Shum v. Intel Corp.

United States Court of Appeals
for the Federal Circuit
__________________________

FRANK T. SHUM,
Plaintiff-Appellant,

v.
INTEL CORPORATION, JEAN-MARC VERDIELL,
AND LIGHTLOGIC, INC.,
Defendants-Appellees.
__________________________

2010-1109
__________________________

Appeal from the United States District Court for the
Northern District of California in case no. 02-CV-3262,
Senior Judge D. Lowell Jensen.
__________________________

Decided: December 22, 2010
__________________________

PAUL F. KIRSCH, of San Francisco California, argued
for plaintiff-appellant. On the brief was GREGORY S.
CAVALLO, Shopoff & Cavallo LLP, of San Francisco,
California.

MARK C. FLEMING, Wilmer Cutler Pickering Hale and
Dorr LLP, of Boston, Massachusetts, argued for defen-
dants-appellees. With him on the brief were RICHARD W.
SHUM v. INTEL CORPORATION 2

O’NEILL, and WILLIAM F. LEE; and SETH P.WAXMAN,
BRIAN M. BOYNTON, of Washington, DC.

__________________________

Before NEWMAN, LOURIE, and PROST, Circuit Judges.
Opinion for the court filed by Circuit Judge PROST.
Dissenting opinion filed by Circuit Judge NEWMAN.

PROST, Circuit Judge.

This appeal reviews an award of costs in a case where
no party prevailed on every claim. The underlying action
was filed by an optical engineer named Frank Shum
(“Shum”). Shum sought correction of inventorship for
seven patents originally issued to his former business
partner, Jean-Marc Verdiell (“Verdiell”), arguing that he,
Shum, should be named as the sole inventor or co-
inventor. See 35 U.S.C. § 256. Shum also asserted nu-
merous claims under California law, all of which allegedly
stemmed from the sale of Verdiell’s company, LightLogic,
Inc. (“Lightlogic”), to Intel Corporation (“Intel”).

The district court correctly observed that both sides
won on some claims and lost on others. Shum, for in-
stance, succeeded on some of his inventorship claims,
with the jury finding him to be the co-inventor of claims
in five of the seven patents-in-suit. As for defendants
Verdiell, Intel, and LightLogic, before trial, the district
court granted their motion to dismiss some of Shum’s
state law claims 1 for failure to state a claim. See Fed. R.

1 These claims were for conversion, rescission, neg-
ligent misrepresentation, intentional interference with
contractual relations, and successor liability.
3 SHUM v. INTEL CORPORATION

Civ. P. 12(b)(6). The district court also granted summary
judgment in favor of the defendants on Shum’s claims for
breach of fiduciary duty and fraudulent concealment.
Finally, after the jury was unable to reach a verdict on
the remaining state law claims, 2 the district court
granted defendants’ post-verdict motion for judgment as a
matter of law (“JMOL”). The final judgment in this action
entitles Shum to be named as a co-inventor for claims in
five of the seven patents-in-suit, but entitles him to none
of the more than $409 million he sought in monetary
damages.

Based on this mixed result, the district court con-
cluded that both parties “prevailed” within the meaning of
Rule 54(d) of the Federal Rules of Civil Procedure, which
governs the award of costs and fees accrued during trial.
Acknowledging, however, that Rule 54 might only counte-
nance a single “prevailing party,” the district court held in
the alternative that the defendants were the “prevailing
party.” The parties were then each awarded the costs
associated with the claims they respectively won. After
offsetting these amounts, the result was a net costs award
of $134,368.28 to defendants, taxed against Shum. Shum
timely appealed.

On appeal, Shum argues that the award of costs must
be vacated and recalculated on remand because there can
only be one prevailing party. Moreover, according to
Shum, he is that prevailing party. Though Shum lost on
all of his California law claims and failed to recover any
fraction of the more than $409 million in damages he
sought, Shum nevertheless argues that his limited victory

2 These claims were for unjust enrichment, breach
of contract, and intentional misrepresentation.
SHUM v. INTEL CORPORATION 4

on the question of inventorship suffices to make him a
prevailing party. Further, as a prevailing party, Shum
contends that he is entitled to all of his costs, while de-
fendants are entitled to none of theirs.

We agree that there can be, by definition, only one
prevailing party. We nevertheless affirm the award of
costs because we agree with the district court’s alterna-
tive holding that defendants are the prevailing party.
Though Shum’s victory on his co-inventorship claims
changes the names appearing on those patents, it has not
materially altered the legal relationship among the par-
ties. Because Shum and Verdiell signed a Plan of Liqui-
dation giving each equal rights to independently exploit
the intellectual property arising from their ephemeral
business partnership, this action has not materially
altered the defendants’ behavior in a way that directly
benefits Shum. On the other hand, defendants were not
liable to Shum for $409 million. Accordingly, the district
court did not abuse its discretion in awarding costs to
each party with respect to the claims on which they each
prevailed, then netting those sums to arrive at the final
figure.

