Supreme Court Sides with Patentees–Providing Flexibility for Proving Enhanced Damages

by Dennis Crouch

The Supreme Court today issued an important unanimous decision in Halo v. Pulse – vacating the Federal Circuit’s rigid limits to enhanced damages in patent cases.  The decision rejects the dual objective/subjective test of Seagate as “inconsistent” with the statutory language of 35 U.S.C. §284.  Rather, the court indicated that district courts have discretion to award enhanced damages where appropriate “as a sanction for egregious infringement behavior” and that those awards will be reviewed with deference on appeal.  Although the district courts are given discretion, the opinion here makes clear that enhanced damages should not be awarded in “garden-variety cases.”

Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement. In applying this discretion, district courts are “to be guided by [the] sound legal principles” developed over nearly two centuries of application and interpretation of the Patent Act.[1] Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement.

The Roberts opinion linked this case to that of Octane Fitness in which the court had earlier rejected a rigid Federal Circuit test for attorney-fee awards in favor of  flexible discretion at the district court level.[2]  In its decision, the Supreme Court also repeatedly cited its 19th century decisions as guidance.[3] However, rather than wholehearted acceptance of those old cases, the nuanced opinion walks through their reasoning and explains which continue to hold force today.

In thinking about enhanced damages, I find it useful to keep in mind that this issue only arises after a patent has been found enforceable and the accused found liable for infringement.  Thus, any ‘excuse’ offered for the infringement at that point is insufficient to avoid liability but may still be sufficient to avoid an enhanced damage award.  An important element of the decision is that of timing for the excuse.  The opinion notes that an ex post defense generated for litigation is does not remove culpability.  Rather, culpability will be measured according to the infringer’s knowledge at the time of the accused unlawful conduct.

Although the burden for proving egregious infringement behavior rests entirely upon the patentee, the court here held that clear-and-convincing evidence is not required to support an enhanced damages award.  Rather, a preponderance of the evidence (more likely than not) is sufficient to support that award.

Missing from the opinion is an express holding as to whether willful infringement is a prerequisite to an enhanced damages award.  The statute, of course, is silent on this point – indicating only that “the court may increase the damages up to three times the amount found or assessed.”  Going forward, it may make sense to refer to the topic as ‘egregious’ infringement rather than ‘willful’ infringement.

The opinion vacates the decisions in both Halo and Stryker. Read the Decision: HaloPulseStrykerZimmerDecision

= = = = = =

Although the court’s opinion was unanimous, Justice Breyer also provided a concurring opinion joined by Justices Alito and Kennedy.  The concurrence suggests a more limited discretion for the district court – namely: (1) that mere knowledge of the patent is insufficient to prove willfulness; (2) failure to obtain advice of counsel cannot be used to prove recklessness (see Section 298); and (3) enhanced damages are not to be used to compensate the patentee for either the infringement or the hassle/cost of litigation.

Regarding the standard for review, Justice Breyer also offers an interesting statement supporting the Federal Circuit’s role as an ‘expert court’:

[I]n applying that standard [of deference], the Federal Circuit may take advantage of its own experience and expertise in patent law. Whether, for example, an infringer truly had ‘no doubts about [the] validity’ of a patent may require an assessment of the reasonableness of a defense that may be apparent from the face of that patent.  And any error on such a question would be an abuse of discretion.

Despite this ‘experience and expertise’, I won’t look for the Supreme Court to begin giving deference to the Federal Circuit anytime soon.

= = = = = =

[1] Martin v. Franklin Capital Corp., 546 U. S. 132, 136 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U. S. 517, 533 (1994)).

[2] Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___ (2014).

[3] See, for example, Seymour v. McCormick, 16 How. 480, 488 (1854); Dean v. Mason, 20 How. 198, 203 (1858); Hogg v. Emerson, 11 How. 587, 607 (1850); Livingston v. Woodworth, 15 How. 546, 560 (1854); Tilghman v. Proctor, 125 U. S. 136, 143–144 (1888); Topliff v. Topliff, 145 U. S. 156, 174 (1892); Cincinnati SiemensLungren Gas Illuminating Co. v. Western SiemensLungren Co., 152 U. S. 200, 204 (1894); Clark v. Wooster, 119 U. S. 322, 326 (1886); Day v. Woodworth, 13 How. 363, 372 (1852); and Teese v. Huntingdon, 23 How. 2, 8–9 (1860).

138 thoughts on “Supreme Court Sides with Patentees–Providing Flexibility for Proving Enhanced Damages

  1. This ruling is interesting but was largely expected. Now for the real potential earth-shaker, when will the Supreme Court decide what to do about Cooper/MCM? Would it be after June 30, since it appears that’s how long they gave the other side respond (at least for MCM v. HP)? Do they make cert/no-cert decisions over their summer recess?

        1. There is nothing published by the Court during their recess, so unless they move prior to the break, then yes, even the decision on cert.

    1. Ken, we have 14 days to respond, placing the date the clerks can first look at the case in mid July. I will assume they will make a positive recommendation given that the Supreme Court takes important cases. That probably means a decision to take the case will occur sometime in September.

      1. Ned, you think there’s any chance they might just do a vacate/remand of sorts (e.g., simply ordering the Federal Circuit to reconsider, in light of the Supreme Court precedent that they’ve thus far summarily ignored)?

        1. Ken,

          Zero chance at that (and that’s being generous).

          What’s your angle with such “insistence” that you are pursuing?

          1. Not really an “angle” – let’s just say it would help me, along with many others I’m sure, to know ASAP whether the Supremes are likely to cut back on IPR in some meaningful way.

              1. I am curious Ned (hence the asking) what do you think that the mode of change will be, given that you foresee a (substantial) change within the year?

                I am curious too when that question is avoided (hence, the repeated question).

                Are there any legally cogent mechanisms that you want to provide that you think this change will happen by? Ones that would account for this law and this law’s particular explicit actions by Congress?

