by Dennis Crouch
Today’s decision in SRI Int’l., Inc. v. Cisco Sys., Inc. (Fed. Cir. 2021) is an important Federal Circuit decision regarding enhanced damages for willful infringement. It also adds further to the complexity of Federal Circuit doctrine on enhanced damages — despite the Supreme Court’s warning against an “unduly rigid” approach in Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016).
The basics here is that the jury originally sided with the patentee SRI over Cisco awarded $23 million in damages. The jury also found the infringement willful. The district court then doubled the damage award in accordance with 35 U.S.C. § 284’s statement that “the court may increase the damages up to three times the amount found or assessed.”
That original decision was vacated by the Federal Circuit in a 2019 appeal. The appellate panel included a few big statements. The biggest of these was instructing the court to focus on whether the adjudged infringer’s “conduct rose to the level of wanton, malicious, and bad-faith behavior required for willful infringement.” On remand, the district court took that statement as a mandate requiring “wanton, malicious, and bad-faith behavior” as a prerequisite to a willful infringement award. That standard had not been met and so the district court refused to enhance damages.
On appeal the second time, the case returned to the same three-member panel (LOURIE, O’MALLEY, and STOLL) and the panel has written to “clarify that it was not our intent to create a heightened requirement for willful infringement.” Rather, the court emphasized the actual standard that “willfulness requires a jury to find no more than deliberate or intentional infringement.” Quoting Eko Brands, LLC v. Adrian Rivera Maynez Enters., Inc., 946 F.3d 1367 (Fed. Cir. 2020). Note that that seeming heightened requirements will still be relevant as a district court determines the amount of enhanced damages to award following a jury finding of willfulness.
Based upon the lower-standard for willfulness, the appellate panel reinstated the jury verdict of willfulness and also reinstated the district court’s award of double-damages.*
The appellate panel also affirmed the award of attorney fees as an “exceptional case” under Section 285. In addition to the willfulness, the district court also found that Cisco’s litigation approach was unduly aggressive in a way that required excess work for both SRI and the Court.
There can be no doubt from even a cursory review of the record that Cisco pursued litigation about as aggressively as the court has seen in its judicial experience. While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.
Cisco’s litigation strategies . . . created a substantial amount of work for both SRI and the court, much of which work was needlessly repetitive or irrelevant or frivolous. . . .
Examples included:
- Maintaining 19 different invalidity theories until the eve of the trial, but ultimately only presenting two at trial;
- Presenting weak non-infringement theories that were contrary to the prior claim construction;
- Exhaustive summary judgment and sanctions efforts;
- Over designating deposition testimony for trial; and
- Pursuing every possible post-verdict defense.
In the end, there was no abuse of discretion to find this case exceptional and award attorney fees.
= = =
* Note that in the original appeal the appellate panel drew a hard line against enhancement of damages that accrued prior to Cisco’s knowledge/disregard of the patents at issue. It turns out that issue was not even up on appeal in the original case. The court now writes that “[t]he parties informed this court for the first time in this appeal that the district court’s award of double damages in SRI I applied only to damages for infringing activity after notice was given to Cisco.”
Cisco’s lawyers pulled this into heavy weather with their unreasonable defense posture. Maintaining 19 invalidity counts until the eve of trial – then going with two? An award of attorney fees was justified, and probably tipped the award of deliberate and intentional a bit easier to push over the line.
The Federal Circuit has done a fantastic job providing uniformity of patent law. It is so unambiguous and predictable now.
Well that is exactly the thing. The CAFC was supposed to be focused on creating a workable patent system. Instead what they are is a group of anti-patent judicial activists that at each chance they have weaken the patent right. Most of them do not understand science/innovation and/or patent law well enough to serve on the CAFC.
And they deliver devastating opinions that eviscerate patent law. Williamson is an example from Taranto. Lourie has his share. I’d say probably the brain trust of the anti-patent judicial activists is Taranto, though.
What does Judge Taranto have to do with Williamson? He just joined the en banc opinion for twelve Federal Circuit judges authored by Judge Linn (how has a background in electrical engineering, by the way).