BACKGROUND

This appeal is only about costs, not the merits. The
merits were appealed separately and are the subject of a
companion opinion, Shum v. Intel Corp., No. 2009-1385, -
1419. For the purposes of reviewing costs, the following
facts matter.

This appeal is the second to this court and but the lat-
est episode in a protracted legal battle, all traceable to a
brief and stormy business partnership. Shum and Verdi-
ell are both engineers who work in the optoelectronics
5 SHUM v. INTEL CORPORATION

field. In 1997, Verdiell and Shum became equal share-
holders in a company called Radiance Design (“Radi-
ance”). A brief nine months later, Radiance was formally
dissolved pursuant to a plan of liquidation (“Liquidation
Plan” or “POL”).

The Liquidation Plan gave both parties equal rights to
independently exploit the intellectual property developed
by Radiance. After Radiance dissolved, Verdiell filed for,
and was issued, the patents that are the subject of this
suit. These patents were subsequently assigned to Verdi-
ell’s company, LightLogic. In 2001, Intel purchased
LightLogic, including all of its intellectual property rights,
for $409 million.

Upon learning of the sale, Shum filed this action. In
his amended complaint, Shum asserted that he should be
named as the co-, if not sole, inventor of claims in the
seven patents-in-suit. 3 In addition to these federal inven-
torship claims, Shum alleged numerous violations of
California law: conversion, rescission, negligent misrep-
resentation, intentional interference with contractual
relations, successor liability, breach of fiduciary duty,
fraudulent concealment, unjust enrichment, breach of
contract, and intentional misrepresentation.

The first appeal to this court occurred after the dis-
trict court dismissed Shum’s claim for unjust enrichment
and granted defendants’ motion to bifurcate the inventor-
ship and state law claims. Pursuant to the district court’s
order, the inventorship claims were tried first in a bench
trial, after which the state law claims were to be tried by

3 The patents are U.S. Patent Nos. 5,977,567 (“’567
patent”), 6,376,268 (“’268 patent”), 6,207,950 (“’950 pat-
ent”), 6,227,724 (“’724 patent”), 6,586,726 (“’6726 patent”),
6,585,427 (“’427 patent”), and 6,252,726 (“’2726 patent”).
SHUM v. INTEL CORPORATION 6

jury. Shum v. Intel Corp., 499 F.3d 1272, 1275 (Fed. Cir.
2007).

Following the bench trial, the district court found that
Shum had not shown by clear and convincing evidence
that he was an inventor of any claims in the asserted
patents. Defendants then renewed their motions for
summary judgment on Shum’s state law claims. The
district court granted the motions and entered judgment
for the defendants. Shum appealed to this court (“first
appeal”). We vacated the judgment, reversed the dis-
missal of Shum’s unjust enrichment claim, and remanded.
Id. at 1276-77. In doing so, we agreed that under Beacon
Theatres, Inc. v. Westover, 359 U.S. 500 (1959), the dis-
trict court abused its discretion in holding a bench trial on
Shum’s inventorship claim before trying his state law
claims to a jury. Shum, 499 F.3d at 1276-79. Because
Shum’s claims had common factual issues, we concluded
that Shum was entitled to a jury trial on his state law
claims prior to any court determination of his inventor-
ship claim. Id. at 1279. We also reinstated Shum’s
unjust enrichment claim, since it was neither “duplica-
tive” nor “dependent” on Shum’s fraudulent concealment
claims. Id. at 1279-80.

The case returns to us after further proceedings be-
low. Shum has had his jury trial on the inventorship and
state law claims. Before trial, Shum withdrew his inven-
torship claims with respect to the ’2726 patent. For the
remaining six patents, 4 Shum limited his claims at trial
to co-inventorship, thus abandoning his prior, alternative

4 The six patents disputed at trial were the ’567
patent, ’268 patent, ’950 patent, ’6726 patent, ’724 patent,
and ’427 patent.
7 SHUM v. INTEL CORPORATION

claims for sole inventorship. The inventorship claims and
state law claims for intentional misrepresentation, breach
of contract, and unjust enrichment were submitted to the
jury.

The jury found that Shum was the co-inventor of some
claims in five of six patents at issue during trial. 5 The
jury was unable to reach a verdict on Shum’s inventorship
claims for the ’427 patent and for one additional claim in
the ’724 patent. 6 It also hung on all of Shum’s remaining
state law claims. After declaring a mistrial, the district
court entertained defendants’ motion for judgment as a
matter of law. Consistent with the jury verdict, the court
then entered judgment for Shum on his co-inventorship
claims for the five patents on which the jury reached a
verdict. It then entered judgment for defendants on the
remaining claims, finding that Shum failed to introduce
sufficient evidence to prove liability or damages for the
state law claims, or to permit a reasonable jury to find
Shum the co-inventor of the ’427 patent or the additional
claim of the ’724 patent.