          1. The Court could theoretically reach the constitutional question in Cuozzo.

            Also – the Court will continue to review / grant / deny cert petitions through the summer, even though technically between terms.

            1. Also – the Court will continue to review / grant / deny cert petitions through the summer, even though technically between terms.

              I don’t believe this is quite accurate. Although the clerks may continue to review petitions, the Justices traditionally do not. The petitions that become ripe for consideration over the summer are not reviewed by the Justices on a rolling basis. They are all considered at the “long conference” at the end of the summer. See here.

              1. Jane, from my understanding, the summer involves clerks having nothing other to do but to review petitions and make recommendations. Petitions that become reviewable during this time will receive careful review.

                The clerks are also operating with to fill out the docket of the upcoming term with worthy cases, cases worthy of Supreme Court review. That is the primary criteria.

                That means, the cases must be important. The minor dispute over claim construction would not meet this criteria regardless of how wrong the Federal Circuit was. Anything that involves an unresolved disputes of fact will never receive certiorari. It is unlikely that any case that did not receive a written opinion from the court of appeals would be taken.

                All petitions try to make the case that their petitions are important. But few rise to the constitutional level, as opposed to statutory construction or rule of law issues. Serious constitution questions are the kind of cases worthy of Supreme Court review.

                I have not reviewed the entire gamut of petitions, so my view here is only speculation, but is the MCM case presents the kind of issue that the Supreme Court would deem worthy — a case involving the constitutionality of a statute, separation of powers, jury trial rights and the nature of a patent, whether it is property or just a government-granted privilege.

                There is little doubt that patents were central to the power struggle between the crown, on the one hand, and parliament and the courts on the other — a struggle that lead to the English civil war and a fundamental constitution change in England. Similarly, it was the patent of the British East Indies Company (Boston Tea Party) that lead to the American Civil War. Famously, the English Privy Council finally transferred the validity of patents to the exclusive jurisdiction of the common law courts in 1753 in one more constitutional crisis.

                The MCM case is historically important, one of the most important cases before the Supreme Court in 200 years. Separation of powers, the scope of the jury trial right, and whether patents truly are property or not. I think the Supreme Court will not pass on MCM.

                1. It doesn’t add up that the Court would sleep on Cooper in order to hear MCM sans Roberts – which leaves Cuozzo.

                2. Why do you think that it is one or the other?

                  Courts have combined cases many times previously.

                3. anony, I do not think that Roberts will be recused if the court takes MCM.

                  Moreover, Cooper is appealing the Fed’s ruling in MCM, but only one aspect of that case. How odd would it be that the court would not take MCM if it took Cooper?

                4. I agree that most of us would like to see the Court hear the cases in parallel.

                  However, Roberts is recused from one, but not the other. Where provided with option, the Court will decide an important constitutional question such as this one with 8, not 7.

                  Additionally, if Cooper was procedurally infirm per the DOJ’s argument, the Court would have denied cert by now.

                  Also, 7A argument is not the separation of powers argument, which is at issue. The Court may determine that a stand alone question of patent validity was historically resolved at equity – which necessarily resolves the jury trial question. Similarly, the Court may determine that a stand alone question of patent validity was historically resolves at law – which also necessarily resolves the question. Finally, the Court may affirm the CAFC’s view that patent validity is a public right, which also necessarily resolves the jury trial question.

                  The inclusion of the jury trial issue is superfluous / redundant, and would not elevate one petition over the other.

                  All signs point to Cuozzo + GVR for Cooper / MCM.

                  Back to the recusal:

                  If Roberts were to sell his HP stock now, he would remain recused.

                  If you are aware of any prior examples, etc. demonstrating were a Justice has reversed a prior recusal and re-entered the case, we’d like to see it.

                5. anony, but, in point of fact, all issues of fact were tried to common law juries prior to 1800. But validity was tried to the jury and judgment entered by a common law judge. Those are the facts. The court cannot ignore facts.

  2. You guys want to hear something ironic? Lee sent a mail to everyone to discuss the Orlando shooting, and invited everyone to “stand in solidarity” with them by giving blood. Irony: Gay mans can’t give blood because Fed gubmit (and the AMA).

        1. Alright so I went ahead and looked into it, multiple reputable sources now confirm apparently it is no longer a lifetime ban. Now it is only a year ban since your last ahem, gay contact. Well I guess its a step in the right direction. Though I do remember the AMA making a lot of noise over at least one other infection that was not HIV but which was nearly entirely prevalent in gay men specifically. I wonder if the AMA switched their position or if they just were overridden.

          link to cnn.com

          1. ahem, gay contact

            You know what else is “ironic”? Like you, the k00k00b@nanas shooter was also kind of fixated on “gay contact.”

            Generally speaking, the grown-up thing to do is work on your own fulfilling sex/love life and not worry too much about what the other grown-ups are doing. I know, I know … you just wanted to share this fascinating news story with your virtual friends here. We get it.

            1. “You know what else is “ironic”? Like you, the k00k00b@nanas shooter was also kind of fixated on “gay contact.”

              Generally speaking, the grown-up thing to do is work on your own fulfilling sex/love life and not worry too much about what the other grown-ups are doing. I know, I know … you just wanted to share this fascinating news story with your virtual friends here. We get it.”

              MM presumes that I’m not a black gay trans disabled person of the islamic faith who suffers this very discrimination. There’s nothing like the “soft” discrimination from those on the left, they always feel so good about discriminating thusly. Why, its a virtue don’t you know?

              For shame MM. Either way, the point of my bringing it up is that gay people were still being discriminated against, by law/rule/regulation by our very gov until just last year, and that they still are actually, and that it is ironic for members of that same gov to invite people to stand beside those people “in solidarity” while they are a part of the same apparatus literally still discriminating against gays. The point is that the gov, who is supposedly all “anti-discrimination” is indeed still a discriminator itself. Not some fixation with gayness or contact re re, it even goes beyond gayness, as there are still several other categories the gov assures people won’t be discriminated against on, and then promptly does so itself.

