Tag Archives: Damages

Samsung v. Apple: A view from inside the courtroom

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By Sarah Burstein, Associate Professor of Law at the University of Oklahoma College of Law

Samsung Elecs. Am., Inc. v. Apple Inc., No. 15-777 (argued Oct. 11, 2016) Transcript

On Tuesday, I attended the oral arguments in Samsung v. Apple.  As mentioned in a previous Patently-O post, the Court granted cert on a single issue, namely:

Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?

The relevant statute is 35 U.S.C. § 289, which provides a special additional remedy for certain acts of design patent infringement. Section 289 states:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

In Apple and a case decided briefly after it, Nordock v. Systems, the Federal Circuit ruled that § 289 requires a court to award the total profit from the entire infringing product to a successful design patentee—even when the design patent claims a small portion of the overall product design.

In its cert petition and merits brief, Samsung argued that the “article of manufacture” in § 289 could be something less than the entire infringing product. In its brief opposing cert, Apple defended the Federal Circuit’s interpretation. Yet, in its merits brief, Apple agreed with Samsung (and the United States) that the relevant “article of manufacture” could be something less than the entire infringing product.

At oral argument, Samsung informed the Court that it was dropping its “causation argument” (i.e., that § 289 must be read in light of background causation principles from general tort law) and wanted to focus on its “article of manufacture” argument (i.e., its argument that a successful design patentee should be entitled to the “total profit” from the “article of manufacture” but that the relevant article should be determined mainly by looking at whether the patent claims a whole design or only part).

Unsurprisingly, the bulk of the oral argument was spent discussing how factfinders should  determine what constitutes the relevant “article of manufacture” for the purposes of § 289. The Justices seemed particularly interested in how a jury could be instructed to perform this determination. The Justices spent a lot of time pressing the parties about the desirability of the four-part test proposed by the United States, asking if they thought that approach was appropriate and if there were any factors they would add.

It was also very clear during the argument that Apple really wanted to focus on its new waiver argument. In its merits brief (though not in its brief opposing cert), Apple argued that Samsung failed to preserve the “article of manufacture” argument for appeal. After a few questions, however, the Justices’ patience for this line of argument waned and the Chief Justice rather pointedly told Apple’s counsel to move on. The clear message conveyed was that the Justices didn’t need to be told what was in the record; they were perfectly capable of reviewing it for themselves.

On the whole, and based solely on the arguments, it seemed like the Justices were leaning toward adopting some form of multi-factor test to determine what constitutes the relevant “article of manufacture.” What that test might look like was far from clear. At some points, the Justices seemed visibly frustrated by the prospect of coming up with a workable test; whether they were convinced that any of the proposed tests would, indeed, be workable remains to be seen.

In this observer’s opinion, the real problem is the attempt to add a qualitative element to this test, instead of focusing on what the patentee actually claims. Also, it’s no wonder that the Justices and parties had difficulty trying to identify the relevant article of manufacture for the D’305 patent, which claims a design for a single screenshot of the iPhone graphical user interface (“GUI”). Like other GUI designs, the D’305 patent claims a design for software, not a design for a screen (no matter what the PTO says).

In any case, there was no indication that any of the Justices were seriously considering upholding the Federal Circuit’s whole-product rule, which a couple of justices derided as clearly absurd. Justice Breyer did express some concern, at the end, about subverting the original congressional intent. However, he seemed more concerned about creating/affirming a rule with “absurd results.”

One thought: The phrase “article of manufacture” doesn’t just appear in § 289. It also appears in § 171, which defines design-patentable subject matter. Although the Federal Circuit wasn’t asked to construe that phrase in § 289 until Apple, it has issued a number of decisions on what constitutes an “article of manufacture” in the context of § 171. The Federal Circuit didn’t mention any of those cases in its decision in Apple and the parties haven’t relied on them to make their points before the Supreme Court. However, under normal principles of statutory construction, this phrase should mean the same thing in both of these key design patent provisions. It seems fairly clear that the Federal Circuit expanded the definition of “article of manufacture” in § 171 without thinking of the potential consequences for § 289 (arguably leading to the worst of the “absurd results” created by the Federal Circuit’s Apple/Nordock rule). And it seems likely that the reverse might happen here—the Justices might redefine the “article of manufacture” in § 289 without considering any potential consequences for § 171. Of course, those issues weren’t briefed. But it’s still an issue worth keeping an eye on.

It is Improper to Consider Extra-Record Claim Construction Evidence On Appeal

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Apple v. Samsung (Fed. Cir. 2016) (En banc)

Note: This SamsApple case is not the design patent damages case now before the US Supreme Court. Rather, this case involves Apple’s patents covering slide-to-unlock; phone number recognition; and auto spell correction. At the district court, the jury found that three of Apple’s touch-screen patents infringed by Samsung devices (resulting in $119.6 million in damages).  The jury also found one Samsung patent  infringed by Apple, but only awarded less than $200,000 in damages.  In a February 2016 opinion authored by Judge Dyk, the Federal Circuit reversed the jury verdicts – finding two of Apple’s patents invalid as obvious and the other not-infringed.

Now, in a surprise en banc ruling Friday, the Federal Circuit has chastised the that original panel in this case – writing to:

[A]ffirm our understanding of the appellate function as limited to deciding the issues raised in the appeal by the parties, deciding these issues only on the basis of the record below, and as requiring appropriate deference be applied to review of fact finding.

Zeroing in here, the en banc found that the original panel had improperly considered “extra-record extrinsic evidence to construe a patent claim term.”

Prior to Teva v. Sandoz (and especially prior to Phillips v. AWH) Federal Circuit panels regularly relied upon extra-record evidence such as dictionary definitions in reaching appellate decisions.  In Phillips, the court shifted focus away from dictionary definition toward intrinsic evidence such as the patent document and prosecution history.   Then, in Teva, the Supreme Court held that extrinsic factual conclusions of a district court must be given deference on appeal.  According to the en banc panel here – “After Teva, such fact findings are indisputably the province of the district court.”  With this framework, the en banc majority then offered its holdings:

(1)  the appellate court cannot rely on extra-record extrinsic evidence in the first instance or make factual findings about what such extrinsic evidence suggests about the plain meaning of a claim term in the art at the relevant time or how such extra record evidence may inform our understanding of how the accused device operates

(2) the appellate court is not permitted to reverse fact findings that were not appealed; and

(3) the appellate court is required to review jury fact findings when they are appealed for substantial evidence.

In discussing the obviousness determination, the en banc majority noted that the panel (and en banc dissents) raise important questions, but found those questions must wait for a different case since “no party—at the panel or the petition for rehearing en banc stage—invited this court to consider changing the existing law of obviousness.”

After chastising the original panel, the en banc majority then reaffirmed the jury verdicts – finding them supported by substantial evidence and thus reinstated the verdict for Apple.

The en banc opinion judgment here was 8-4 8-3 with Judge Moore authoring the 7-member majority opinion; Judge Hughes concurring in judgment but without authoring any opinion whatsoever; The original panel members, Chief Judge Prost, Judge Dyk, and Judge Reyna each dissented and each authored their own opinions; and Judge Taranto not participating.

Judge Dyk’s is the most interesting in the way that it reveals some inner-court-workings:

 For the first time in 26 years, this court has taken an obviousness case en banc. See In re Dillon, 919 F.2d 688 (Fed. Cir. 1990) (en banc). Remarkably, the majority has done so without further briefing and argument from the parties, amici, or the government, as has been our almost uniform practice in this court’s en banc decisions. . . .

