Federal Circuit to Wait on Carnegie Mellon Willfulness Case until the Supreme Court Decides Halo and Stryker

Carnegie Mellon University v. Marvell Tech (Fed. Cir. 2015) [CMUMarvellEnBanc]

The Federal Circuit has issued an interesting en banc order in this billion-dollar-case between the university patentee and the storage/chip maker Marvell. The Pennsylvania district court had originally awarded $1.5 billion to the university based upon a judgment of willful infringement. On appeal, however, the Federal Circuit panel reduced that award to a still-healthy but much smaller $278 million. The reduction was based upon (1) elimination of punitive damages for willfulness since Marvell had an objectively reasonable argument of invalidity; and (2) potential elimination of foreign sales from the award calculation – sales contracts were apparently “inked” in the US but then manufactured and delivered abroad. Regarding this cross-border infringement, the panel did not fully deny the availability of damages but instead remanded for further development as to whether the chips made and used outside of the U.S. could be considered “sold” in the U.S. based upon the contracting location.

After cross en banc petitions by Carnegie Mellon and Marvell, the court now writes:

Carnegie Mellon’s petition for rehearing en banc is denied in part and held in abeyance in part. The court will hold in abeyance any decision on the request for rehearing en banc with respect to the first issue raised in Carnegie Mellon’s petition, which seeks review of the panel’s ruling on the enhancement of damages issue. The court will hold Carnegie Mellon’s petition as to that issue pending the Supreme Court’s decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371 (Fed. Cir. 2014) cert. granted, No. 14-1513, 2015 WL 3883472 (U.S. Oct. 19, 2015) and Stryker Corp. v. Zimmer, Inc., 782 F.3d 649 (Fed. Cir. 2015) cert. granted, No. 14-1520, 2015 WL 3883499 (U.S. Oct. 19, 2015).

Carnegie Mellon’s petition for rehearing en banc is otherwise denied. Marvell’s petition for rehearing and rehearing en banc is denied.

A partial mandate will issue returning the case to the district court, which shall have discretion to determine how and when best to handle the proceedings on remand.

Willfulness at the Supreme Court: In my view, there is a good chance that the Supreme Court will dramatically change course on willfulness doctrine. The history of patent law had given broad discretion to district courts to determine the appropriate circumstances for awarding punitive damages. And, that history fits well with other areas of law as well as with the Patent Act that broadly and simply states that “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. §284. Note here, that the statute does not even require willful infringement as a prerequisite and certainly does not delve into the layered subjective/objective approach currently required by the Federal Circuit. Rather, the only statutory limitation on enhanced damages is that they
“shall not apply to provisional rights under §154 (d).”

In Carnegie Mellon’s case, the enhanced damages were about 20% of the total $1.5 billion (updated by 1000x).

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Generally, the Federal Circuit’s strategy here is interesting and overall I like it. In the past there have been times where the Federal Circuit silently delayed its decision making. This case is also big-money, I wonder wither the Federal Circuit will be willing to delay all of its willfulness cases pending the outcome of Halo and Stryker. And, is this a suggestion to district courts to also delay? An important element of the decision here is that there is a parallel remand and so the willfulness issue is not the last remaining issue in the case and so the court’s delay is likely not delaying the final outcome.