              1. MM presumes that I’m not a black gay trans disabled person of the islamic faith

                I definitely did not presume any of those things.

                who suffers this very discrimination.

                Ah, so there’s some some form of anti-gay discrimination that’s bothering you. Kinda odd that you chose to focus on the “irony” without mentioning that the discrimination itself was problematic for you … until now. But I’ve pretty much seen everything on the Internets so …. [shrugs].

    1. 6, the Orlando incident tends to confuse. Was the bar attacked because it was gay? But, as we learn more, the shooter himself was gay. Thus, it appears, the more we learn, the more we find that what we thought we knew may not be true.

      1. I just saw a headline that suggested the Orlando shooting was a hate crime. That assumes the shooter targeted Pulse because of gays. How is this possible if the shooter himself was gay and a frequent patron?

        1. Sorry I didn’t get back to you for awhile there Ned. I don’t know bro, lots in there, actual gayness, actual self-hatred, actual jihadism, and actual mental illness amongst others all seem to play a role.

          1. 6, the information since does seem to suggest that Pulse was targeted on behalf of ISIS and its ideology because of its patrons were gays. What this says, to me at least, is that gays are special targets of ISIS and its allies.

            But there is another consideration: Is it not it also interesting that the radical in Santa Barbara and the radical in Orlando both attacked groups of which they were a member?

  3. Dennis – were threads 9 and 10 lopped off on purpose or has there been a tragic loss of data and backup/restore?

      1. A thread was edited? Wow. Sounds like a conspiracy.

        Or at least it could give someone the “perception” of a conspiracy. And that’s just as bad, at least if you’re already an embittered entitled paranoiac who perceives all kinds of stuff via the voices in your fillings.

          1. Still hearing those voices

            Just recalling your typical silliness and “concern” about Dennis’ reputation, “anon.” Golly, it must have been almost three weeks since you last lost your marbles and went off the deep end with one of your recycled rants about “perceptions.” Okay, maybe it was five weeks.

            But don’t worry. We’re all trying to be considerate of your precious fee-fees. “Perceptions,” you know.

            LOL

            1. LOL right back at you: your “crocodile tears” of concern would be far better addressed if you were not such a blight.

              Happy decade of decadence.

              Chump.

  4. I think MM was hinting at this at 5.0 but to expound further.

    Page 9: “The principal problem with Seagate’s two-part test is that it … excludes from discretionary punishment many of the most culpable offenders, such as the “wanton and malicious pirate” who intentionally in­fringes another’s patent — with no doubts about its validity or any notion of a defense — for no purpose other than to steal the patentee’s business.”

    Really? How does that work?

    The Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appro­priate under §284 only in egregious cases. That test, however, “is unduly rigid and it impermissibly encumber sthe statutory grant of discretion to district courts.”

    Page 8: “At the same time, “[d]iscretion is not whim.”

    This opinion seems to be running true to form, e.g., KSR. A CAFC rule, like TSM, is useful but too rigid. What’s needed is common sense, albeit with a requirement to articulate sound reasoning.

    1. Also note that the standard of proof was lowered from clear and convincing to preponderance. I do not recall why it was placed at clear convincing in the first place. Does anybody?

      In the IEEE brief filed in MCM Portfolio LLC v. Hewlett-Packard, the IEEE argues that a heightened standard of proof is required when the risks are asymmetric, where would the one party has little to lose and the other party a great deal to lose, such that the standard must be set such that the a wrong answer is unlikely. Thus when a party is accused of a crime where his life, liberty or property are at stake, the standard is beyond reasonable doubt. Furthermore, when the validity of a patent is at issue, the burden is set a clear convincing to avoid a wrong answer.

      In the case of willful infringement, on the one hand we have a willful violation of the patentee’s rights and on the other the risk of treble damages. The risks seem symmetric to me. Thus it is a wonder that the Federal Circuit ever came up with clear convincing evidence as standard of proof.

    2. Troubled: This opinion seems to be running true to form, e.g., KSR. A CAFC rule, like TSM, is useful but too rigid. What’s needed is common sense, albeit with a requirement to articulate sound reasoning.

      Right. My comment in 5 is directed to the judicial determination that comes after the determination that the losing defendant’s behavior was “egregious” such that some measure of enhanced damages are warranted.

      The question is: what level of articulation of “reasoning” will suffice to insulate a judge’s determination of precisely how much “enhancement” is appropriate? I suspect it will be enough for a judge to say “Because behavior a, b and c was egregious, treble damages are appropriate.” What’s odd about that result, however, is that treble damages are themselves just an option. The statute says “up to 3x the amount”. So it would seem that judges need to articulate some reason that they chose “3x” rather than “1.5x”. My hunch is that a decision to award 1.5x damages will be scrutinized more closely than a decision to award 3x (i.e., the judge will need “better reasons” to award less than the maximum than he/she needs to award the maximum).

      1. I think judges/ district courts/ CAFC will either (1) start from 3 and work down with mitigating factors considering the aggravating factors, or (2), and the more likely scenario, start at 1 and work up with aggravating factors considering the mitigating factors.

        In the environmental law arena, where Congress has sanctioned $X amount per day for a continuing violation (e.g., violation of clean water act, up to $35k (I think) per day for a violation), Courts do one of those two frameworks. Either way is fine as long as it is reasoned.

        I guess my point is that District Courts are used to exercising this kind of discretion.

        1. District Courts are used to exercising this kind of discretion.

          One would hope so! We’ll find out soon enough, I’m sure.

  5. First, note that this is a pro-patent-owner Sup. Ct. decision overruling a less pro-patent-owner decision of the Fed. Cir.
    Secondly, this decision of the Sup. Ct. was so widely predicted after its prior and closely similar issue Octane Fitness decision that one wonders why the Fed. Cir. did not itself take an enhanced damages case en banc rather than continuing to apply inconsistent law and waiting for another unflattering unanimous reversal?