The present en banc decision will have a significant and immediate impact on the future resolution of obviousness issues. While purporting to apply established circuit law, the majority is in fact making significant changes to the law as articulated by the Supreme Court. Indeed, as Judge Reyna convincingly points out, it is difficult to understand how this case would satisfy the requirements for en banc review if the majority’s purpose were not to clarify the law.

The majority states that it takes this case en banc to correct the original panel’s reliance on extra-record evidence. This could hardly be the reason the majority has granted en banc review, since the panel has continuingly expressed willingness, and indeed desire, to eliminate references to any extra-record evidence because of concerns raised in Apple’s petition for rehearing and because they were unnecessary to the panel opinion. . . . [T]he principles that the majority announces are inconsistent with the Supreme Court’s decisions in KSR, Graham v. John Deere, as well as earlier Supreme Court cases, and will make proof of obviousness far more difficult.

Judge’s Prost and Reyna also agreed that the majority’s application of the law in this case is inconsistent with Supreme Court precedent.

If you made it here, then you you see that there is substantially more to discuss – save that for the next post.

 

Infringement Complaint Must Provide Factual Allegations at the Claim-Element-by-Claim-Element Level

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by Dennis Crouch

Lyda v. CBS (Fed. Cir. 2016)

Although at first glance, Lyda appears as a narrow decision against an individual-inventor plaintiff, the decision is important because it establishes that a patent infringement complaint must provide factual allegations at the claim-element-by-claim-element level in order to avoid a dismissal on the pleadings.  

In a civ-pro focused decision, the court has affirmed the dismissal of Lyda’s infringement case for failure to state a claim – finding that Lyda’s complaint fails to satisfy the Twiqbal pleading standards.[1]  Rule 8 of the Federal Rules of Civil Procedure require a “ a short and plain statement of the claim showing that the pleader is entitled to relief.”[2]  Failure to state a claim is grounds for dismissal under R. 12(b)(6).[3] The Supreme Court gloss requires allegations of sufficient facts to state a plausible claim for relief.  Although statements in the complaint are taken as true, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[4] “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”

Until recently, Twiqbal was not directly applied to patent complaints because the existence of a bare-bones form infringement complaint (Form 18) that the rules deemed to be sufficient.  Form 18 was eliminated in the December 1, 2015 changes to the rules.  In the present case, the amended complaint was filed prior to the change, but the court held that Form 18 does not apply in this case because Lyda implicitly alleged a claim of joint infringement rather than the standard direct infringement that is the focus of Form 18.[5]

Applying Twiqbal is not easy – although the general rule is that the pleadings must include enough plausible facts that – if taken as true – would lead to a verdict for the plaintiff.  In discussing its application, the Supreme Court noted that it will be “context-specific” requiring both “judicial experience and common sense.”  Applying that approach to patent infringement cases, the court here took the fairly bold stance of requiring that the facts plausibly pled be “sufficient to allow a reasonable inference that all steps of the claimed method are performed.”

Lyda’s case was particularly dismissed because the patentee failed to plead the elements of joint infringement required by Akamai.  The Lyda court writes:

[Under the plaintiffs theory of infringement, the] Amended Complaint must plausibly allege that Defendants exercise the requisite “direction or control” over the performance of the claim steps, such that performance of every step is attributable to Defendants. The Amended Complaint alleges that CBS Interactive controls certain independent contractors who in turn direct and control the “participation” of unnamed third persons to send votes on either their own or borrowed cell phones. Mr. Lyda does not set forth any factual allegations in support of his assertion that CBS Interactive directed or controlled the independent contractors. Nor does the Amended Complaint contain factual allegations relating to how the independent contractors directed or controlled the unnamed third parties. Most importantly, the Amended Complaint does not allege any relationship between the Defendants and the unnamed third parties, who own or borrow cell phones, in a way that the actions of these unnamed third parties should be attributed to Defendants. Rather, the Amended Complaint alleges conclusively and without factual support that CBS directed or controlled the independent contractors who then directed or controlled the unnamed third parties. There are thus no allegations in the Amended Complaint that can form the basis of a reasonable inference that each claim step was performed by or should be attributed to Defendants. The Amended Complaint fails to plausibly plead sufficient facts to ground a joint infringement claim under this court’s Akamai decision and does not satisfy the Iqbal/Twombly pleading standard.

The district court also denied Lyda leave to amend the complaint a second time. On appeal, the Federal Circuit affirmed that determination – finding that the district court has “broad power to control its own docket.” With the case dismissed, I expect that Lyda can refile and just potentially lose some of the back damages.

= = = = =

[The complaint]

[1] Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).

[2] Fed. R. Civ. Pro. R. 8.

[3] Fed. R. Civ. Pro. R. 12(b)(6) (“a party may assert . . . (6) failure to state a claim upon which relief can be granted”).

[4] Iqbal.

[5] See Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (requiring that “(1) one party exercises the requisite ‘direction or control’ over the others’ performance or (2) the actors form a joint enterprise such that performance of every step is attributable to the controlling party).

Supreme Court Patent Cases – September 28 Update

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by Dennis Crouch

Cooper v. Lee and Cooper v. Square are both ask the same question: whether 35 U.S.C. §318(b) violates Article III of the United States Constitution, to the extent that it empowers an executive agency tribunal to assert judicial power canceling private property rights amongst private parties embroiled in a private federal dispute of a type known in the common law courts of 1789, rather than merely issue an advisory opinion as an adjunct to a trial court.”  The issues here are also parallel to those raised in MCM Portfolio v. HP (“Does IPR violate Article III of the Constitution?”).  The cases received a boost this month with the Court’s call for response (CFR) in Cooper v. Square.  Square had previously waived its right to respond, but its response is now expected by October 11, 2016.  Under Supreme Court R. 37, the Call for Response reopens the period for filing of an amicus curiae brief in support of petitioner. (~ due October 8, 2016).  Eight Amici Curiae briefs were filed in MCM and two in Cooper v. Lee.  In general, each brief additional brief incrementally increases the odds of certiorari.  Statistical analysis also suggests that a call for response significantly increases the odds of certiorari being granted.

I wrote earlier this week about the new IPR process challenge in Ethicon where the patentee has challenged Director Lee’s delegation of institution decision authority to the PTAB.  The case is one of statutory interpretation but uses the separation-of-function doctrine as an interpretive guide. The same question is also presented in LifeScan Scotland, Ltd. v. Pharmatech Solutions, Inc.  Both petitioners (Ethicon and LifeScan) are owned by J&J.

The final new petition is a personal jurisdiction case: Mylan v. Acorda.  The Hatch-Waxman setup involved Mylan preparing and filing its abbreviated new drug application that created a cause of action for infringement under 35 U.S.C. 271(e)(2). Although the ANDA preparation occurred in West Virginia and the filing in Maryland, the infringement lawsuit was filed by Acorda in Delaware.  Mylan asks: “Whether the mere filing of an abbreviated new drug application by a generic pharmaceutical manufacturer is sufficient to subject the manufacturer to specific personal jurisdiction in any state where it might someday market the drug.”  The argument builds on the non-patent decision Daimler AG v. Bauman, 134 S. Ct. 746 (2014). In the pro-business case of Daimler, the Supreme Court reduced the scope of general personal jurisdiction to states where the defendant company is incorporated or has its personal place of business.

