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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF NEW YORK
`________________________________
`UNIVERSAL INSTRUMENTS
`CORPORATION,
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`Plaintiff,
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`v.
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`MICRO SYSTEM
`ENGINEERING, INC. et al.,
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`Defendants.
`________________________________
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`SUMMARY ORDER
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`3:13-cv-831
`(GLS/DEP)
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`Plaintiff Universal Instruments Corporation commenced this action
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`against defendants Micro System Engineering, Inc. (MSEI) and Missouri
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`Tooling & Automation (MTA) alleging copyright infringement and New York
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`state law claims for the wrongful use of its source code. 1 (See generally 3d
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`Am. Compl., Dkt. No. 103.) After lengthy discovery and motion practice,
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`the case proceeded to a jury trial on the surviving claims: breach of
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`contract, misappropriation of trade secrets, and copyright infringement
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`claims against MSEI; and unjust enrichment, unfair competition,
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`misappropriation of trade secrets, and copyright infringement claims
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`1 The court presumes a basic familiarity with the underlying facts and procedural
`history of this action, which is set forth in the court's Summary Order dated August 8, 2017.
`(Dkt. No. 396.)
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 2 of 8
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`against MTA. (Dkt. No. 228 at 37.)
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`Defendants ultimately prevailed when the court granted their motions
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`for judgment as a matter of law pursuant to Rule 50 of the Federal Rules of
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`Civil Procedure. (Dkt. No. 396 at 9; Dkt. No. 409 at 47-50.) The court then
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`awarded defendants’ attorneys’ fees in the amount of $3,008,990.92
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`pursuant to Section 505 of the Copyright Act.2 (Dkt. Nos. 421, 426.)
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`Universal appealed the court’s Rule 50 order (hereinafter “the Merits
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`Appeal”), (Dkt. No. 413), which was affirmed by the Second Circuit, see
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`Universal Instruments Corp. v. Micro Sys. Eng’g, Inc., 924 F.3d 32, 51 (2d
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`Cir. 2019) (hereinafter “the Merits Appeal Decision”), as well as the court’s
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`award of attorneys’ fees, (Dkt. No. 428), which was vacated and remanded,
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`see Universal Instruments Corp. v. Micro Sys. Eng’g, Inc., 799 F. App’x 43,
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`48 (2d Cir. 2020) (hereinafter “the Fees Appeal Decision”).
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`In between the Merits Appeal Decision and the Fees Appeal
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`Decision, defendants moved for attorneys’ fees expended in defending the
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`Merits Appeal, (Dkt. No. 441), which is currently pending. And, as a result
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`of the Fees Appeal Decision, also pending is defendants’ initial motion for
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`2 See 17 U.S.C. § 505.
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`2
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 3 of 8
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`attorneys’ fees.3 (Dkt. No. 410.) For the reasons that follow, defendants’
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`motions are denied.
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`The Copyright Act grants courts discretion to “allow the recovery of
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`full costs by or against any party other than the United States” and to
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`“award a reasonable attorney’s fee to the prevailing party as part of the
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`costs.” 17 U.S.C. § 505. There is no precise formula for making fee
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`determinations under Section 505; instead, the court must rely on its
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`equitable discretion. See Fogerty v. Fantasy, Inc., 510 U.S. 517, 534
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`(1994). In deciding whether an award of attorneys’ fees is appropriate, a
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`court should consider “(1) the frivolousness of the non-prevailing party’s
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`claims or defenses; (2) the party’s motivation; (3) whether the claims or
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`defenses were objectively unreasonable; and (4) compensation and
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`deterrence.” 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 264 (2d Cir.
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`2015) (citation omitted). The third factor, objective unreasonableness, is
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`“an important factor in assessing fee applications” and should be given
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`“substantial weight.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979,
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`1986-89 (2016).
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`3 Also pending is Universal’s motion to stay execution of the court’s initial award of
`attorneys’ fees, (Dkt. Nos. 421, 426), “until the Second Circuit’s disposition of Universal’s
`appeal from those judgments,” (Dkt. No. 436). In light of the Fees Appeal Decision, this motion
`is denied as moot.
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`3
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 4 of 8
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`On February 7, 2018, the court, applying these factors, granted
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`defendants’ motion for attorneys’ fees, finding that “Universal ha[d] litigated
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`this case in an unreasonable manner that exacerbated the issues to be
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`resolved and the expenses incurred by all parties[,]” by, for example,
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`“shift[ing] its theory of liability to such an extent that [it] actually advanced
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`theories which contradicted their own pleadings[,]” and by requesting
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`“staggering damage demands.” (Dkt. No. 421 at 4-5.) The court also
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`considered Universal’s “lack of understanding about basic legal concepts”
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`and “lack of any reasonable attempt to resolve this litigation short of trial.”
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`(Id. at 5.) In sum, the court found that “[e]ven if [Universal’s]
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`unreasonableness d[id] not rise to the level of frivolousness,” and although
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`“there [was] no specific evidence that Universal acted in bad faith, its
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`contradictory and meritless theories unnecessarily increased the time and
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`resources expended on this litigation.” (Id. at 5.)
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`On appeal, the Second Circuit vacated and remanded this decision,
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`concluding in its findings that (1) “section 8.2 of the relevant contract . . .