    1. It is almost as if they have become accustomed to the fire-hose treatment….

      (The training of simians in a cage, reaching for bananas)

    2. Paul: “[O]ne wonders why the Fed. Cir. did not itself take an enhanced damages case en banc rather than continuing to apply inconsistent law and waiting for another unflattering unanimous reversal?”

      Indeed.

      Then we have other examples such as not overturning Aukerman in view of Petralla, and Patlex overruling McCormick Harvesting, a Supreme Court case. We even have the Federal Circuit itself overruling Patlex in Lockwood and refusing to follow Lockwood.

      Now just why would the Federal Circuit not following controlling Supreme Court cases law? Why did they not follow Benson? Whey did they not follow Bilski ’till Allice. Why?

      Well, for one reason, Paul, the courts seems to be highly influenced by the patent bar; and the patent bar, or at least a large segment of the patent bar, has viewed the Supreme Court with alarm since the ’30s and ’40s. There is not a day goes by where the likes of Gene Quinn, anon or Night Writer does not pound that drum. Quinn is on record for the Federal Circuit to openly defy the Supreme Court.

      And, Paul, you too are somewhat guilty of this in the case of IPRs, are you not?

      1. Your “selectivity” is appalling Ned.

        MY attorney oath does not place the Supreme Court above the Constitution.

        I suggest that you check yours – maybe for the first time, eh?

          1. Ned,

            Your reply here is a non-sequitur.

            Let me know what your particular state attorney oath says about placing the Supreme Court above the Constitution.

            Your “feality” is rather fickle and reflects the typical affliction of yours of “6-is-a-genius-because-he-agrees-with-me.”

            1. Let me know what your particular state attorney oath says about placing the Supreme Court above the Constitution.

              Last time I checked the Supreme Court gets to intepret Federal statutes. And they’ve done that numerous time with respect to the patent statutes.

              But the patent maximalists (i.e., “anon” and his quail-inhaling c0horts) just can’t wrap their heads around that. Nope. After all, nobody is as important as they are. They invent everything! And “Big Corp” copies them. Yup. They told us so. And they’re very serious people.

                1. Interpret is just not the same as re-write.

                  And remember folks: if it was up to super serious “anon”, he’d take us back to State Street Bank.

                  Because that worked out so wonderfully.

                  LOL

                  But he’s super serious! We all have to pay attention to him and his quail-inhaling hero.

                2. The “poker-tell” of “so serious” compounded by the fact that I have NEVER banked on State Street – you funny (but not in the way that you think)

      2. No, I am not.
        What aspect of the IPR statute [or any other part of the AIA] has yet even been contested by the Fed. Cir.? Or even reached the Sup. Ct. after being supported by the Fed. Cir. other that Cuozzo? And Cuozzo is only a challenge to two PTO statutory interpretations of the IPR statute.

        That is completely different from expressing a realistic view of the indisputably very low odds of the Sup. Ct. accepting and supporting a constitutional challenge to a federal statute that no lower court has sustained, rather than missleading lay readers as to those low odds.

        1. The CAFC, in fact, just affirmed various aspects of IPR proceedings this morning (e.g., no due process issues raised by the presentation of new references/evidence of non-obviousness which weren’t cited at the initiation stage, as long as the patentee has an opportunity to respond).

          1. It was also interesting that the Fed. Cir. recently held that late changing of the claim interpretation in an IPR proceeding without providing an opportunity to respond, was a violation of the APA statute, rather than raising it to a Constitutional due process issue, as they could have.
            [A full opportunity to respond in an IPR should include being able to cross-examine the authors of any new declarations?]

              1. “anon” those were Office procedures and not the legislative statutes under review, eh?

                Are you suggesting that Office procedures can’t violate the Constitution? If not, then it’s unclear what you’re talking about. Again.

                1. Not at all – but there is a point to be distinguished as to when the APA can serve as a basis and when it cannot.

                  Think before you v0m1t, please.

                2. there is a point to be distinguished

                  ROTFLMAO

                  Keep digging, “anon.” You’re a super serious person!

            1. Paul, the decision at one point said that the point of the trial was to introduce new evidence.

              The purpose of the trial in an inter partes review proceeding is to give the parties an opportunity to build a record by introducing evidence—not simply to weigh evidence of which the Board is already aware.

              Yes and No. Petitioner’s entire case must be presented in the petition. The petitioner has no right to add new evidence except on motion.

              The motion to submit supplemental information must show why the supplemental information reasonably could not have been obtained earlier, and that consideration of the supplemental information would be in the interests-of-justice.

              Rule 42.122(b)

              It is the patent owner that has the right to present evidence in rebuttal. While the petitioner has a right to reply, that reply cannot introduce new evidence or argument. Rule 41.122(b).

              When the Reply DOES present new evidence and argument, the Feds say the patent owner can move to strike otherwise it appears that that the PTAB can rely on it. That seems contrary to the rules. The patent owner should be able to respond at oral argument that the reply contained argument and evidence beyond the patent owner’s response. That is what apparently happened here. Nevertheless, the PTAB did rely on it, and the patent owner lost.

              The result of this case is that the Patent owner will have to move to strike reply briefs that add or rely on new evidence or argument exceeding the scope of the opposition brief and evidence.

              1. Petitioner’s entire case must be presented in the petition.

                Give everyone a break, please. The petitioner does not need to pre-answer the patentee’s replies. If the patentee replies with some bizarre dust kicking, turf-twisting bal0ney — which is very typical behavior when the patentee is presented with good evidence that their patent is junk — then the petitioner is certainly entitled to address that bal0ney. The only “showing” that’s possibly needed is a statement that the patentee has presented an argument that doesn’t appear in the specification or the prosecution history of the patent. But most of the time that’s going to be self-evident to everyone involved (the patentee, of course, will have its head buried in the sand).

                When the Reply DOES present new evidence and argument, the Feds say the patent owner can move to strike otherwise it appears that that the PTAB can rely on it. That seems contrary to the rules.

