a multi-billion-dollar electronics company, posting a bond was unnecessary, and that alternative arrangements could be made. Ericsson did not agree that TCL's proposed alternative arrangements would guarantee satisfaction of its judgment and insisted on a common supersedeas bond guaranteed through a third-party surety. The court required TCL to obtain a supersedeas bond for $132,240,250.00, and TCL paid $2,248,983.48 in premiums.
The court found that TCL's supersedeas bond premiums were “reasonably necessary” because Ericsson insisted that TCL post a full bond and rejected TCL's alternatives. The Court noted also that Ericsson did not itself provide any alternatives and there was no suggestion in the record that Ericsson would have accepted other guarantees from TCL.
The court awarded TCL $2,248,983.48 in supersedeas bond premiums and $505 in uncontested appellate docketing fees, but did not award $757,473.39 in corporate guarantor fees and financing costs.
The court ultimately awarded TCL fees and costs totaling $2,354,108.93.
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