 

In the claim construction front, the Supreme Court also called for a response in Google v. Cioffi. In that case Google suggests an interpretative principle of “strictly construing” amended claim language against the patentee. [GoogleCioffiPetition]

On the merits side – we have three patent cases pending oral arguments.  First-up is the design patent damages case of Apple v. Samsung.   Although not a party, the Solicitor General has requested to been granted leave to participate in oral arguments.   Its brief, the SJ argued (1) Section 289 does not permit apportionment but rather requires award of the infringers profits on the relevant article of manufacture; but (2) the article of manufacture can be a “component” rather than a finished product sold to end-users.  In the end, the SJ argues that the jury should have been tasked with determining the appropriate article-of-manufacture and that the case should be remanded to determine whether a new trial is warranted.  Briefing continues in both SCA Hygiene (laches) and Life Tech (Component Export liability).

 

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Unpacking Trade Secret Damages

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Prof. Elizabeth Rowe (Florida) has posted a new article on trade secret damages: Unpacking Trade Secret Damages.   The article looks at outcomes of about 150 federal trade secret lawsuits that went to trial and received a verdict. These cases are all pre-DTSA and thus in federal court on diversity or supplemental jurisdiction grounds.   Prof Rowe found – in my view – a surprisingly low percentage of cases where punitive damages or attorney fees were awarded (~2% and 8% respectively – of cases with an award).

The award distribution is also highly skewed.  “[T]en cases account for half of the total damages of the approximately $2.4 billion awarded since 2000.”  Top on this list is DuPont’s 2011 award of 900 million against Kolon.

[Read the Article]

 

Update: If Alice was always the law, why did you get so many “invalid” patents for your clients?

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I blogged about this case — Encylopaedia Britannica, Inc. v. Dickstein Shapiro LLP (D. D.C. Aug. 26, 2015) — way back when it came out.  The case was summarily affirmed in June.  A cert petition has been filed, and it’s worth reviewing this case again.  If the law stays the way it is, then maybe clients should start suing lawyers to get their fees back for patents that the lawyers “should have known” were “invalid” years before Alice came out…

The Dickstein Shapiro firm had been retained by Encyclopaedia Britannica, Inc. (EB) in 1993 to file a patent application. The patent issued, and in 2006 EB sued several companies for infringing it. The patent was held invalid due to “an unnoticed defect” in the 1993 application.  The basis for invalidity was not 101, and is not clearly stated in the opinion, but seems to have been a break in the chain for priority.

EB then sued the law firm for malpractice in prosecuting the 1993 application.  EB contended that, but for the firm’s negligence, it would have made a lot of money in the infringement suit.

After the malpractice suit was filed, Alice was decided.  The defendant law firm then argued that — had the defendants in the 2006 case not prevailed on the “unnoticed defect” defense (the break in the chain for priority) — they would have prevailed because the patents were “invalid” under 101.  Because the claims would have been “invalid” in the 2006 litigation under 101, there was no harm caused by the actual basis for invalidity — the priority problem.

To put this in context:  Because of a 2014 Supreme Court decision, the 2006 infringement case would have been lost in 2009 anyway because the court in 2009 would have applied Alice’s standard and found the claims ineligible.

And the argument worked.  The district court granted a motion to dismiss for failure to state a claim (actually, for judgment on the pleadings under 12(c), but same standard), finding (holding?) the subject matter ineligible on the face of the patent.

What is interesting is the court’s approach to retroactive application of Alice.  The issue was whether in the 2006 litigation asserting the patent, even had the firm’s alleged malpractice not caused the invalidity of the patent because of the break in priority, the claims were “invalid” under 101 in 2006 — years before Alice was decided.  The district court held that Alice did not change the law, but merely stated what it had always been.    Specifically, the district court stated:

When the Supreme Court construes a federal statute… that construction is an authoritative statement of what the statute has always meant that applies retroactively.  Alice represents the Supreme Court’s definitive statement on what 101 means — and always meant.  Because the underlying case is governed by 101, it is appropriate for this Court to apply the Supreme Court’s construction of 101 as set forth in Alice.

(Citations omitted).

For this and other reasons, the court reasoned that “the only rule that makes sense in this context is to apply the objectively correct legal standard as enunciated by the Supreme Court in Alice, rather than an incorrect legal standard that the [district court in the 2006 infringement case] may have applied prior to July 2015 [when the court was deciding the motion.]”  The court then applied Alice and found the claims “invalid” under 101.  Thus, the firm’s failure to maintain priority did not cause harm — the “invalidity” under 101 did.

There’s a lot to unpack here.

Let’s start with a basic statutory interpretation principle: as a matter of statutory construction the retroactivity principle relied upon by the district court is correct in that retroactivity does not ordinarily apply when an interpretation is changed.  (This perhaps explains why the Supreme Court is careful to avoid saying it is changing an interpretation, because changes to interpretations of a statute are prospective, only, as a general rule.  In that regard, think about Therasense for a moment.) So, if Alice changed the law, then the district court was likely wrong to apply it retroactively.

Let’s be real:  the Supreme Court will never say that Alice changed the law.  We all know it did, or I guess a better way of putting it is:  we were wrong about what the pre-Alice law meant — despite reading the cases as best we could, and so was the USPTO (which is why it issued all those bad patents, and had to put in place, post-Alice, all of those new guidelines, etc.).  So, we were all wrong and Alice merely said what we all were not smart enough to understand the law always was and had been.

Shame on us.

But now let’s look at Dickstein Shapiro’s conduct through that lens: if the law was that clear — that you could 12(b)(6) or summary judgment this patent for “invalidity” under Section 101, why did you get the for the client in the first place?    If the law about 101 “always” was this way, why did you advise EB to spend so much money on a patent so clearly invalid that a judge could decide it by looking at it?

If cert is not granted, patent prosecutors should be ready to disgorge a lot of fees, I guess is what I’m saying.  Remember:  fee disgorgment doesn’t require damages — it requires (usually) a clear and serious breach of duty.  How can this not be?

So now let’s say prospective litigation counsel looks at a patent and in evaluating it, says to the patentee “no, this one’s bad under Alice.  It’s worthless.”  If the client then sues the lawyer who prosecute the patented, you’d think the client would have an easy case: “Lawyer, the law was always the way Alice says it was, and yet you got me this stupid patent, and charged me $25,000 to get it. Give that money back.”

Now, we can get into what is called judgmental immunity — but if the law was settled and clear, how can that help?  We could also argue the law changed — but it didn’t, or so the courts tell us.

But we can’t obviously do this: Allow lawyers to escape liability for bad patents because the law was “clear” back then, and so the client would never have prevailed in an infringement suit, but then allow lawyers to say “the law was unclear” and allow them to avoid disgorging fees.

Someone got any ideas?  The intellectually honest way to approach it is to say that the EB case was wrongly decided:  whether the patent would have been “invalid” under 101 in the 2006 litigation should be decided under the law at the time of trial, not the law in 2014, just as the decision to seek the patent in 1993 should turn on 101 law in 1993, not the law in 2014.  More to that point, we all know that certain claim formats have fallen out of favor (e.g., means-plus-function). If the law was favorable to them in, say, 1993, and a lawyer picked them, why should we use standards developed in 2014 to judge the lawyer’s conduct, even though the “change” is more subtle than occurred in Alice?

And now one more wrinkle.  Suppose a firm represents the client, and sues.  Suppose the judge shifts fees onto the client under 285.  Unless the court holds that those fees are the responsibility of the lawyer bringing the suit, not the client, then the client’ going to be responsible for having sued on an “invalid” patent. Is it going to sue the prosecution firm and say: the law was clear back then, why did you get this patent for me? Look at the damages you caused…?

Stay tuned.

 

Objective Reasonableness Still at Play in Willfulness Cases

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WesternGeco v. Ion Geophysical (Fed. Cir. 2016) [WesternGeco]

Following Halo v. Pulse, the Supreme Court vacated and remanded WesternGeco’s case for further consideration.  Now on remand, the Federal Circuit now vacates the district court judgment denying willfulness.