                It’s not contrary to the rules at all.

                1. MM, the Rules forbid anything in a reply that is beyond addressing the opposition (patent owner’s statement).

                  Regarding “bizarro” arguments and evidence, the petitioner has the right to cross declarants and to comment on such evidence and arguments based thereon. What they do not have a right to do is introduce new evidence except with leave of the court, and that leave has a very high showing before it can be introduced.

                  What you argue for here, MM, is that petitioners should be able to get away with violating the rules. That is illegal and immoral, would you not agree?

                2. B-b-but the Ends Ned, the Ends…

                  …and cohorts…

                  …and (checks short script)… and “Important People”….

                  lulz

      3. Why didn’t they follow Benson? Perhaps because no one understands what Benson says? Perhaps because Benson is unintelligible gibberish? Perhaps because Benson does not make sense in a world where everything is on computers and the only reasonable place to perform many inventions is on computers?

        Seriously, Benson is the worst-written and reasoned case in the history of US patent law. It was written by people who had no freaking clue what a computer was and certainly no clue what they would become.

        1. Someone at the Federal Circuit knew more about the statutory law known as patent law and knew just what the Supreme Court was shoveling that did not have to be “followed.”

          Someone with enough cajones not to be brow-beaten like the current set of Federal Circuit simians (in a cage, being subject to firehoses when they reach for bananas).

          1. anon, Rich is famous for ignoring precedent. Let me give you this from State Street Bank,

            “As an alternative ground for invalidating the ‘056 patent under § 101, the court relied on the judicially-created, so-called “business method” exception to statutory subject matter. We take this opportunity to lay this ill-conceived exception to rest. Since its inception, the “business method” exception has merely represented the application of some general, but no longer applicable legal principle, perhaps arising out of the “requirement for invention” — which was eliminated by § 103. Since the 1952 Patent Act, business methods have been, and should have been, subject to the same legal requirements for patentability as applied to any other process or method.[10]”

            1. ? What precedent was being ig nored?

              You are aware of course (since I have reminded you like a gazillion times) that business method patents have been granted throughout the life of the Office, that Congress itself recognized business method patents (by providing a limited prior user rights avenue to a subset of those selfsame business methods – when IF as you would have it, they would not need to have done so, that you are (once again) misapplying Hotel Security, that you are (once again) simply getting wrong the ENTIRE printed matter doctrine, including the exceptions to that judicial doctrine of printed matter {hint: my simple set theory explication, which you TO THIS DAY have been unable – and even unwilling – to try to find fault with.

              What next Ned? You r typical running away from these point I present to you?

              1. anon, I was bringing to your attention the utterly cavalier way Rich disposed of a hoary doctrine long followed in the courts. He ridiculed it, and effectively said it had been overruled by Congress.

                The man simply would not follow prior 101 precedent. He utterly refused.

                1. Let me repeat myself and ask you POINT BLANK once again:

                  ? What precedent was being ig nored?

                  What was this 101 precedent that you claim was being ig nored?

                  Are you going to retreat to your hackneyed and utterly vacuous pre-1952 “101” version and not pay attention to what Congress actually did in 1952?

                  As for your personal smear campaign against Rich, you do of course know that he was following the words of Congress – and as we have discussed, he was in the best possible position to understand those very words of Congress.

                2. anon, Rich did not want to look at the basis for Hotel’s Security’s preliminary holding. Let me quote from it:

                  “Section 4886 of the Revised Statutes (U. S. Comp. St. 1901, p. 3382) provides, under certain conditions, that “any person who has invented or discovered any
                  new and useful art, machine, manufacture or composition of matter” may obtain a patent therefor. It is manifest that the subject-matter of the claims is not a machine, manufacture or composition of matter. If
                  within the language of the statute at all, it must be as a “new and useful art.” One of the definitions given by Webster of the word “art” is as follows: “The employment of means to accomplish some desired end;
                  the adaptation of things in the natural world to the uses of life; the application of knowledge or power to practical purposes.” In the sense of the patent law, an art is not a mere abstraction. A system of transacting
                  business disconnected from the means for carrying out the system is not, within the most liberal interpretation of- the term, an art.”

                  In other words, divorced from the means, a business method is not a patentable Art.

                  Hotel Security further held that the means was not new and that neither was the business method.

                  The court did leave open for a future date the precise question of whether the entirety of the claimed subject matter would recite patentable subject matter if new. But that question was not before the court.

                  But Rich simply ignored the rational for the preliminary holding that a method of doing business was not a patentable Art. (It was this holding that was followed in subsequent cases and that became established law.)

                  He then ridiculed the opinion, setting up a strawman about “invention,” and then saying that strawman had been overruled by the ’52 Act. Such “analysis” is not worthy of a judge of any stripe. Yet it was typical of Rich.

                3. You once again improperly invoke Hotel Security – as Prof Crouch has told you – and David Stein ripped you apart – your “version” is malarkey.

                  You are ALSO trying to ig nore what happened in 1952 – exactly as I predicted that you would.

                  What was it that you said?

                  having a belief that the law should be X, when it is in fact Y, is not a proper legal defense.

                  You just don’t get to act like 1952 never happened. Congress (not your scape goat attempts on Rich) DID act – and were prompted by the exact same type of mess that the current Court is making with 101. The power of the court to set the definition of “invention” was removed in 1952.

                  Accept.
                  Understand.
                  Integrate.

                4. Still no answer to my simple and direct question, Ned?

                  I am neither surprised, nor am I holding my breath – this is yet another point on the table for discussion that you run away from.

        2. I agree that its reasoning was unclear.

          I do not agree that they had no clue as to how computers operated.

          They should have been informed of Hotel Security and how to address claims with mixed subject matter, some eligible, some not. We are now almost there thanks to Alice and its progeny.

          1. PatentBob leads on with the the horridness of Benson and Ned quickly doubles down on his twin windmill curse-ades of anti-software and anti-business methods…

            Like a clarion call of horridness (with zero surprise).