Following entry of judgment, both parties submitted
bills of costs pursuant to Federal Rule of Civil Procedure
54. The Clerk of Court taxed costs of $507,644.82 in
defendants’ favor and costs of $195,523.27 in Shum’s
favor. Offset against each other, Shum thus owed
$313,121.55 in costs to defendants. Before the district
court, Shum moved to deny defendants costs on two

5 As stated previously, Shum withdrew his correc-
tion of inventorship claims for the ’2726 patent before
trial.
6 The jury unanimously found that Shum was the
inventor of claims 1, 7, 14, and 16 of the ’724 patent.
SHUM v. INTEL CORPORATION 8

grounds. First, Shum argued that defendants were not
entitled to costs because they were not the “prevailing
party” within the meaning of Rule 54. Second, Shum
argued that certain items in defendants’ bill of costs
should be disallowed.

With modifications to certain cost items submitted by
defendants, the district court upheld the award of costs.
As to the threshold question of who was the prevailing
party, the district court found that Shum and defendants
were both prevailing parties, because both had prevailed
with respect to some claims. Acknowledging that the law
might require it to choose a single prevailing party, the
district court held in the alternative that defendants were
the prevailing party. In support of this determination,
the district court noted that rather than being ordered to
pay the over $400 million in damages sought by Shum,
defendants owed nothing. Further, defendants retained
their inventorship rights and ability to commercially
exploit the covered technology. Though Shum gained
legal title to five patents as a co-inventor, the district
court found this limited victory did not materially alter
the parties’ legal relationship because Shum already had
the right to commercially exploit the covered technology
under the Radiance POL.

Shum timely appealed the district court’s award of
costs. We have jurisdiction pursuant to 28 U.S.C.
§ 1295(a)(1). 7

7 We reject Shum’s argument that the district court
lacked subject matter jurisdiction based on Shum suppos-
edly lacking a “concrete financial interest” in the patents-
in-suit. At minimum, Shum’s state law claims necessarily
depended on the resolution of a substantial question of
federal patent law, inventorship. See Christianson v. Colt
Indus. Operating Corp., 486 U.S. 800, 808-09 (1988);
9 SHUM v. INTEL CORPORATION

ANALYSIS

Rule 54(d)(1) governs the award of costs. It provides
that “[u]nless a federal statute, these rules, or a court
order provides otherwise, costs—other than attorney’s
fees—should be allowed to the prevailing party.” Fed. R.
Civ. P. 54(d)(1). An award of costs thus involves two
separate inquires. Power Mosfet Techs., L.L.C. v. Siemens
AG, 378 F.3d 1396, 1407 (Fed. Cir. 2004). First, who is
the “prevailing party” within the meaning of Rule
54(d)(1). Second, how much (if any) costs should be
awarded to the prevailing party.

We address these questions below.

I. Prevailing Party

Federal Circuit law defines “prevailing party” for the
purposes of patent litigation. Manildra Milling Corp. v.
Ogilvie Mills, Inc., 76 F.3d 1178, 1182 (Fed. Cir. 1996).
Determination of the prevailing party is a question of law

Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d
1318, 1330 (Fed. Cir. 1998), overruled in part on other
grounds, Midwest Indus., Inc. v. Karavan Trailers, Inc.,
175 F.3d 1356 (Fed. Cir. 1999).
This court’s decision in Larson v. Correct Craft, Inc. is
not to the contrary. 569 F.3d 1319 (Fed. Cir. 2009).
Shum is not like the plaintiff in Larson, who had already
transferred title to the patents for which he sought correc-
tion of inventorship, and thus had no ownership interest
in the patents-in-suit. Id. at 1326-27. Our conclusion
that the plaintiff in Larson suffered no injury-in-fact
sufficient to confer constitutional standing was based on
that transfer of ownership rights. No such transfer or
assignment has occurred here. Accordingly, Shum had,
and continues to have, standing to pursue his correction
of inventorship claims under 35 U.S.C. § 256.
SHUM v. INTEL CORPORATION 10

reviewed de novo. Inland Steel Co. v. LTV Steel Co., 364
F.3d 1318, 1320 (Fed. Cir. 2004).

On appeal, Shum argues that it was error for the dis-
trict court to declare both him and the defendants “pre-
vailing parties” within the meaning of Rule 54(d)(1). We
agree.

The district court is correct that both parties won or,
said another way, “prevailed,” on certain claims and lost
on others. But just because a party can be said to have
“prevailed” on a claim does not necessarily make him a
“prevailing party” as the term is used in Rule 54.

