C.A.G. Insights

Willfulness? Enhanced Damages? It’s a Judge-ment Call

Depending upon where you stand, on June 14, 2012, the Federal Circuit Court of Appeals either executed a “bloodless” coup d’état, or brought order to the issue of enhanced damages in patent cases.  In Bard Peripheral Vascular, Inc. et al. v. W. L. Gore and Associates, Inc. ((Bard Peripheral Vascular, Inc. v. W. L. Gore & Associates, Inc., No. 03-CV-0597, slip op (Fed. Cir. June 14, 2012); 2012 LEXIS 13561. Bard has been followed in several cases, including: Highmark, Inc. v. Allcare Health Mgmt. Sys., (Fed Cir 2012), 701 F.3d 1351; 2012 U.S. App. LEXIS 25054;  Sargent Mfg. Co. v. Cal-Royal Prods., (D Con), 2012 U.S. Dist. LEXIS 105260;  Tomita Techs. United States, LLC v. Nintendo Co., (SD NY), 2013 U.S. Dist. LEXIS 8111; and Carnegie Mellon Univ. v. Marvell Tech. Group, LTD., (WD Pa), 2012 U.S. Dist. LEXIS 157337 (noting that mixed questions of law and fact may be resolved by submitting special interrogatories to the jury on fact issues).)), the court ruled that the preliminary determination of “willfulness,” a sine qua non for enhancement of damages, is a matter of law for the court to determine, and subject to de novo review on appeal.  This takes the issue out of the hands of the jury and places both the determination of willfulness as well as the enhancement of damages in the hands of the trial judge.  Since judicial interpretation of statutes is retrospective, Bard applies to all ongoing litigation ((Voda v. Cordis Corp., 536 F.3d 1311 (Fed. Cir. 2008); 2008 LEXIS 17542.)).

Bard completes the revision of the law on the willfulness standard that commenced five years ago in the landmark 2007 opinion, In re Seagate ((In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007); 2007 LEXIS 19768.)). Seagate reversed the long-standing rule of Underwater Devices ((Underwater Devices, Inc. v. Morrisen-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983) )) that an accused infringer has an affirmative duty of care to take reasonable steps to avoid patent infringement.  In its stead, Seagate substituted a requirement that the patentee provide “at least a showing of objective recklessness” on the part of the accused infringer.  In addition, because the court expressly abandoned the affirmative duty of due care, it also emphasized that the accused infringer had no affirmative obligation to obtain an opinion of counsel.  Notwithstanding, subsequent cases have shown that obtaining an opinion of competent counsel continues to be a factor that mitigates in favor of a finding of no willfulness ((See, e.g., Finisar Corp. v. DirecTV Group, Inc., 523 F. 3d 1323 (Fed. Cir. 2008); 2008 LEXIS 8404, cert denied, 2008 U.S. LEXIS 9026 (2008) (competent opinion of counsel on non-infringement or invalidity would negate objective recklessness).)).Thus, while an opinion of counsel is not necessary to negate a finding of willfulness, it certainly helps.

To establish willful infringement, restated as “objective recklessness,” under Seagate, a patentee must make two showings by clear and convincing evidence.  Firstly, the patentee must show that the infringer acted despite “an objectively high likelihood that its actions constituted infringement of a valid patent.”  The state of mind of the accused infringer is not relevant to this objective inquiry.  If this threshold objective standard is satisfied, the patentee must in addition also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known, or so obvious that it should have been known, to the accused infringer.  Accordingly, Seagate set a two-pronged test: (1) was there an objectively high likelihood of infringement?  If so, (2) was that risk known or obvious?  If so, then there is willfulness.  The next step of awarding enhanced damages falls within the discretion of the trial judge.  Despite a finding of willfulness, the judge may decline to enhance the damage award or opt to enhance up to the maximum of three times actual damages, as allowed under the statute, 35 U.S.C. § 285.

Seagate left the issue of who should determine whether there was an objectively high likelihood of infringement open.  Bard now puts that decision in the hands of the trial judge.  In so doing, the Bard court acknowledges that the issue of willfulness has long been considered a factual issue.  It further acknowledges that willfulness may require resolution of both factual as well as legal issues.  Under these circumstances, ordinarily the jury may decide on the factual issues, and the trial court may decide the legal issues.  However, even under these circumstances, the judge remains the final arbiter of whether the defense was reasonable.  Leaning on the reasoning in the Supreme Court’s Markman v Westview ((Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996) )) opinion that placed patent claim construction, arguably also a mix of factual and legal issues, in the hands of the trial judge, the Bard court held that although willfulness might have mixed questions of fact and law, the determination of willfulness is best left to the trial judge, with de novo review on appeal.

As matters stand today, the jury is restricted, in patent cases, to determining infringement, based on the judge’s patent claim construction.  The jury may also determine damages, but the enhancement of damages, if any, is within the purview of the trial judge

Shaukat Karjeker is a partner at Carstens, Allen & Gourley, LLP. He offers over 20 years of experience in patent and trademark litigation and prosecution before both US and foreign patent and trademark offices.

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