  6. Here’s an interesting fact pattern.

    Company A realizes (either on its own or through notification) that it is infringing a patent held by Company B. Company A decides to continue its activities, choosing to rely on an opinion (either generated in-house or by outside counsel) that Company B’s patent is invalid/ineligible.

    Company A loses its case. The judge determines that, while it was “reasonable” to rely on the invalidity/ineligibility opinion in a factual vacuum, Company A’s behavior was neverthless “egregious” because the arguments in the opinion would render hundreds of Company A’s patents (it’s own patents, and licensed patents, including patents applied for after it generated its ineligibility opinion and patents that it licensed to others) invalid/ineligible. There is no evidence in the record that this latter fact was ever addressed or acknowedged by Company A, and Company A was unable to marshall a convincing argument explaining the discrepency.

    “Egregious” conduct? It seems obviously so to me, but I’m curious about what others think.

    1. This is an interesting fact pattern. It might also go to the applicant’s duty of candor to the Patent Office. So, for example, the Company A might rely on an opinion that beauregard claims are per se patent ineligible to avoid treble damages, but in parallel file patent applications with beauregard claims.

      1. Beauregard claims are invalid (in my opinion anyway), but there’s no court case directly on point. Therefore, until there is a court case holding that Beauregard claims are invalid, they’re valid. Regardless of what an invalidity opinion says. And the opinion should say that these claims are valid, at least as claim structures, and if it doesn’t, the law firm should be fired.

        MM’s fact pattern involves two completely disconnected events having nothing to do with each other.

        1. completely disconnected events having nothing to do with each other.

          LOL

          “It’s totally reasonable to argue that your patent on X is invalid for reason Y. The fact that the identical argument renders hundreds of our own patents — including applications we’re currently applying for and patents we’ve licensed to others — has nothing to do with the evaluation of our conduct as infringers. Nothing, I tell you! Nothing at all!”

          Super persuasive stuff, Bob.

          1. MM these things happen in real litigation all the time- I suspect Microsoft was hamstrung arguing Enfish for that exact reason.

            It’s hard to attack a system that you depend on in those moments when the system has you on the defensive.

    2. I would argue that it is not egregious to apply the current understanding of the law to a certain patent.

      Whether or not it would cast doubt on hundreds of company A’s patents is beside the point – company A could just be waiting for the maintenance fee period to end and forget about those patents or company A could have a longer viewpoint – hoping the law swings back. This latter argument does not negate the current good faith belief that company B’s patent is invalid.

      I’ve also seen the CAFC reject this argument concerning someone making an Alice/101 counter argument: Patent Owner says company A can not argue X because X would mean their patents are also invalid. The court rejected that argument. I’ll look for the case later. Sorry, I didn’t have it memorized.*

      * Yes I know there is a difference between treble damages (tied to the mental state of the infringer) and the ability to use a certain argument under 101.

        1. Malcolm’s (straw) “facts” include:

          judge determines that, while it was “reasonable” to rely on the invalidity/ineligibility opinion in a factual vacuum,

          Too funny – something about “super persuasive” comes to mind…

          …not.

          1. Remember, “anon”: if you’ve got something to say, try declarative sentences and plain English.

            Nobody knows what you’re talking about. That’s almost certainly because you don’t know what you’re talking about.

            1. I used your own words -if YOU don’t understand that, that is most definitely a YOU problem.

              Your “rely… in a factual vacuum” contrasts nicely with your post at 1.1: “The arguments for sticking your head in the sand “before going to market” always seemed highly suspect.

              Pull your own head out, son.

                1. LOL – your own words and you have no clue.

                  Not a surprise (no matter how many people you want to attempt to speak for)

  7. Looking forward, I’m curious about what happens when a judge finds that a defendant’s behavior was “egregious” and decides that “enhanced” damages are warranted.

    The statute plainly allows for flexibility in the extent of that award (“… up to … “). Is it enough for a judge to say “While the defendant’s infringing conduct was ‘egregious’, it could have been even worse, e.g., [insert example of potentially worse behavior here]. In light of that fact, I am going to enhance damages by 1.5 times rather than the full 3 times” ? Would that be deemed an “abuse of discretion” by the district court?

    If the answer is “yes”, then presumably a statement that “defendant’s conduct was egregious because they knew about the patent and ignored it without any effort to determine its invalidity or establish a non-infringement position therefore I’m going to award 3x damages” would also be an “abuse of discretion.”

  8. “Martin Snyder February 24, 2016 at 11:54 am

    I predict 8-0 overturning CAFC, setting the standard as ‘exceptional’ and allowing district judges discretion, with abuse of discretion as the standard of review. They will do this to intuitively balance Sections 285 and 284 in concept and effect because even though the language is vague and different in both statues, the underlying intent of Congress was likely very similar in both sections to give judges discretion to respond to the facts of any given case on the key issues of fee awards and punitive damages, recognizing that IP torts are a different species in the way actor’s perceptions of risk unfold with events”.

    Holiday Inn, or something….

  9. DC: Although the district courts are given discretion, the opinion here makes clear that enhanced damages should not be awarded in “garden-variety cases.”

    “Garden variety” would seem to include infringing acts where the defendant wasn’t aware of the patent until notified by the patentee, and/or cases where the defendant reasonably relied on an invalidity or non-infringement opinion (either before or after after being notified by the patentee).

    1. I think your comment makes sense MM. I’m curious where others believe the line to be for “garden variety”. I might argue that intentionally copying a product of a competitor (which is welcomed in american capitalism/free markets) without knowledge of the patent, coupled with knowledge after going to market that there was a patent covering some aspect of the product, and continuing to produce the infringing product might still be garden variety…

      1. You want knowing that you are breaking the law to be considered “garden variety”…?

        What would you consider not to be “garden variety”…?

        Efficient infringement can NOT be allowed to become to be considered to be “garden variety.”