The patent act authorizes district court to award enhanced damages. 35 U.S.C. 284 (“the court may increase the damages up to three times the amount found or assessed”).  In Halo v. Pulse, the Supreme Court held that the statute grants district courts discretion in awarding enhanced damages – although noting that the punitive damages should ordinarily be limited to egregious infringement – “typified by willful infringement.”  In rejecting the Federal Circuit’s Seagate test, the Court held proof of “subjective willfulness” is sufficient to prove egregious infringement.  “The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”  Halo at 1933.  As with other punitive damage regimes – proof sufficient for an award does not necessitate such an award. In patent cases, punitive damages remain within the discretion of the district court even after sufficient evidence establish the egregious behavior.

In WesternGeco, the jury issued a verdict on subjective willfulness — that “ION actually knew, or it was so obvious that ION should have known, that its actions constituted infringement of a valid patent claim.”  However, following that verdict, the district court excused the willfulness under the objective willfulness prong of Seagate – finding that ION’s non-infringement and invalidity defenses were “not unreasonable.”

On remand, the district court will first determine whether the jury verdict was supported by substantial evidence and, if so, whether enhanced damages should be awarded.  The Federal Circuit writes:

The district court, on remand, should consider whether ION’s infringement constituted an “egregious case[] of misconduct beyond typical infringement” meriting enhanced damages under § 284 and, if so, the appropriate extent of the enhancement.

Slip Opinion. On remand, we vacate the district court’s judgment with respect to enhanced damages for willful infringement under 35 U.S.C. § 284 and reinstate our earlier opinion and judgment in all other respects.

Using Objective Evidence Going Forward: An interesting aspect of the WesternGeco decision is its discussion of the ongoing relevance of “the objective reasonableness of the accused infringer’s positions.” In particular, the Federal Circuit held that objective reasonableness is part of the “totality of the circumstances” that to be considered before awarding enhanced damages.  In some ways this holding is in tension with the Halo decision itself. Halo does not mention the “totality of the circumstances” approach and writes harshly against the objective test as merely awarding “attorney[] ingenuity.”  Judge Dyk explains the holding as follows: (1) “Halo relied upon the patent attorney fee case of Octane Fitness for the relevant standard of district court’s discretion; (2) Octane Fitness in turn held looked to the copyright case attorney fee case of Fogerty v. Fantasy; and (3) Fogerty required consideration of a “totality of the circumstances,” which “could” include objective unreasonableness.” Thus, the Federal Circuit writes: “objective reasonableness is one of the relevant factors.”

Supreme Court Patent Cases: Malpractice, Obviousness, and Venue

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by Dennis Crouch

The Supreme Court will begin granting and denying petitions in early October.  Meanwhile, several new petitions are now on file.  Last week I wrote about the TC Heartland case as a mechanism for limiting venue. Without any good reason, the Federal Circuit overruled a 1957 Supreme Court case that had strictly limited patent venue as spelled out in the patent venue statute 1400(b).  See VE Holdings (explaining its overruling of Fourco Glass). A result of VE Holdings is the expansive venue availability that facilitated the rise of E.D. Texas as the most popular patent venue. TC Heartland simply asks the Supreme Court reassert its Fourco holding – something that could almost be done with a one-line opinion: “REVERSED. See Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957).”  The best arguments for the Federal Circuit’s approach are (1) the reasoning of Fourco itself is a bit dodgy; and (2) VE Holdings is well settled doctrine (decided 26 years ago) and Congress has revised the statutory provisions several times without amending.  As a side note, several members of Congress have suggested they will act legislatively if SCOTUS fails to act.

Two new petitions (Grunenthal v. Teva and Purdue v. Epic) stem from the same Federal Circuit OxyContin case and focus on anticipation and obviousness respectively.  Grunenthal v. Teva questions how ‘inherently’ operates for anticipation purposes.   Purdue suggests that – despite the final sentence of Section 103, that the actual circumstances of the invention should be available to help prove non-obviousness (but still not be available to prove obviousness).   Another new petition includes the BPCIA case Apotex v. Amgen that serves as a complement to the pending Sandoz case questioning the requirements and benefits of providing notice of commercial marketing.

Finally – Encyclopedia Britannica v. Dickstein Shapiro is a patent prosecution malpractice action.  The lower court held the lawyers harmless since Alice would have invalidated the patents even if drafted to perfection. The petition asks whether Alice Corp can excuse patent prosecutors from alleged prosecution errors made well prior to that decision.

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Stryker v. Zimmer: Federal Circuit Remands Enhancement Determination for Enhancement Determination

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By Jason Rantanen

Stryker Corp. v. Zimmer, Inc. (Fed. Cir. 2016) Download opinion
Panel: Prost (author), Newman, Hughes

Stryker prevailed in a patent infringement suit against Zimmer, obtaining partial summary judgment of infringement as to some claims, a jury verdict of infringement as to another claim, and a jury finding that the claims were valid.  The jury awarded Striker $70 million in lost profits, further finding that Zimmer’s infringement was willful.  In a post-trial order, the district judge awarded treble damages, found the case exceptional and awarded Stryker its attorneys’ fees.

On appeal, the Federal Circuit affirmed as to infringement, validity and damages.  Applying In re Seagate, however, it reversed as to willful infringement and the enhancement of damages.  Based on that reversal, it also vacated the award of treble damages and attorneys’ fees.  Styrker sought, and obtained, review by the Supreme Court in a case that was consolidated with Halo Electronics., Inc. v. Pulse Electronics., Inc.  In Halo v. Pulse, the Supreme Court held that the the Federal Circuit’s two-part Seagate “test for determining when a district court may increase damages pursuant to § 284” was not consistent with § 284.  Both Halo and Stryker were remanded to the Federal Circuit for further proceedings.  Last month, the Federal Circuit issued its revised opinion in Halo.  Today, the court released the  revised Stryker opinion.

Most of the new Stryker opinion involves a recitation of the Federal Circuit’s previous opinion affirming the district court as to infringement and validity.  The last three pages, however, deal with the § 284 enhancement issue on remand.  What’s interesting is that the Federal Circuit is maintaining its bifurcated approach to enhancement of damages, first requiring a predicate willfulness determination followed by the judge’s discretionary determination of whether and how much to enhance damages.  This is essentially the same process as before.   See i4i Ltd. Partnership v. Microsoft Corp., 598 F.3d 831 (2010).  Pre-Halo, the second step of the process (the district judge’s determination of whether and how much to enhance damages) was a totality-of-the circumstances analysis that was reviewed for abuse of discretion (i.e.: basically the same as the court required in Halo).  Id. The Federal Circuit’s post-Halo approach to enhancement involves the same two steps, with the exception that the willfulness determination itself is guided by the holding in Halo rather than requiring the two-element objective/subjective determination of Halo. (The enhancement determination is too, but it’s hard to see much difference there.)  Under Halo, the subjective component alone can be enough to establish willfulness.

Here, Zimmer did not challenge the subjective component so the Federal Circuit affirmed willfulness on remand.  However, it then remanded the case back to the district court for a further determination as to whether and how much damages should be enhanced. In Halo, this remand made sense, as the district judge had relied on the Seagate test to grant JMOL of no willful infringement over a jury verdict of willful infringement.  Here, however, after the jury found willful infringement and the district judge denied JMOL of no willful infringement, the district judge exercised his discretion to treble damages.  The consequence is that a remand in this case is somewhat odd given that the district judge has already made a discretionary determination to award the maximum amount of enhancement.  In any event, the Federal Circuit decided that the better course of action was to ask the district judge to re-make the discretionary determination:

“As Halo makes clear, the decision to enhance damages is a discretionary one that the district court should make based on the circumstances of the case, ‘in light of the longstanding considerations . . . as having guided both Congress and the courts.’ Id. at 1934. Thus, it is for the district court to determine whether, in its discretion, enhancement is appropriate here. We therefore vacate the district court’s award of enhanced damages and remand to the district court so that it may exercise its discretion.”