The question then is whether Rule 54 limits how
many “prevailing parties” there can be in a particular
case. To answer that question, we begin with the text of
the statute. Rule 54(d)(1) awards costs to “the prevailing
party.” Fed. R. Civ. P. 54(d)(1) (emphasis added). In our
view, the plain language of Rule 54 unambiguously limits
the number of prevailing parties in a given case to one
because the operative term, “prevailing party,” is singu-
lar. Had Congress intended for there to be multiple
prevailing parties, it could easily have said so, substitut-
ing “parties” for “party.”

Our conclusion that there can only be one prevailing
party in a given case is reinforced by the use of the defi-
nite article “the” before “prevailing party.” Alternatives
like “a,” “any,” or “some” lead to phrases like “a prevailing
party” and “any prevailing party.” These hypothetical,
unenacted versions of Rule 54 could be read to suggest
that it is possible to have more than one prevailing party
in an action. However, none of these theoretical alterna-
tives is what Congress enacted. In our view, the word
Congress did use, “the,” is evidence that what follows,
11 SHUM v. INTEL CORPORATION

“prevailing party,” is specific and limited to a single party.
See Rapanos v. United States, 547 U.S. 715, 732 (2006)
(relying on use of “the” as evidence the statute narrowed
the type of “waters” at issue); Rumsfeld v. Padilla, 542
U.S. 426, 434-35 (2004) (relying on use of the definite
article as evidence there was “generally only one proper
respondent to a given prisoner’s habeas petition”); Freytag
v. Comm’r, 501 U.S. 868, 902 (1991); see also Webster’s
Third New International Dictionary 2368 (1981) (discuss-
ing the difference between the indefinite articles “a” and
“an” and the definite article “the”). Rule 54(d) has no
special rule or exception for mixed judgment cases, where
both parties have some claims decided in their favor, as
occurred here. Thus, even in mixed judgment cases,
punting is not an option; Rule 54 does not allow every
party that won on some claims to be deemed a “prevailing
party.” For the purposes of costs and fees, there can be
only one winner. A court must choose one, and only one,
“prevailing party” to receive any costs award. 8

The rub, of course, is choosing the “prevailing party”
in a mixed judgment case like this one. To be a “prevail-
ing party,” our precedent requires that the party have
received at least some relief on the merits. That relief
must materially alter the legal relationship between the
parties by modifying one party’s behavior in a way that

8 That is not to say, of course, that the court must
award a prevailing party costs. Depending on the extent
and nature of the prevailing party’s victory, it may be
proper for the trial court to award only low costs or no
costs at all. See Farrar, 506 U.S. at 115; Manildra Mill-
ing, 76 F.3d at 1183. As we explained in Manildra Mill-
ing, even if a party satisfies our prevailing party test, the
trial court “retains broad discretion as to how much to
award, if anything.” 76 F.3d at 1183 (emphasis added).
SHUM v. INTEL CORPORATION 12

“directly benefits” the opposing party. Farrar v. Hobby,
506 U.S. 103, 111-13 (1992); Manildra Milling, 76 F.3d at
1182; see also Inland Steel, 364 F.3d at 1320; Former
Emps. of Motorola Ceramic Prods. v. United States, 336
F.3d 1360, 1364 (Fed. Cir. 2003). A party is not required,
however, to prevail on all claims in order to qualify as a
prevailing party under Rule 54. See Kemin Foods, L.C. v.
Pigmentos Vegetales Del Centro S.A. De C.V., 464 F.3d
1339, 1347-48 (Fed. Cir. 2006).

Here, our inquiry accordingly focuses on the relief
Shum and defendants respectively received. Based on an
examination of the parties’ respective successes, we hold
that defendants are the “prevailing party” for the pur-
poses of Rule 54. As set out in our companion opinion on
the merits, Shum v. Intel Corporation, No. 2009-1385, -
1419, defendants won on all of Shum’s state law claims.
Before trial even began, the district court dismissed
Shum’s claims for conversion, rescission, negligent mis-
representation, intentional interference with contractual
relations, and successor liability for failure to state a
claim. See Fed. R. Civ. P. 12(b)(6). The district court also
granted summary judgment in favor of defendants on
Shum’s claims for breach of fiduciary duty and fraudulent
concealment. After the jury hung on Shum’s claims for
intentional misrepresentation, unjust enrichment, and
breach of contract, the district court granted post-verdict
JMOL in favor of the defendants on those claims. Defen-
dants also won by post-verdict JMOL on Shum’s correc-
tion of inventorship claims for the ’427 patent and claim 5
of the ’724 patent. As a result, defendants do not owe,
and thus will not pay, any of the $409 million in damages
and restitution sought by Shum. Further, defendants
retain sole ownership and inventorship of the ’427 patent
and claim 5 of the ’724 patent. We agree with the district
court that the relief defendants obtained on these claims
13 SHUM v. INTEL CORPORATION

alters the legal relationship of the parties: in addition to
avoiding significant monetary liability, the judgment in
defendants’ favor will have res judicata effect in any
future action. See Inland Steel, 364 F.3d at 1320-21.