        1. Anon – I’m merely proposing the argument whether continuing to infringe after spooling up manufacturing without knowledge may not warrant enhanced damages. i.e., efficient infringement may be ok for society in that particular context.

        2. Also, “efficient infringement” is entirely independent concept from enhanced damages. Conceivably, you could still have efficient infringement with enhanced damages under a loss leader business model.

          1. They are not as separate as you may like to think, and the fact that such would be a “choice,” only shows that for entities like that, that treble is simply not high enough.

            1. No Ned – it does NOT require a “lack of” (as in total lack), but rather, it merely required a “lack of” (in terms of an effective deterrent). A slap on the wrist (a presence of a meager penalty) is STILL very much reflective of a “efficient infringement” scenario.

              For example, even 3x may be nothing to a Big Corp that knows it can infringe with impunity because it knows that the little guy that it infringes upon could never withstand an onslaught (including PGR).

    2. MM, what about after notice? Do they have a right to continue to infringe just because they began their infringement without knowledge of infringement?

      1. There is a presumption of validity / even if you believe with all your might that the patent cannot possibly be valid, you are choosing to “break the law” by engaging in infringement before that patent is found invalid at law.

        You do not get to keep on trespassing while you fight the patent (or should not, without penalty).

        The proper path would be to desist infringement while fighting (or be willing to pay the penalty for continued transgressions).

  10. “The Supreme Court also repeatedly cited it’s 19th century decisions as guidance” = good sign for Cooper / MCM, bad sign for IPR.

    1. I think you’re reading way too much into this case, which has absolutely nothing to do with IPR proceedings, nor anything to do with the Constitutionality of a patent statute.

  11. The pendulum swings back, at least a little bit, in favor of getting non-infringement/invalidity opinions before going to market. More work for the patent attorneys.

    1. The arguments for sticking your head in the sand “before going to market” always seemed highly suspect.

      The fact remains that if there is a ridiculous invalid/ineligible patent out there that reads on your product or reads on some activity you’d like to engage in, you don’t need to spend tens of thousands of dollars on a formal legal opinion demonstrating the patent’s invalidity/ineligibility.

      All you need to do is memorialize the reasoning. That can take as few as two sentences (or one long one).

    2. In one of the cases, management relied on the opinion of an engineer that the patents were invalid. We are going to find out, I think, as to whether such reliance is reasonable.

      1. Let me know if that engineer ALSO knows enough law to make even an “educated” guess, then let me know how that state views the unauthorized practice of law.

        1. Not sure there’s anything to gripe about on a state-law level? Do state UPL statutes reach an action where a (non-attorney) engineer says a patent covers a product previously marketed by his employer?

          Note I’m not saying it’s not a legal-related opinion at its heart. But maybe it’s more a matter for OED. But that seems a bit of a catch-22 also.

          Also, back to state UPL statutes, is the engineer insulated as an employee making such an opinion directly to his employer? I’ve just read my state’s UPL statutes and in some ways they seem to go in circles on this question, but it appears to insulate both such an employer in seeking an internal employee’s opinion and the employee for complying with the request.

          1. Mellow,

            Your questions are fair enough – and I am more than certain that obtaining an engineer’s perspective can be valuable – for the engineering aspect that may be involved, and should be sought out as a portion of any larger legal conclusion on the matter.

            But the point I make is that a question of law concerning validity remains a question of law.

            I will even grant you that it may not even be the engineer who steps across the line in the practice of law, if it is not she that makes here opinion into something more than what it should be.

            But make no mistake that what is being offered here by Ned would be a violation of the unauthorized practice of law, and the entity being careless in overstepping the limits of an engineering opinion to formulate a legal position is guilty of that transgression.

            1. “But the point I make is that a question of law concerning validity remains a question of law.”

              Yes, but patent validity is a creature of federal law, whereas you asked “let me know how that state views the unauthorized practice of law”.

              My point is, do state UPL statutes reach this question? I don’t know the answer there.

              So in digging deeper, I also found that in my state it seems such intra-corporate activity may also not fall under the UPL statute, as I mentioned (by I’m not certain of this).

              1. The distinction is because individual attorneys must answer to State boards regarding the issue of unauthorized practice of law (attorneys do not take a “Federal Oath” that covers this aspect of practice).

                As to the “intra-corporate” wranglings, I think that you are confusing yourself to a certain degree. Certainly, within a corporation, any number of portions of what may later become a legal opinion can be obtained by many and various non-lawyers (hence my reply that engineers should be consulted for engineering opinions).

                But such items are (by definition) NOT legal opinions.

                The crux of the matter is that there is a clear and unmistakable difference between all other things and a legal opinion.

                Legal opinions simply do not – cannot – and should not come from non-attorneys.

                1. “The distinction is because individual attorneys must answer to State boards regarding the issue of unauthorized practice of law (attorneys do not take a “Federal Oath” that covers this aspect of practice).”

                  Sure. But they are under federal discipline. And the SC has told states to lay off attempting to exercise disciplinary jurisdiction over purely patent matters (of course, there the guy was at least subject to OED, so yes, distinguishable from here).

                  I’m a browser of OED decisions (morbid curiosity). Many of them are reciprocal discipline cases where OED disciplines (reciprocally) a patent or TM attorney for the trouble they earlier got into with their state bar which was solely a non-PTO matter (e.g., sleeping with a divorce client).

                  But if you track attorneys who were disciplined by OED directly due to a complaint from a patent client (failure to communicate with applicant-client, letting their app abandon needlessly), it seems very rare – I don’t think I’ve seen one – where a state bar later instituted reciprocal discipline based on that original OED discipline.

                  None of this to say I disagree with your main point – engineers should give technical info (full stop) to help a patent attorney come to an opinion on validity or infringement.

                  But in the case here, where the CEO asks one of his engineers about a patent and engineer says his opinion is that it should be invalid because it covers prior art products, I just don’t see a state instituting any sort of UPL action, even assuming it came to the right persons’ attention.