Based on a similar rationale (although relying instead on Octane Fitness v. ICON), the Federal Circuit also remanded on the issue of attorney’s fees.

Disclosure: I co-authored an amicus brief in support of neither party in Halo v. Pulse.

Supreme Court Patent Cases: Previewing the October Term 2016

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by Dennis Crouch

When the Supreme Court’s October 2016 Term begins in a few weeks, its first patent hearing will be the design patent damages case of Samsung v. Apple. In Samsung, the Court asks: Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?  The statute at issue – 35 U.S.C. § 289 – indicates that, someone who (without license) “applies” the patented design (or colorable imitation thereof) to an article of manufacture, “shall be liable to the owner to the extent of his total profit.”  Up to now, courts have repeatedly held that the “profits” are profits associated with the product (i.e., the article of manufacture) being sold, but Samsung is asking that the profits be limited only to components of the product closely associated with the patented design.  Although Apple’s position is supported by both the text and history and is the approach easiest to calculate, I expect that many on the Court will be drawn to the potential unjust outcomes of that approach.  Apple wins in a 4-4 split.  Oral arguments are set for October 11, 2016.

The court has granted certiorari in two other cases for this October 2016 term with briefing ongoing. In Life Tech v. Promega, the court again takes up the issue of exporting components of a patented invention and the extraterritorial application of US law.  35 U.S.C. § 271(f)(2). The question here is whether export of one component can legally constitute the “substantial portion of the components” required by statute for liability to attach.  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention. In SCA Hygiene v. First Quality, the Court asks whether the equitable defense of laches applies in patent cases.  The case is a follow-on to the Supreme Court’s 2014 holding in Petrella v. MGM that laches does not apply in copyright cases.  In its decision, the Federal Circuit distinguished Petrella based both upon statutory and policy arguments. Oral arguments in SCA are set for November 1, 2016.

The three pending petitions most likely to be granted certiorari are Impression Products (exhaustion); Amgen (BPCIA); and GlaxoSmithKline (antitrust reverse payments)   However, these cases are awaiting views of the Solicitor General — which likely will not be filed until well after the presidential election.

A substantial number of cases are set for the Supreme Court’s September 26 conference.  These include the constitutional challenges to IPR coming in MCM and Carl Cooper as well as the interesting eligibility case of Genetic Tech v. Merial.

It looks to be an interesting term.

The big list:

(more…)

Claiming: Special Care with Terms of Degree

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LibertyPatentedAmmoby Dennis Crouch

Liberty Ammo v. US (Fed. Cir. 2016)

The U.S. Government has waived its sovereign immunity against allegations of patent infringement. However, the infringement charges are not brought via Civil Action under the infringement definition of 35 U.S.C. 271.  Rather, 28 U.S.C. § 1498 spells out that the infringement claim against the U.S. must be brought in the Court of Federal Claims (CFC) and that the remedy is limited to the “reasonable and entire compensation for [the Govt’s] use and manufacture.”  The CFC does not allow for a jury nor will it award injunctive relief against the U.S.

Liberty sued the U.S. alleging that the ammunition rounds manufactured for and used by the Army are covered by Liberty’s U.S. Patent No. 7,748,325.  In the 1990s and 2000s, the U.S. military became concerned that lead-based ammunition might be a form of harmful pollution – the patented ammunition here follows that lead by eliminating lead from the round while remaining lethal to soft-tissue targets (such as humans).  According to the patent, the projectile (shown in the image above) separates into three portions upon striking a target.  The projectile also includes a reduced-size jacket that limits barrel heat build-up.

In 2005, Liberty provided the Army with a set of 50 prototype rounds for testing (subject to a NDA).  The Army decided not to take a license or purchase those rounds from Liberty, but did begin using substantially similar rounds.  In the subsequent CFC infringement case, the court sided with Liberty – finding the asserted claims infringed and enforceable. The court then awarded $15 million in damages to Liberty with an ongoing royalty of 1.4¢ per round.

Claim Construction a Loser: On appeal, the Federal Circuit reversed – finding that the lower court had erred in its interpretation of the claim term “reduced area of contact.”  The debate over the unstated reference point – reduced from what? The CFC used the reference of “traditional jacketed lead bullet of calibers .17 through .50 BMG” based upon the specification statement that the invention is designed for “all calibers generally ranging from .17 through .50.”  On appeal, however, the Federal Circuit found that the reference for the accused 5.56 mm should – in particular – be traditional M855 rounds – since that is “the specification’s only mention of a specific conventional projectile” and was the standard-issue round for the Army at the time.  This modification to the construction is important because the traditional M855 projectiles already had a rather small area of contact and the accused projectiles have an increased contact area — thus no infringement.

Almost Indefinite: “Reduced area of contact” is a problematic claim term because it is a term of degree that calls for comparison against some unstated baseline.  Reflecting that sentiment, the court here writes that “Terms of degree are problematic if their baseline is unclear to those of ordinary skill in the art.”  Although not ‘inherently indefinite’, terms of degree will be found indefinite if they fail to provide some ‘objective boundaries.’  In talking through this, the Federal Circuit wrote that the lower court’s construction would have left the claim as indefinite because there would be multiple ‘traditional’ bullets that could be used as the baseline.

Claim 1 would not be definite had the trial court’s construction been correct because there would not be a sufficient objective boundary around the term of degree “reduced area of contact.” It is true that the trial court did objectively limit the claim language by including the “.17 through .50 BMG caliber” guidepost in its construction. This standard is objective in the sense that it defines a set range of calibers from which the baseline projectile may be drawn. Yet, even after limiting the field of baseline projectiles according to the trial court’s construction, a multitude of candidates for the conventional baseline projectile would remain for each caliber within that range, making the claim indefinite under Interval.

Here, the Federal Circuit goes on to suggest that the difficulty in proving infringement may be indicative of indefiniteness. “[A] term of degree cannot be definite when construed in a manner that lends itself to this sort of scattershot infringement analysis.”

The Background of the Invention section first narrows the ambiguity by disclosing that the patent’s proposed projectile has “a reduced contact area as compared to conventional projectiles.”

NDA Not Enforceable against the Army: Although the patent portion of the case is most relevant for Patently-O readers, the most important business element may be the court’s disregard of the non disclosure agreement signed by Lt. Col. Glenn Dean.  When the inventor of the ‘325 patent approached the army, he was directed to the Chief of Small Arms for the army’s Infantry Combat Directorate (DCD), Lt. Col. Dean.  Prior to discussing the ammunition, Dean signed a non disclosure agreement (NDA).

The courts, however refused to enforce the agreement – finding that Lt. Col. Dean “did not have the requisite authority to enter the NDA on the Government’s behalf.”  In traditional contract law, an agent’s “apparent authority” can be sufficient to bind a principal.  However, several cases have held that the U.S. Government “is immune to actions of its agents who merely possess apparent authority.”  See CACI, Inc. v. Stone, 990 F.2d 1233, 1236 (Fed. Cir. 1993).

Plagiarism Actions

Patent

Drobetsky v. Chicago School of Prof. Psych. (Ill. App. 2016) [1152797_R23]

There is no general cause of action for ‘plagiarism’ – it comes up most often in student and employment cases.