Can we all just agree that this is an awesome block diagram?
+1
Possibly drafted by a young associate who had been playing too much Call of Duty and had the Radioactive symbol seared in their memory?
I can agree that it is annoying to have to tolerate all these posts from a paid blogger. In this case the script is that the CAFC made an a$$ of themselves, so deflect.
Regarding the last point and footnote 2 of the opinion, I did not read the description of the prior opinion that way. In the first appeal, the Federal Circuit found no substantial evidence to support a finding of willful infringement prior to the May 8, 2012 notice date because SRI conceded that Cisco had no knowledge of the patent before that date. The court was not ruling on the timing of when damages could be enhanced.
Depending on the facts of a given case, it seems an infringer could have knowledge of the patent and willfully infringe prior to 35 USC 287 notice, even if damages (including enhanced damages) only accrue after the notice date.
Also, does not “the actual standard that ‘willfulness requires a jury to find no more than deliberate or intentional infringement’ ” also require the absence of a viable invalidity or unenforceability defense by the infringer?
Why?
I do not think that any such defense bears on whether or not an objective state of deliberate or intentional infringement may be found.
Deliberating doing something does not matter if one believes (no matter how strongly or even ‘correctly’) that the patent to which the action applies should not have been granted or is otherwise invalid. There is, after all, that whole presumption thingie…
I believe yes, so long as the viable invalidity or unenforceability defense goes to the infringer’s subjective belief at the time of infringement. From the SRI Int’l opinion:
“First, we presume, as we must, that consistent with the
jury instructions, the jury found that Cisco had no reasonable basis to believe that it did not infringe or that it had a
reasonable defense to infringement.”
That statement suggests that if the jury had found no willfulness, then the fact that the defendant had a “reasonable basis to believe that it did not infringe” or that “it had a reasonable defense to infringement” would be enough to sustain the verdict.
The SRI court cited SRI’s evidence that Cisco’s invalidity defenses were unreasonable. There would have been no need to address the invalidity defenses if they weren’t relevant to the willfulness issue.
But the existence of these defenses still have to relate to the infringer’s subjective belief at the time of the infringement — post hoc defenses developed by litigation counsel likely aren’t enough.
And that is consistent with earlier Fed. Cir. decisions. Thank you.
I was thinking along these lines (emphasis added)…
“As a logical matter, a defendant may have the liability-supporting subjective state of mind even if a person could believe, with objective reasonableness (though wrongly), that the induced conduct was not infringing.”
TecSec, Inc. v. Adobe Inc., 978 F.3d 1278, 1286 (Fed. Cir. 2020)
The awarded attorney fees against Cisco [in addition to the $46 million in damages with the willfulness enhancement] are going to be huge in this long and hotly contested case. Note also that these patents have presumably survived earlier Alice 101 attacks? So how were the claims were written to avoid that? The first of the numerous claims of the first of the two patents in suit is:
“1. A computer-automated method of hierarchical event monitoring and analysis within an enterprise network comprising:
deploying a plurality of network monitors in the enterprise network;
detecting, by the network monitors, suspicious network activity based on analysis of network traffic data selected from one or more of the following categories: {network packet data transfer commands, network packet data transfer errors, network packet data volume, network connection requests, network connection denials, error codes included in a network packet, network connection acknowledgements, and network packets indicative of well-known network-service protocols};
generating, by the monitors, reports of said suspicious activity; and automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.”
Also interesting is that this patent has one of the longest and largest 1449 “reference dumps” I have ever seen.
[I also think that a study would show that the odds of winning by a distinguished research organization like SRI here are considerably better than many PAEs.]
If this were a biotech case, the number of references would not be unusual
This sounds pretty flakey.
From “wanton, malicious, and bad-faith behavior” to “willfulness requires a jury to find no more than deliberate or intentional infringement.”
The Fed. Cir. can’t seem to get patentable subject matter right, so why would anyone expect consistency on this issue too.
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