In contrast, Shum’s victory was limited to his claims
for correction of inventorship. For five of the seven pat-
ents originally at issue, Shum successfully established
that he was the co-inventor of some claims. This deter-
mination gives Shum a property interest in the five
patents. It also requires the U.S. Patent and Trademark
Office to correct the inventorship and assignments of
those patents to reflect Shum’s status as a co-inventor.

Shum argues that he should be considered a “prevail-
ing party” because he obtained some of the benefits he
sought in bringing suit—namely, correction of inventor-
ship. Shum is correct that his limited victory “alter[ed]
the legal relationship between the parties.” Manildra
Milling, 76 F.3d at 1182. As a result of the judgment,
Shum is now the co-owner of five patents Intel bought
from Verdiell. Shum will also henceforth be listed as the
co-inventor, while Verdiell has lost his status as sole
inventor.

Not every alteration in the legal relationship between
parties, however, satisfies our prevailing party test.
Instead, the alteration must be (1) material and (2) “mod-
ify[] the defendant’s behavior in a way that directly
benefits the plaintiff.” Manildra Milling, 76 F.3d at 1182
(quoting Farrar, 506 U.S. at 111-13). Despite Shum’s
protestations to the contrary, the question of inventorship
was not the “central issue” in this case. As the district
court found, this case was about the money. Indeed,
Shum initially pled only state law claims, for which he
requested over $409 million in damages and restitution;
SHUM v. INTEL CORPORATION 14

the correction of inventorship claims were added later, in
a subsequent amendment.

We find it dispositive that Shum’s limited victory—a
declaration of co-inventorship—has not met the second
requirement under our prevailing test: the victory has
not modified defendants’ behavior in a way that signifi-
cantly benefits Shum. Id. As we explained in Singer v.
Office of Senate Sergeant at Arms, 173 F.3d 837, 842 (Fed.
Cir. 1999), it is not enough that the issue was contested,
actually litigated, and ultimately decided in a party’s
favor; the recognition of Shum’s co-inventorship status
also had to confer some material benefit on Shum. We
agree with the district court that Shum received no mate-
rial benefit with respect to any of the defendants.

For example, with respect to Verdiell, Shum’s co-
inventorship status has not given Shum a competitive
advantage or required Verdiell to change his behavior.
Under the POL which dissolved Radiance, Shum and
Verdiell

acknowledge[d] and agree[d] that, after the ap-
proval of this Plan [POL], each of them shall be
entitled, without any liability or duty to account to
the Corporation or to the other, to pursue any and
all such other business activities as they shall de-
sire, even if such activities are in competition with
the business of the Corporation and even if they
take, or attempt to take, a business opportunity
that the Corporation could have itself pursued.

(emphasis added.) The district court found that the
declaration of co-inventorship did not give Shum any
rights in the patented technology that he did not already
have under the POL. We agree. Even before Shum was
15 SHUM v. INTEL CORPORATION

declared a co-inventor, the POL gave him the right to
exploit the covered technology without incurring any
financial liability or legal obligations to Verdiell. Cf.
Singer, 173 F.3d at 842 (holding that official recognition
of depression did not make petitioner a “prevailing party”
because it entitled him to no benefits beyond those the
agency was already giving him).

Similarly, Shum’s co-inventorship status does not give
Shum a competitive advantage with respect to Intel or
LightLogic, nor does it require either company (Intel or
LightLogic) to change its behavior. By purchasing Light-
Logic, including Verdiell’s share of the patents, Intel
became a co-owner of the patents-in-suit. As a co-owner,
Intel acquired and retains the right to make, use, license,
offer to sell, or sell the inventions covered by the patents,
with or without Shum’s consent. See 35 U.S.C. § 262.

Shum’s victory is thus unlike the success obtained by
the prevailing parties in cases like Farrar and Manildra
Milling. In Farrar, plaintiffs obtained an award of nomi-
nal damages; in Manildra Milling, the plaintiff won a
declaration that the competitor’s patent was invalid.
Farrar, 506 U.S. at 111-12; Manildra Milling, 76 F.3d at
1183; see also Ruiz v. A.B. Chance Co., 234 F.3d 654, 670
(Fed. Cir. 2000); Gentry Gallery, Inc. v. Berkline Corp.,
134 F.3d 1473, 1480 (Fed. Cir. 1998) (noting that obtain-
ing an injunction might also constitute a “benefit” qualify-
ing a party for prevailing party status). Likewise, an
injunction or judgment of infringement can both satisfy
the prevailing party test because each constitutes “relief
on the merits which alters . . . the legal relationship of the
parties.” Inland Steel, 364 F.3d at 1320; Kemin Foods,
464 F.3d at 1348. As this court stated in Manildra Mill-
ing, a party that obtains an injunction, declaration of
patent invalidity, or judgment of infringement gains
SHUM v. INTEL CORPORATION 16

“significant latitude” and frequently a “competitive edge”
vis-à-vis the opposing party. 76 F.3d at 1183. Here, by
contrast, Shum’s victory resulted in no equivalent gain
because the POL already gave him those rights.