Drobetsky was a masters degree student at the Chicago School of Professional Psychology.  In her assigned 5-page reflection paper of the Benjamin Button movie, she apparently copied from Wikipedia and a blog post by Richard Larson.   The allegations are “that a portion of one sentence in the reflection paper was copied word for word from the Wikipedia article, and portions of two other sentences were copied word for word from the Larson blog, without quotation marks, citation or attribution.”

The school dismissed Drobetsky for plagiarism in violation of school policy – she sued in Illinois state court for readmittance, recover of the $53,000 paid to the school, etc.

The trial court offered an interesting decision. On the one hand, it sided with Drobetsky that the school had breached its contract and acted in an arbitrary & capricious manner by: (1)  “failing to notify plaintiff in advance of … the names of the [campus hearing committee] members so that she could properly vet them”; (2) “failing to have Dr. Adames [the professor making the allegations] present at the hearing”; (3) “failing to consider Dr. Adames’ [own] plagiarism” (he had copied portions of his syllabus from another professor without attribution); and (4) “failing to inform plaintiff of the basis for her dismissal.”  Despite all these deficiencies, however, the court ruled in favor of the school because Drobetsky had failed to follow the internal appeal process and because the plaintiff had “failed to prove damages.”

On appeal, the Illinois court affirmed – but first rejected the finding that the school acted in an arbitrary & capricious manner in its hearing process. “[T]he trial court’s finding that plaintiff met her heavy burden of proving that defendant acted arbitrarily, capriciously, or in bad-faith by dismissing her without any discernible rational basis was against the manifest weight of the evidence.”

 

 

 

Publication of the Patent Case Management Judicial Guide (3rd edition)

Patent,

District Court judges (and their clerks) across the country now rely heavily upon Patent Case Management Judicial Guide – that has now published in its third edition.  Professor Peter Menell (Berkeley) has lead the multi-party effort in cooperation with the Federal Judicial Center. Its popularity with judges means that it is also a necessary tool for patent litigators.

Get it:

The Third Edition ads substantial coverage of managing litigation to deal with parallel proceedings at the PTAB, pleading standards, patentable subject matter, claim construction, enhanced damages following Halo, and reasonable royalty disputes. The treatise also covers recent developments in ANDA and biologics litigation, design and plant patent litigation, and litigation at the Federal Court of Claims. The appendices provide case management checklists and exemplars of patent management filings.

Enhancing Damages in Halo v. Pulse

Patent,

The 2012 jury verdict form in Halo v. Pulse asks “Has Halo proven that it is highly probable that Pulse’s infringement was willful?”  The jury answered “YES.”

HaloVerdict

Judge Pro instructed the jury that:

Halo must prove willful infringement by clear and convincing evidence. This means Halo must persuade you that it is highly probable that prior to the filing date of the complaint, Pulse acted with reckless disregard of the claims of Halo’s patents. To demonstrate such reckless disregard, Halo must persuade you that Pulse actually knew or it was so obvious that Pulse should have known, that Pulse’s actions constituted infringement of a valid patent. In deciding whether Pulse acted with reckless disregard for Halo’s patents, you should consider all of the facts surrounding the alleged infringement including, but not limited to, whether Pulse acted in a manner consistent with the standard of commerce for its industry. You should base your decision on the issue of willful infringement on all of the evidence, regardless of which party presented it.

When it originally denied enhanced damages, the district court did not mention this verdict but rather focused on its conclusion that Pulse had a legitimate (but ultimately losing) obviousness defense sufficient to defeat the ‘objectively reckless’ portion of the Seagate willfulness analysis.

On remand the district court will be hard-pressed to find that the infringement was not willful – based upon the apparently unchallenged verdict.  Still, it will be within the district court’s discretion to decide whether the willfulness warrants enhanced damages under Section 284. If enhanced damages are warranted, the district court must then determine how much to award (with an upper limit of treble damages).

The setup thus-far appears to fairly neatly wrap up the case in Halo’s favor in terms of enhanced damages.  Perhaps the only abuse-of-discretion at this point would occur if the district court refused to award any enhancement at all.  In the four-years since the 2012 jury verdict, Judge Pro has retired and a new judge assigned to the case – it will be interesting to see his take on this decade-long litigation.

Federal Circuit: District Courts Must Exercise their Discretion and in Deciding Whether to Enhance Infringement Damages

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by Dennis Crouch

Halo Electronics v. Pulse Electronics (Fed. Cir. 2016)

On remand from the Supreme Court, the Federal Circuit has shifted its holding on enhanced damages (as required by the Supreme Court) and remanded for reconsideration:

Because the district court applied the Seagate test in declining to enhance damages . . . we vacate its unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court’s opinion on enhanced damages.

The only remaining in the case is that of enhanced damages under 35 U.S.C. § 284.  In its Halo decision, the Supreme Court held that the provision “gives district courts the discretion to award enhanced damages . . . in egregious cases of misconduct beyond typical infringement.”  The court rejected the Federal Circuit’s prior test under Seagate, noting that it was both “unduly rigid” and “impermissibly encumbers the statutory grant of discretion to district courts.” (quoting Octane Fitness).

According to the evidence previously presented,

“Pulse allegedly knew of the Halo patents as early as 1998. In 2002, Halo sent Pulse two letters offering licenses to its patents, but did not accuse Pulse of infringement in those letters. The president of Pulse contacted a Pulse engineer, who spent about two hours reviewing the Halo patents and concluded that they were invalid in view of prior Pulse products. Pulse did not seek an opinion of counsel on the validity of the Halo patents at that time and continued to sell its surface mount electronic package products. A Pulse witness later testified that she was “not aware of anyone in the company . . . that made a conscious decision” that “it was permissible to continue selling” those products.”

Hearing this evidence, the jury found that “it [was] highly probable that Pulse’s infringement was willful.”  However, the district court held that it could not find willfulness under Seagate because the obviousness defense was not objectively baseless.

On remand, the district court must now “exercise its discretion and to decide whether, taking into consideration the jury’s unchallenged subjective willfulness finding as one factor in its analysis, an enhancement of the damages award is warranted.”  The statement from the Federal Circuit here is interesting and important in its focus on the question of enhancement rather than willfulness. Notably, the court does not suggest that the district court first determine whether Pulse was a willful infringer and then determine whether to enhance damages.  Rather, the Federal Circuit indicates that the discretion for enhanced damages is a full bundle of discretion and willfulness only “one factor in [the] analysis.”  This approach matches with the statutory language of Section 284 that does not mention willfulness but rather simply indicates that “the court may increase the damages up to three times the amount found or assessed.”

florence-nightingale-1[1]At the Time of the Infringement: Of course, as the Supreme Court wrote, the discretion is not limited. In considering Pulse’s culpability, the Federal Circuit also noted the Supreme Court’s statement that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.”   Thus, an important question on will be the level of culpability at the time of infringement. There will also be a question of who-knew-what and the extent that the court will follow Florence Nightengale’s opinion that the person ‘in charge’ must “not only to carry out the proper measures yourself but to see that every one else does so too; to see that no one either willfully or ignorantly thwarts or prevents such measures.”

Federal Circuit: Still No Clarity on Definiteness Standard

Patent

reasonabledoubtAlthough non-precedential, Philips v. Zoll Medical (Fed. Cir. July 28, 2016) offers some interesting insight on the Federal Circuit’s approach to indefiniteness.

The Patent Act requires that claims be written in a way that “particularly point[s] out and distinctly claim[s] the subject matter which the inventor . . . regards as the invention.” 35 U.S.C. 112(b).  In Nautilus, the Supreme Court held that a patent claim survives this test only if it provides “reasonable certainty” as to the scope and bounds of the invention.

