by Dennis Crouch
Cisco Systems v. SRI Int’l. (Supreme Court 2022) [Petition for Writ of Certiorari]
In a new petition for writ of certiorari, Cisco asks for guidance on whether enhanced damages under Section 284 require “egregious infringement behavior” or instead is it enough to find “deliberate or intentional infringement?”
The case has been up and down already. Here are the basics:
- Jury Verdict: A jury sided with the patentee SRI over Cisco and awarded $23 million in damages and also found the infringement willful.
- Enhanced Damages: Although the jury decided willfulness, the award of enhanced damages is done by the judge. Here, the district court relied upon the jury verdict and doubled the damage award as permitted by 35 U.S.C. § 284.
- Vacated on Appeal: In 2019, the Federal Circuit vacated — holding that the district court must focus on whether the infringer’s conduct was the “wanton, malicious, and bad-faith behavior required for willful infringement.”
- 2nd-Chance No Enhanced Damages: On remand, the district court recognized saw heightened standard and concluded that the evidence presented was not sufficient to meet this seemingly new requirement.
- Reversed on Appeal: Back on appeal in 2021, the Federal Circuit clarified that it had no intent to create a heightened requirement in its first opinion of the case: “it was not our intent to create a heightened requirement for willful infringement.” Thus, the court reinstated the jury’s finding of willfulness, and also reinstated the judicial award of enhanced damages.
- Supreme Court: The new petition asks two questions “(1) Whether enhanced damages under 35 U.S.C. § 284 may be awarded absent a finding of egregious infringement behavior; and (2) Whether the court of appeals may award enhanced damages without first allowing the district court to exercise its discretion to decide that issue.“
The starting point for enhanced damages should begin with the statutory text found in 35 U.S.C. § 284. The text is simple and open ended and does not place any substantive limitations on the court about when damages may be enhanced: “the court may increase the damages up to three times the amount found or assessed.” § 284. Section 284 should be contrasted with Section 285, which allows for award of attorney fees to the prevailing party, but only in “exceptional cases.”
The Supreme Court discussed enhanced damages in some depth in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93 (2016). In that case, the Supreme Court rejected the Federal Circuit’s somewhat rigid two-part test for enhanced damages in favor of a more flexible approach coupled with district court discretion. The court’s “principal problem” with prior Federal Circuit precedent was “that it require[d] a finding of objective recklessness in every case before district courts may award enhanced damages.” In Halo, the court noted that the objectively reckless standard meant that “many of the most culpable offenders”, “deliberate wrongdoers” could be excluded from punishment by cobbling together an excuse after-the-fact. The court cited to its old precedent in Seymour v. McCormick, 16 How. 480 (1854) – focusing on punishing the “wanton and malicious pirate” who intentionally steals the patentee’s business.
For the most part, the old cases cited by the Supreme Court generally focus on “wanton and willful breaches” by the defendant as justification for enhanced damages. Thus, we generally speak of enhanced damages only in terms of “willful infringement.” Some old cases used enhanced damages for full compensation, but the Supreme Court in Halo concluded that those justifications were eliminated by the merger of Law & Equity and the availability of attorney fees under Section 285.
With this background, the adjudged infringer here argues that it should not be held liable since – as the district court held, “[t]here is no substantial evidence that Cisco’s infringement was ‘wanton, malicious, and bad-faith.’” The argument here was that the jury’s verdict of willfulness was wrong as a matter of law. On appeal, the Federal Circuit concluded that a jury can find willfulness absent any showing of maliciousness or bad faith. Rather, a jury verdict of willfulness can instead be supported by evidence of “deliberate or intentional infringement.” Here, evidence of knowledge of the patent followed by induced infringement and then coupled with weak trial defenses were sufficient for a reasonable jury to find the infringement willful.
The enhanced damages does not mention willfulness, but the courts have agreed that willfulness is a primary justification for enhancing damages. The ordinary procedure in these cases is that the judge permits the jury to determine willfulness and then the judge herself decides whether to enhance damages. The Cisco decision does not delve deeply into this, but the Halo could be read as requiring that the judge find that the defendant was culpable beyond simply intentionally infringing. “The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”
In Cisco, the district court identified additional reasons beyond just willful infringement: “Cisco’s litigation conduct, its status as the world’s largest networking company, its apparent disdain for SRI and its business model, and the fact that Cisco lost on all issues during summary judgment and trial, despite its formidable efforts to the contrary.” On appeal, the Federal Circuit found those reasons sufficient for doubling the damage award even without a finding that the infringement was more egregious than your typical willful infringement.
[UPDATED on 4/3/2002 – Thanks to Prof. Tom Cotter for pointing out an error in my prior analysis.]
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One note: the jury was instructed to only find willfulness upon “clear and convincing evidence” that the “defendant actually knew or should have known that its actions constituted an unjustifiably high risk of infringement of a valid and enforceable patent.”
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>Section 284 should be contrasted with Section 285, which allows for award of attorney fees to the prevailing party, but only in “exceptional cases.”
Personally, I’d advise the Fed. Cir. to take that textual difference seriously….Normalizing enhanced damages would be a slick way to address the current ‘efficient infringer’ problem w/o the public harm potential of an injunction. Win-win, right??
Dennis, if I remember correctly, a Fed. Cir. judge had published several years ago [before becoming a judge] an article showing that a surprisingly high percentage of decisions for patent owners held infringement “willful”? Are there any current statistics on that?
The Federal Circuit sure can confuse the simplest statutes. Willful means willful. This nonsense and chaos is indistinguishable from the Who Stole the Tarts trial in Alice in Wonderland.
Just another byzantine test that enables them to go either way on any case in accordance with what they feel the outcome should be.
The word “willful” is not even in the patent damages statute, Section 284.
Not enough “there – there” to induce SCOTUS to put on their swim suits and dive into this morass.
Something about too much clarity being bad for the soul, or some such.
Petition denied.
I am going to guess the right panel?
Not discussed here is the further complicating issue in many cases as to which term or part of the infringement is subject to willful infringement enhanced infringement damages, and which is not, if the infringing defendant was not aware of the patent and its infringement until after it was sued. [Since pre-suit license offers or infringement notices or assertions have become less and less common, and the number of patent claims in force has increased exponentially.]
Two good points with:
“
The starting point for enhanced damages should begin with the statutory text found in 35 U.S.C. § 284.”
and
“Section 284 should be contrasted with Section 285”
I would posit that these two should be viewed — in simple and direct terms — in light of the fact that patent law has always been about BOTH wielding a carrot and a stick.
A carrot to those innovators such that – in general – people will WANT to opt to use the patent system.
A stick to those – in general – whose actions would defeat the purpose of encouraging those to use the system.
This should be dispositive in any case in which it is found that the transgressor acted in knowledge of their transgression.
Otherwise, all you have is (yet another) plank in the Efficient Infringer doctrine.
There are certainly situations in which additional infringement awards under both statutes, § 284 and § 285, are appropriate. I.e., getting paid both attorney fees and enhanced infringement damages. Petitioner here is arguing that it is paying twice for the same thing – its litigation misconduct. But Dennis has noted the jury instructions and finding of active inducement as supporting willful infringement.
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