Because we agree with the district court’s alternate
holding that defendants are the “prevailing party” within
the meaning of Rule 54, we turn to the reasonableness of
the cost award.

II. Cost Award

Whether an award of costs is reasonable is deter-
mined under the law of the regional circuit. Manildra
Milling, 76 F.3d at 1183. Accordingly, in this case we
apply Ninth Circuit law. The Ninth Circuit reviews the
reasonableness of a costs award for abuse of discretion
and is “hesitant” to find an abuse of the trial court’s broad
discretion over costs. K-S-H Plastics, Inc. v. Carolite, Inc.,
408 F.3d 54, 60 (1969). This deferential review is still
guided, however, by Rule 54(d)(1), which the Ninth Cir-
cuit has construed as creating a presumption in favor of
awarding costs to the prevailing party. Champion Pro-
duce, Inc. v. Ruby Robinson Co., 342 F.3d 1016, 1022
(Fed. Cir. 2003); Dawson v. City of Seattle, 435 F.3d 1054,
1070 (9th Cir. 2006); Save Our Valley v. Sound Transit,
335 F.3d 932, 944 (9th Cir. 2003). To overcome this
presumption, the losing party must establish a reason to
deny costs and the district court must give specific rea-
sons for refusing to award costs. Champion Produce, 342
F.3d at 1022; Stanley v. Univ. of S. Cal., 178 F.3d 1069,
1079 (9th Cir. 1999).

In this case, Shum argues that the district court
abused its discretion by awarding defendants part of their
costs associated with the first bench trial, as well as
17 SHUM v. INTEL CORPORATION

various costs associated with demonstrative exhibits,
copying charges, and expert witness fees.

Under the Ninth Circuit’s deferential standard of re-
view, we cannot agree. It was not error for the district
court to wait until the case was finally decided, after the
second trial, to determine the prevailing party and award
costs. When it finally did award costs, the district court
carefully considered and meticulously explained its rea-
soning. It was not unreasonable for the district court to
consider which claims the parties respectively won, or to
reduce the prevailing party’s costs award to reflect the
extent of its victory (i.e., the claims it lost). Here, the
district court accounted for the claims defendants lost in
precisely that fashion: it reduced defendants’ costs asso-
ciated with the claims they won by the costs incurred by
Shum on the claims he won. Further, given that defen-
dants ultimately won on the all of the state law claims
and that Shum’s limited victory on some inventorship
claims did not modify defendants’ behavior in a way that
materially benefited Shum, the district court did not
abuse its discretion by awarding half of the costs associ-
ated with the first bench trial to defendants. As for
Shum’s other quarrels with the costs award, Shum has
given no reasons on appeal that were not already ad-
dressed and reasonably rejected by the district court.
Shum has thus failed to overcome the Ninth Circuit’s
strong presumption of awarding costs to the prevailing
party.

CONCLUSION

For the foregoing reasons, we hold that defendants
were the prevailing party and the district court did not
abuse its discretion in considering the parties’ relative
success when awarding costs in this mixed judgment case.
SHUM v. INTEL CORPORATION 18

The award of costs is affirmed.

AFFIRMED
 United States Court of Appeals
for the Federal Circuit
__________________________

FRANK T. SHUM,
Plaintiff-Appellant,
v.
INTEL CORPORATION, JEAN-MARC VERDIELL,
AND LIGHTLOGIC, INC.,
Defendants-Appellees.
__________________________

2010-1109
__________________________

Appeal from the United States District Court for the
Northern District of California in Case No. 02-CV-3262,
Senior Judge D. Lowell Jensen.
__________________________

NEWMAN, Circuit Judge, dissenting.
The award of “costs” is rarely of sufficient legal sub-
stance to warrant appellate attention, much less appellate
dissent. But here the award is so flawed that it indeed
was appealed, and its affirmation by my colleagues raises
important concerns of justice and fairness, as well as
conformity with rule and precedent.
On his first appeal to the Federal Circuit, Mr. Shum
obtained a reversal and remand of the major issue in
dispute, that is, inventorship of five patents obtained by
Verdiell and sold to Intel on the Radiance technology.
Shum v. Intel Corp., 499 F.3d 1272 (Fed. Cir. 2007).
SHUM v. INTEL CORPORATION 2