In the case, the jury was instructed under the old standard that permitted invalidation under 112(a) only when a claim’s meaning was “insolubly ambiguous.”  On appeal, the Federal Circuit vacated the not-invalid jury verdict and ordered a new trial.  The court writes:

While there may be some factual scenario where the reference to “insolubly ambiguous” is nonprejudicial, this is not that case. Here, the sentence, “Rather, only claims that are insolubly ambiguous are indefinite,” is the strongest, most forceful statement in the entire instructions on indefiniteness. It seems almost certain that amidst the back-and-forth, give-and-take of the remainder of the jury instructions on indefiniteness, the jury would gravitate to the single, definitive statement in the instructions. Furthermore, this sentence is juxtaposed with, “Absolute clarity is not necessary,” and connected with “rather, only,” which slants the playing field against a finding of indefiniteness in a way that is no longer appropriate after Nautilus. On this basis, we find that the district court’s reference to the insolubly ambiguous standard was prejudicial.

Although we know that Nautilus made it easier to invalidate claims as indefinite, the court still has not spelled out the meaning of “reasonable certainty.”  On this point, the court merely demurred: “While we have not clarified the relationship between ‘insolubly ambiguous’ and ‘reasonably certain,’ it must be admitted that the “insolubly ambiguous” standard is a harder threshold to meet than the post-Nautilus standard.”

Although the reasonable certainty test is new to the indefiniteness doctrine, it is not new to the law.  The area where it is most well known is likely in proving “special damages” such as lost-profits on breach of contract or in a tort action. Some have also linked “reasonable certainty” as the inverse of “reasonable doubt.”  Reasonable certainty only exists when there is no reasonable doubt. Henry L. Chambers, Jr., Reasonable Certainty and Reasonable Doubt, 81 Marq. L. Rev. 655 (Spring 1998).

The bottom line for the reasonable certainty standard is that, while some uncertainty is permissible, the scope should be free from speculation or conjecture.

[Updated to fix typo 102(b), not 102(a)]

Unwired Planet v. Apple: Fault and Patent Infringement

Patent,

By Jason Rantanen

Unwired Planet, LLC v. Apple Inc. (Fed. Cir. July 22, 2016) Download Unwired Planet
Panel: Moore (author), Bryson, Reyna

Last week, the Federal Circuit issued two opinions, both written by Judge Moore, dealing with what I refer to as “fault” in patent law: the degree of culpability the accused infringer possessed with respect to the issue of patent infringement.*  Although the cases involve different legal doctrines–WBIP v. Kohler involves willful infringement under § 284 and Unwired Planet involves inducement of infringement under § 271(b)–both present that core question of fault.  This post will focus on the issue of fault in the context of Unwired Planet, although its observations about fault are relevant to issues of culpability in the context of enhanced damages determinations.  I’ll focus on the specific issues raised by WBIP in a future post.

*While some folks prefer the terms “scienter,” “mens rea,” or “mental state,” I tend to use  “fault” because patent infringement primarily involves businesses not humans, and businesses don’t really have minds. In addition, the idea of “fault” captures standards (such as strict liability and negligence) that do not really have mental state components.  Terminology matters less than what’s actually going on in the analyses in these opinions, though, so substitute your preferred term as desired.

Unwired Planet v. Apple involved inducement of infringement under 35 U.S.C. § 271(b).  In Global-Tech v. SEB, and reaffirmed in Commil v. Cisco, the Supreme Court held that inducement requires knowledge or willful blindness to the fact that the relevant acts constitute infringement of a patent.  563 U.S. 754, 766 (2011); 135 S.Ct. 1920, 1926 (2015).

Among other subjects raised on appeal, Unwired challenged the district judge’s grant of summary judgment against its § 271(b) inducement of infringement claim.  The district court based its decision on the ground “that no reasonable juror could conclude that Apple was willfully blind because of ‘the strength of Apple’s noninfringement argument.'”  Slip Op. at 18.  On appeal, the Federal Circuit vacated the grant of summary judgment because the “objective strength” of Apple’s position was insufficient to avoid liability for inducement:

Because the district court’s grant of summary judgment was based exclusively on its view of the strength of Apple’s non-infringement argument, we vacate. The Supreme Court’s Global-Tech Appliances and Commil decisions require a showing of the accused infringer’s subjective knowledge as to the underlying direct infringement. The district court’s reliance on the objective strength of Apple’s non-infringement arguments as precluding a finding of induced or contributory infringement was erroneous.

On its face, this statement in Unwired Planet seems inconsistent with the court’s recent holding in Warsaw Orthopedic, an opinion that Dennis wrote about last month.  In Warsaw Orthopedic the Federal Circuit held that the objective unreasonableness of the accused infringer’s position, together with its knowledge of the patents, was a sufficient basis for a jury to conclude that the accused had knowledge of or was willfully blind to the fact that it infringed the patents-in-suit.  See 2016 WL 3124704, *3, *5 (“[H]ere we conclude that there was substantial evidence that MSD’s infringement position was objectively unreasonable and that the jury, based on this evidence, could reasonably have concluded that MSD had knowledge (or was willfully blind to the fact) that it was infringing”).  In other words, while the objective reasonableness of the accused infringer’s position is insufficient to avoid a finding of willful blindness, the objective unreasonableness of the accused infringer’s position is sufficient for a finding of knowledge or willful blindness.

Adding to the potential confusion is an observation that Judge Reyna made in his concurrence in Warsaw Orthopedic: that “the Supreme Court in Commil stated that a defendant lacks the intent for induced infringement where his reading of the claims is both different from the plaintiff’s and reasonable.”  2016 WL 3124704, *6 (the concurrence does not provide a pin cite for this statement, but he’s presumably referencing 135 S.Ct. 1920, 1928 (“In other words, even if the defendant reads the patent’s claims differently from the plaintiff, and that reading is reasonable, he would still be liable because he knew the acts might infringe. Global–Tech requires more.”)).  Although Judge Reyna was making the point that he would resolve the appeal on the ground that the accused infringer had not presented its claim construction to the court, his reading of Commil nevertheless reinforces the idea that a reasonable claim construction would be sufficient to avoid a finding of inducement liability–a conclusion at odds with the Federal Circuit’s statement in Unwired that “the objective strength of Apple’s non-infringement arguments” cannot preclude a finding of induced infringement.

Timing matters: These statements are not as irreconcilable as they seem, however. The critical missing aspect is that of timing.  As the Federal Circuit observed in WBIP, “timing does matter,” Slip Op. at 35 (emphasis in original), a point made in Halo v. Pulse, 136 S.Ct. 1923, 1933, and repeatedly emphasized by Timothy Holbrook in his scholarship and amicus briefing.   Patent infringement almost never consists of just a single act.  Instead, it typically consists of a multitude of acts performed over months or years: the individual acts of making, using, selling, and offering for sale of the patented invention.  Mental states can change and evolve over this time.  Perhaps during early periods, the accused infringer is entirely unaware of the patents-in-suit; later on, it becomes aware and begins to have thoughts about them; still later it is embroiled in litigation and develops sophisticated legal arguments.

Viewed in this light, the court’s holdings in Warsaw and Apple are easily reconciled.  In Warsaw, the court was simply saying that relying on an noninfringement position that is objectively unreasonable allows for a jury to find that the accused possessed the requisite fault.  This makes sense, as a noninfringement position that is objectively unreasonable cannot foreclose a finding of fault regardless of whether that unreasonable position was developed before infringement began or later on during litigation.