                2. I “don’t see it” either – mainly because I do not have that morbid curiosity to follow it.

                  That does not change that an engineer cannot practice law.

                3. “That does not change that an engineer cannot practice law.”

                  Note I’ve been careful to point this out myself. No need to keep repeating it.

                4. Except that you seem to think otherwise (even as you say it)….

                  Something here you continue to “not see”…

                  😉

                5. Alright then, I guess I’m done with you here. But go back and read what I’ve written. What I actually wrote, not what you kinda sorta think maybe I mighta meant.

                  I did not say engineers should give patent validity opinions, even in the inside-the-company situation as happened in this case.

                  I did question whether any state would chase someone who did, in these circumstances, via their state’s UPL statute.

                  And that is “something here you continue to “not see” … ” (Trust me, I got it from the horse’s mouth).

                6. Sorry that you are done – as I think we are closer than you might think (we agree on the bottom line).

                  Whether a state “chases” an engineer is secondary. And you can bet that if an attorney in a case tries to offer a legal opinion by an engineer, any “chase” will be very short.

          2. Mellow, in the MillGo cases, apparently engineering staff marked modems with the patent number of a patent currently in litigation even though many of the modems did not have the assertively novel feature argued to the court to preserve the validity of the patent the face of a challenge by an accused defendant.

            What you think happened when this fact was brought to the attention of the court?

            1. “What you think happened when this fact was brought to the attention of the court?”

              I did google [Milgo, engineer, patent marking] and found “Rixon Inc. v. Racal-Milgo, Inc. (DDel, ’82)” which mentions in one place that Milgo marked its wide rolloff filter modems with “the Whang patent” despite also claiming out of the other side of its mouth that the Whang patent mainly related to modems with a narrow rolloff filter.

              But the opinion didn’t tell us what (if anything) they did to the engineers, so if you do know, please don’t leave me hanging, Bro.

              1. Well, the court held that the argument made to the court was false when it was made and it was knowingly false. To me, it is just as likely as all get out that the engineers that affixed the patent number to the modems did so without advice of counsel, and specifically did so without seeking advice of their litigation counsel.

                I conducted a marking program one time for a big company with a large number of patents and a large number of products. In every case, we made sure the marked product was covered by the patent, and that every product using the invention was marked. Now let me tell you that that was a lot of work.

                Even when we did it for a smaller company with fewer pr0ducts and fewer patents, it was a bear.

                1. “likely as all get out that the engineers that affixed the patent number to the modems did so without advice of counsel”

                  No argument there – most engineers and scientists I’ve worked with tend to think that patents developed during a project cover products developed during the project.

                  I had the flip side of a marking program from what you mention – spent almost a year fixing one that had been on a “glide path” for many years without anyone consulting IP counsel as to most of the packaging.

                  The setup before I got there was that patent dept. approval of new or revised packaging was not required so long as the holy patent protection lingo was not disturbed. Nor was there any routine (e.g. every 3 years) review by patents of the packaging. (To be fair, that company had over 80,000 product SKUs, so I’m not sure who would have done it with the staffing they had then anyway.)

                  What happens when they “improved” a product but no one involved thinks to check with patents to see if the “improvement” takes it outside coverage? Or made a “transparent” change to reduce cost? Or change a product by breaking up a multi-part kit, some of which are patented, others not, to sell as individually packaged components?

                  Oops.

                2. Mellow, exactly. Patent marking is a moving target so that changes have to be reviewed, but seldom do companies put in place systems where the patent department is consulted.

                  The bottom line, since both of us went through this, is that marking for modern industry is extremely hard if done properly. Which tells me that the mistakes made by Milgo may well have been innocent and that there was no fraud on the court.

                3. “Being hard” does NOT generate the excuse of not bothering.

                  That path leads to abuses extreme.

                4. Ned/anon – I’d say it’s actually becoming easier with the permitted e-marking. Now the packaging can simply reflect a centralized website where for each product it’s simple to add patents as they grant and remove as they expire.

                  This makes for real-time correct info vs. the troubles before where you might have to obsolete 6 month’s worth of very expensive film-foils or (bog forbid, if you’re a Solo cup) change out then engravings on 300 stamper presses at $1K per press.

                5. Now, Mellow, do you agree or disagree that the contents of the e-marking website should be controlled/supervised by patent counsel?

                  I wish I knew exactly what happened in the Milgo cases, but I would find it hard to believe that litigation counsel had approved the marking in question. But, that also raises the significant side issue of whether litigation counsel needs to review a marking program so that it is consistent with their litigation position.

                6. ” agree or disagree that the contents of the e-marking website should be controlled/supervised by patent counsel”

                  At minimum it should be patent counsel who reviews the claims to determine (with information from the scientists/engineers if/as needed) whether all elements met by a given product. And a product (even a line extension type) shouldn’t be listed on the website without the attorney review and sign off.

                7. Mellow,

                  To poke back (just a little), what do you think should happen if these ideas that you and Ned are sharing are not only not done, but then inside counsel tries to offer up in an actual litigation that some engineer was making these “legal decisions”….?

        2. Anon, I would think that most engineers would simply say that what is disclosed in the patent is old, and perhaps cite chapter and verse in a written opinion if he is wise enough. The problem is whether a corporate executive or manager should be able to rely on the opinion of an engineer that is not documented with evidence in a written opinion. I do not think any executive would simply take the say-so of one of his engineers that the patent was invalid.

          So I think the law will continue to require the corporate executive to seek advice of counsel if he becomes aware that his product or service potentially infringes the patent of another.

          Perhaps we should take a survey here of inside patent attorneys who had occasion to be told by their engineering staff that a patent of a third-party is invalid. What did they do? Did they ask, at least, why?

          1. No Ned – you need to recognize the difference between and engineering opinion and a legal one.

            Engineers may provide engineering opinions, but they do not get to play attorneys and provide legal advice.

            ALL attorneys have an ethical obligation of understanding this difference and it is a part of our state oaths to help watch out for the unauthorized practice of law.

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