Despite Shum’s success on appeal, the district court
awarded Intel $77,200 in costs for the first trial, which
was half the amount submitted. Upon the second trial,
Mr. Shum obtained unanimous jury verdicts that he is the
joint inventor of five patents on the technology for which
Intel paid $409 million. Thus Shum obtained the right to
make, use, sell, license, and otherwise exploit the inven-
tions that Verdiell had patented as his sole invention and
that Intel had purchased for exclusive ownership. None-
theless the district court, holding that neither side pre-
vailed or alternatively that the defendants prevailed,
awarded net costs in favor of defendants and against
Shum, in the amount of $134,368.28. This award is
contrary to precedent, and inappropriate.
This is not the rare case in which a court might exer-
cise its discretion, in the interest of justice, to mitigate the
burdens of trial. I must protest this unusual ruling,
whereby the losing side that presented a more expensive
case 1 is awarded the amount by which its costs exceeded
those of the prevailing party. From my colleagues’ en-
dorsement of this award of net costs to the losing party, I
respectfully dissent.
DISCUSSION
The Federal Rules provide that “costs” shall be taxed
in favor of the prevailing party. By every measure Shum
is the prevailing party, not the defendants. Shum ob-
tained the judgment of joint inventorship that established
his ownership in common of five of the six patents previ-
ously held exclusively by the defendants. When the
district court refused to retry the deadlocked issues

1
For example, Intel’s bill of costs includes over
$200,000 for “demonstrative exhibits,” “graphics,” and
“models,” for use at trial, on which Shum spent less than
$60,000.
3 SHUM v. INTEL CORPORATION

concerning monetary remedy and instead decided them
“as a matter of law” in favor of the defendants, the defen-
dants avoided damages, but they still lost exclusive
ownership of the patented technology. This did not con-
vert the defendants into “the prevailing party.”
“Because a plaintiff prevails by achieving some of the
benefit sought in bringing suit, it follows that a defendant
is a prevailing party only if the plaintiff obtains no relief
whatsoever from the litigation.” 10 James Wm. Moore,
Moore’s Federal Practice §54.171[3][c], at 54-310 (3d ed.
2010). Whatever the monetary value of Shum’s victory, it
is apparent that Intel and Mr. Verdiell did not prevail, for
they lost the exclusivity of five patents for which Shum
was adjudged the joint inventor, and simply avoided
monetary damages when the jury hung and the district
court refused a retrial.
The Court explained in Farrar v. Hobby, 506 U.S. 103
(1992), that “a plaintiff ‘prevails’ when actual relief on the
merits of his claim materially alters the legal relationship
between the parties by modifying the defendant's behav-
ior in a way that directly benefits the plaintiff.” Id. at
111-12. In Manildra Milling Corp. v. Ogilvie Mills, Inc.,
76 F.3d 1178 (Fed. Cir. 1996), the court applied this
reasoning to taxation of costs in patent litigation in which
the plaintiff did not obtain monetary damages, but the
court held that the plaintiff was the prevailing party
because a “judicial declaration that one is free from an-
other's right to exclude alters the legal relationship be-
tween the parties.” Id. at 1183. The jury’s verdict
granting Mr. Shum co-ownership of five of the six liti-
gated patents was a victory that altered the legal rela-
tionship of the parties to Mr. Shum’s benefit.
Although it is now final on this appeal that Mr. Shum
will not receive a retrial on monetary damages, the Court
SHUM v. INTEL CORPORATION 4

explained in Farrar that “the prevailing party inquiry
does not turn on the magnitude of the relief obtained.”
506 U.S. at 114. Mr. Shum now has the unchallengeable
right to make, use, and sell for others to use, the five
patented inventions “without the consent of and without
accounting to the other owners.” 35 U.S.C. §262. In
Manildra Milling this court explained that: “The freedom
to practice an invention without fear of suit by the pat-
entee is a valuable commercial benefit. By removing the
potential threat of the patentee instituting an infringe-
ment action, the competitor necessarily alters the pat-
entee's subsequent behavior to his benefit.” 76 F.3d at
1183. The rights Mr. Shum has won here are greater
than freedom from suit, for Shum became the co-owner of
five patents that had previously been the exclusive prop-
erty of Verdiell, LightLogic, and now Intel.
My colleagues state that Shum was not the prevailing
party because the judgment of joint inventorship and the
ensuing co-ownership “did not give Shum any rights in
the patented technology that he did not already have
under the POL.” Maj. Op. at 14. This is plainly incorrect.
The trial record is replete with Verdiell’s assertions of
exclusivity, and that the patented subject matter was not
included in the Radiance technology subject to the POL.
Intel and Verdiell vigorously disputed Shum’s claims,
stating that “the issue of inventorship is at the heart of
the case” and a “necessary element” of all of the other
claims. Defs.’ Opp’n to Pl.’s Mot. to Remand at 4-5, Shum
v. Intel Corp., No. C 02-03262 (N.D. Cal. Nov. 1, 2002).
Only now that Shum has prevailed do Intel and Verdiell
proclaim that Shum already had what he won by jury
verdict. However, at trial the defendants testified and
argued that these patents and the technology they
claimed were not part of the Radiance technology and
that Shum had no rights in any of it.
5 SHUM v. INTEL CORPORATION