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`arguably prohibits . . . MSEI and its suppliers from modifying Universal’s
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`pre-existing intellectual property,” and that (2) Universal did not shift its
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`theory of liability, which “undercut[] the [court’s] conclusion that no
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`4
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 5 of 8
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`reasonable lawyer would have filed a claim in the first instance.” See
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`Universal Instruments Corp., 799 F. App’x at 46-47 (internal quotation
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`marks and citation omitted). The Second Circuit found no error in the
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`court’s consideration of Universal’s “lack of understanding about basic legal
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`concepts” and “lack of any reasonable attempt to resolve this litigation
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`short of trial.” Id. at 47 (citation omitted).
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`Defendants argue that the court should reaffirm its initial attorneys’
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`fee award, because, among other things, the court’s findings that Universal
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`had a “lack of understanding about basic legal concepts” and a “lack of any
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`reasonable attempt to resolve this litigation short of trial” are sufficient to
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`maintain a fee award. (Dkt. No. 453 at 8.) Further, defendants argue that
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`the Fees Appeal Decision does not necessarily preclude a finding that
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`Universal’s conduct throughout the litigation satisfies the objective
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`unreasonableness factor. (Id.) The court disagrees, and finds that, in light
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`of the Fees Appeal Decision, the relevant factors weigh in Universal’s
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`favor.
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`To begin, the court previously found, whether implicitly or explicitly,
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`that Universal’s claim was not frivolous and that there was no evidence of
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`an improper or bad faith motive in bringing its claim. (Dkt. No. 421 at 5.)
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`5
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 6 of 8
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`Thus, at the outset, those two factors weigh in favor of Universal.
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`Next, “objective unreasonableness,” a substantial factor in the
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`analysis, has been defined as a “legal position [that] has no chance of
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`success, and [where] there is no reasonable argument to extend, modify,
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`or reverse the law as it stands.” We Shall Overcome Found. v. Richmond
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`Org., Inc., 330 F. Supp. 3d 960, 968-69 (S.D.N.Y. 2018) (citation omitted).
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`Although the court previously found that Universal’s claim was
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`objectively unreasonable, the Second Circuit reversed two key grounds on
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`which the court’s finding was based. See Universal Instruments Corp., 799
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`F. App’x at 46-47. Specifically, the Second Circuit found that
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`(1) Universal’s claim “arguably” had merit, evidenced by the fact that it
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`“caused [the Second Circuit] in its written opinion to clarify ‘an important
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`limitation’ to the affirmative defense raised [by defendants]”; and
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`(2) Universal did not shift its theories of liability, and instead “consistently
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`argued that MSEI and MTA’s use and modification of the source code
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`exceeded the scope of use permitted by [the relevant contract].” Id.
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`(citations omitted). Thus, notwithstanding defendants’ argument to the
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`contrary, (Dkt. No. 453 at 9-10), and in consideration of the foregoing, the
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`court interprets the Fees Appeal Decision as effectively precluding a finding
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`6
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 7 of 8
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`of objective unreasonableness. Accordingly, this factor also weighs in
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`Universal’s favor.
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`Finally, in light of the analysis above, the Second Circuit’s affirmance
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`of the court’s consideration of Universal’s “lack of understanding of basic
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`legal concepts” and “lack of any reasonable attempt to resolve this litigation
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`short of trial,” in determining the “the need in particular circumstances to
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`advance considerations of compensation and deterrence,” see Universal
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`Instruments Corp., 799 F. App’x at 47 (citations omitted), is of no
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`consequence. That is because—as alluded to above—these facts alone
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`are insufficient to establish objective unreasonableness, and without a
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`finding of frivolousness, improper motive, or objective unreasonableness,
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`there is no behavior for the court to deter. See Creazioni Artistiche
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`Musicali, S.r.l. v. Carlin Am., Inc., No. 14-CV-9270, 2017 WL 3393850,
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`at *5 (S.D.N.Y. Aug. 4, 2017) (“Plaintiff’s conduct in this litigation was not
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`objectively unreasonable, frivolous, or driven by an improper motive, and
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`thus does not warrant the deterrent effect of fees.”). Thus, the
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`“compensation and deterrence” factor necessarily weighs in favor of
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`Universal as well.
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`Accordingly, in light of the Fees Appeal Decision, and having found
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`7
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`Case 3:13-cv-00831-GLS-DEP Document 460 Filed 05/01/20 Page 8 of 8
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`that all four factors weigh in Universal’s favor, defendants’ initial motion for
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`attorneys’ fees, (Dkt. No. 410), is denied. And, consequently, defendants’
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`motion for attorneys’ fees expended in defending the Merits Appeal, (Dkt.
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`No. 441), which is based on the same arguments advanced in defendants’
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`initial request for attorneys’ fees, (Dkt. No. 442 at 7 (“Defendants are thus
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`entitled to their attorneys’ fees spent defending Universal’s appeal for the
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`same reasons defendants were entitled to fees for the prior
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`proceedings.”)), is also denied.
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`Accordingly, it is hereby
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`ORDERED that Universal’s motion to stay (Dkt. No. 436) is DENIED
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`AS MOOT; and it is further
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`ORDERED that defendants’ motions for attorneys’ fees (Dkt.
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`Nos. 410, 441)4 are DENIED; and it is further
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`ORDERED that the Clerk provide a copy of this Summary Order to
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`the parties.
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`IT IS SO ORDERED.
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`May 1, 2020
`Albany, New York
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`4 This Summary Order does not affect the court’s previous award of $38,247.89 in
`costs to defendants. (Dkt. No. 421 at 9.)
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`8
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