On the other hand, the flip is not necessarily true.  Just because an accused infringer develops a reasonable non-infringement position during litigation does not mean that it had a reasonable noninfringement position earlier on.  Logic would indicate, though, that if it had a reasonable noninfringement position earlier on, then it would not possess the requisite degree of fault at that time, given the passage in Commil v. Cisco referenced by Judge Reyna.

The Nature of the Determination of Fault: Wrapped up with the issue of timing is that of the actual determination of knowledge or willful blindness.  It is the patent owner’s burden to prove that the accused infringer possessed the necessary degree of fault, not the accused infringer’s burden to prove that it did not.  “The doctrine of willful blindness requires the patentee to show not only that the accused subjectively believed that there was a high risk of infringement, but also that the accused took deliberate actions to avoid confirming infringement.”  Unwired, Slip Op. at 19.  On this basis, the Federal Circuit observed, Apple might be able to prevail on summary judgment on remand.  When coupled with the reality of temporally evolving mental states, this requirement poses an interesting challenge: the patentee must make out a plausible case for fault at the relevant points in time.  The objective reasonableness of the infringer’s legal position would seem to be relevant to this determination, but the existence of an objectively reasonable legal position at one point in time does not necessarily mean that it applies to other periods of time.  Furthermore, as Prof. Holbrook has observed, the issue of reasonableness falls out once the court issues its ruling on the “correctness” of the position.  If the accused inducer loses on that issue, it can no longer argue that it’s position was “reasonable.”

Thanks to Dennis Crouch, Dmitry Karshtedt, Chris Seaman and Timothy Holbrook for helpful discussions relevant to this post.

Supreme Court Patent Report: End of 2015 Term

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by Dennis Crouch

The Supreme Court has completed its patent law business for the 2015 term and will re-open decision making in September 2016.  Briefing and new filings will, however, continue throughout the summer.

Two Decisions: The Supreme Court has decided its two major patent cases – Halo/Stryker and Cuozzo.  In Halo, the court re-opened the door to more treble-damage awards for willful patent infringement.  The decision rejects the objective-recklessness standard of Seagate (Fed. Cir. 2007)(en banc) and instead places substantial discretion in the hands of district court judges for determining the appropriate sactions “egregious infringement behavior.”  In Cuozzo, the court affirmed the Federal Circuit’s pro-PTO decision.  The decisions confirms the PTO’s authority construe claims according to their broadest-reasonable-construction (BRI) even during post-issuance review proceedings and also confirms the Federal Circuit ruling that the PTO’s initiation of an inter partes review (IPR) proceeding is not appealable (even after final decision).  A major caveat of this appealability issue is that the court limited its holding to run-of-the-mill IPR patent issues.  The court did not determine when other issues arising from institution, such as constitutional due process challenges, might be appealable.

Both decisions are important. Halo adds at least a gentle breeze to the would-be patent infringement armada.  I heard many discussions of pendulum’s swinging in the days following the case, although I would not go quite so far.  Cuozzo was a full affirmance of the PTO position and will operate to continue to raise the statute and importance of the agency.

Three Pending Cases Set the Stage for Next Term: With the certiorari writ grant in Life Tech v. Promega, we now have three patent cases set for review and judgment next term.  The issue in Life Tech is fairly narrow and involves export of of a component of a patented invention for combination in a would-be-infringing manner abroad.  The statute requires export of a “substantial portion of the components” and the question in the case is whether export of one component can legally constitute that “substantial portion.”  In the case, the component (Taq) is a commodity but is also an admitted critical aspect of the invention.  Life Tech may be most interesting for those generally interested in international U.S. law (i.e., extraterritorial application of U.S. law).  The other two pending cases are Samsung v. Apple (special damages in design patent cases) and SCA Hygiene (laches defense in patent cases).

None of these three pending cases are overwhelmingly important in the grand scheme of the patent system, although Samsung is fundamental to the sub-genre of design patents.  This week, the Supreme Court denied certiorari in Sequenom v. Ariosa – a case that some thought might serve to rationalize patent eligibility doctrine in a way that favors patentees.  For now, the Mayo, Alice, _____ trilogy remains open-ended. This leaves the Federal Circuit in its nadir.

Following Cuozzo, the only AIA post-issue review cases still ongoing are Cooper and MCM.  These cases raise US Constitutional issues that were expressly not decided in Cuozzo.  Briefing is ongoing in MCM and one scenario is that the court will sit on Cooper and then grant/deny the pair together.  A new petition was filed by Trading Technologies just before Cuozzo was released – the case focuses on a mandamus (rather than appeal) of a CBM institution decision for a patent covering a GUI tool. (Full disclosure – while in practice I represented TT and litigated the patent at issue).  Of minor interest, the court issued a GVR order (Grant-Vacate-Remand) in Click-to-Call Tech. v. Oracle Corp (15-1014) with instructions to the Federal Circuit to reconsider its prior decision in light of the recently decided Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ___ (2016).  It will be interesting to see whether the patentee can develop a new hook for the Federal Circuit.

The end-of-term clean sweep leaves only two-more briefed-cases with potential for certiorari: Impression Prod. v. Lexmark Int’l. (post-sale restrictions); and Sandoz v. Amgen (BPCIA patent dance).  In both cases the court called for the views of the Solicitor General (CVSG). DOJ briefs should be filed around the end of the year – although the election may shift some of the timing.  SG Donald Verrilli has stepped down with former deputy Ian Gershengorn now serving as Acting SG.

The big list:

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Halo, Civil Procedure, and Defending On-going Infringement Suits

Current Affairs, Ethics, ,

I was listening to conversation about Halo, the decision of the Supreme Court to make it easier to establish willful infringement.  If the case is “egregious” and not “typical” infringement, enhanced damages are now available.  Further, the key time period is the time of moving forward with what turned out to be infringement of a valid patent, not the time of trial.

Of course, the obvious lesson going forward is that it will be more likely for accused infringers to rely upon an opinion of counsel indicating lack of infringement or invalidity (or some other way to avoid liability, like 101 or unenforceability like inequitable conduct or prosecution laches).  No news flash there.  And, of course, the fact that the timing of the opinion — earlier the better — means that there are likely going to be more opinions generated.

So, looking forward:  there will be more opinions used more often, you would think.

What I think is interesting are pending cases where a decision has already been made not to rely upon an opinion of counsel.

There are, no doubt, many pending cases where it is too late because of a scheduling order to disclose an opinion of counsel previously obtained.  The battle there will be over whether there is good cause to modify the scheduling order.  Lawyers in the position of needing to make that modification should do so quickly. I can imagine arguments cutting both ways in a particular case.  But competent lawyers in need of buttressing a defense against willfulness would get on that analysis, and soon.

What if, in contrast, a lawyer had advised a client– based upon the pre-Halo standard — not to get a formal opinion, with the idea being that the defendant would rely upon litigation defenses that were basically expressed to the client somewhat informally at the time of infringement.  Can the defendant now get into evidence the fact that those litigation defenses were communicated originally informally?  Does this implicate the need to modify the scheduling order or comply with some other local rule about waiver of privilege for opinions?

Finally, lawyers should consider cases where clients may pre-Halo have not needed an opinion but now may want to have one.  That advice needs to be given soon!

There are probably other fact patterns, but those jumped out at me sitting and listening today.  Thoughts?

Finally, and on a related note:   The Supreme Court’s statement that it’s the time of infringement that matters and not later is really unworkable and flawed.  A defendant, for example, who finds another piece of prior art later, closer to trial, surely can rely upon that evidence (and/or opinion analyzing it) as (a) confirming the strength of an earlier opinion or  (b) providing evidence that, from that time forward, its infringement was not “egregious”?

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

Patent,

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

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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.

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[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).