Re-Calibrating Willfulness and Enhanced Damages

By Dennis Crouch

Corning Optical Communications v. PPC Broadband (Supreme Court 2018) (on petition for writ of certiorari).

This new petition for writ of certiorari is focused on the same willfulness issues as another recent petition, Bombardier Recreational Products Inc., et al. v. Arctic Cat Inc., No. 17-1645 (cert denied, October 2, 2018).

Does a finding of willful infringement based on a “should have known” standard violate the requirement that willfulness be “intentional or knowing”?

The Patent Act is remarkably unhelpful in terms of spelling out the doctrine of willfulness and enhanced damages.  The statute simply states that “the court may increase the damages up to three times the amount found or assessed” without providing further guidance or limitation. 35 U.S.C. 284.  The Federal Circuit has taken this simple statutory text and layered over a multi-step analysis and multi-prong doctrine that must be met prior to increasing the damage award.  In Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), the Supreme Court cut through a portion of the complexity — holding that an infringer’s “objective reasonableness” in its infringement decision does not bar an enhanced damages award.   Still, the doctrine continues to have muti-layers, including a first decision as to whether the infringer’s behavior was “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.” Halo. That factual inquiry (willfulness finding) is then followed by a judicial decision as to whether to actually enhance damages.

The question above focuses on the jury’s willfulness finding — are jury instructions sufficient if they include a “should have known that it likely infringed” standard?

The petition also asks a second question about the court’s process in determining whether to enhance damages (following a willfulness verdict).  Corning asks:

In determining whether to enhance damages for “egregious” infringement under §284, must courts consider all relevant circumstances, including evidence that the defendant’s position was objectively reasonable?

In Halo, the Supreme Court held that subjectively egregious behavior could be sanction by enhanced damages even if “objectively reasonable.”  That situation typically involves a defendant who recognized that they were likely infringing a patent but continued to infringe. Then, later in litigation, the attorneys came up with a credible non-infringement argument.  After being adjudged an infringer, the defendant finally argues that its after-developed attorney arguments should be considered as relevant to the willful infringement.

In the petition, Corning explains:

The District Court … joined a growing number of courts in concluding that a finding of willful infringement suffices to support enhanced damages, regardless of the reasonableness of the defendant’s conduct.

Rather, according to Corning, the court should have considered the objective evidence of non-infringement.

Here, I’ll note that the Corning’s objective evidence is pretty good — the US Court of International Trade (CIT) ruled that an ITC General Exclusion Order didn’t apply to the same products at issue here — since they weren’t covered by the patent at issue. U.S. Patent No. 6,558,194.  (Note that in that case the patent owner was not permitted to participate, even as an amicus).