Whatever the “prevailing” status of Shum, it is clear
that Intel and Mr. Verdiell are not the prevailing party.
Applying precedent, Mr. Shum won the judgment that he
was a joint inventor of five of the six patents from which
he had been excluded, and thus owner in common of these
patents. See Manildra Milling, 76 F.3d at 1183 (the
plaintiff was the prevailing party when the adverse
patent was invalidated, although federal and state law
claims were lost and no damages were awarded). Shum is
now assured that he and his transferees cannot be sued
on these patents, and that his right to practice and to
grant licenses to the patented subject matter is not sub-
ject to challenge. The district court reasoned that Shum’s
joint invention and co-ownership “did not give Shum a
competitive edge over Verdiell in the marketplace.” Shum
v. Intel Corp., 682 F. Supp. 2d 992, 997 (N.D. Cal. 2009).
However, obtaining a competitive edge in the marketplace
is not a requirement of being the prevailing party in
litigation.
Partial or apportioned costs have on occasion been
awarded, when appropriate to the circumstances. See 10
Wright & Miller, Federal Practice & Procedure §2667 (3d
ed. 2010); Ortho-McNeil Pharm., Inc., v. Mylan Labs. Inc.,
569 F.3d 1353, 1358 (Fed. Cir. 2009); K-S-H Plastics, Inc.
v. Carolite, Ind., 408 F.2d 54, 60 (9th Cir. 1969). This
court has observed that costs should be apportioned only
under “limited circumstances, such as when the costs
incurred are greatly disproportionate to the relief ob-
tained.” Kemin Foods, L.C. v. Pigmentos Vegetales Del
Centro S.A. de C.V., 464 F.3d 1339, 1348 (Fed. Cir. 2006)
(citing 10 Moore’s Federal Practice §54.101[1][b] (3d ed.
2006)). Here the district court did not apportion “greatly
disproportionate” costs; the court simply required Shum
to pay Intel the amount by which Intel’s costs exceeded
SHUM v. INTEL CORPORATION 6

Shum’s costs. This form of apportionment has no support
in precedent or in logic, and in this case is unfair.
When the plaintiff as well as the defendant have lost
on significant issues, courts have generally awarded “no
costs.” See Ruiz v. A.B. Chance Co., 234 F.3d 654, 670
(Fed. Cir. 2000); Kropp v. Ziebarth, 601 F.2d 1348, 1358
n.27 (8th Cir. 1979) (where neither party prevails, it is
“quite appropriate to deny costs to both parties” (citing
Srybnik v. Epstein, 230 F.2d 683, 686 (2d Cir. 1956)));
Brunswick-Balke-Collender Co. v. Am. Bowling & Billiard
Corp., 150 F.2d 69, 74 (2d Cir. 1945) (affirming denial of
costs where both parties to a suit involving patent and
trademark infringement prevailed in part); 10 Federal
Practice & Procedure §2668 (3d ed. 2010) (the denial of
costs to both sides “has been considered appropriate when
neither side entirely prevailed, or when both sides pre-
vailed”).
In Ruiz, this court held that “neither party prevailed
sufficiently to require an award of costs,” where the
patent was declared invalid but no damages were
awarded on the state law claims. 234 F.3d at 670. Thus
even if Shum’s victory is viewed as no better than nomi-
nal, the proper result is “no costs,” not an award to the
losing party. The Supreme Court in Farrar stated that
when a victory is nominal “the only reasonable fee is
usually no fee at all.” 506 U.S. at 115.
As mentioned ante, the district court also taxed Mr.
Shum for half of Intel’s costs associated with the first
trial, which this court reversed and remanded in Mr.
Shum’s favor. Shum v. Intel Corp., 499 F.3d 1272 (Fed.
Cir. 2007). A determination of who is the prevailing party
should be made when the controversy is finally decided.
See 10 Federal Practice & Procedure §2667 (3d ed. 2010).
Yet the district court charged Mr. Shum with $77,200,
7 SHUM v. INTEL CORPORATION

which were half of Intel’s costs for the first trial, in which
Shum succeeded on appeal.
In accordance with precedent, Mr. Shum is the pre-
vailing party. At worst, the award should be “no costs.”
The district court exceeded its discretion in requiring
Shum to pay Intel the difference between Shum’s lower
costs and Intel’s higher costs, even on the district court’s
theory that it was “close” as to which side “prevailed.” It
is grievously unjust to tax Mr. Shum with the net costs of
Intel’s unsuccessful but more expensive defense. This
approach cannot be reconciled with any theory of taxable
costs. From my colleagues’ endorsement of this ruling, I
respectfully dissent.