WISHING ALL EDIG SHAREHOLDER VERY GOOD HEALTH AND PROSPEROUS ONE IN 2009. This article bodes well for EDIG and its patents.

Willful Infringement after Seagate

May 2008

Patent suits are particularly frightening for defendant companies because patent suits have the potential for astronomical damages.

by Sanford E. Warren Jr. and William Kennedy Jr.
Akin Gump Strauss Hauer & Feld LLP

For instance, a plaintiff inventor, Dr. Bruce Saffran, recently won a $500 million verdict against Boston Scientific in a patent suit in the Eastern District of Texas. Although that damages number is very high, it could have been higher if willful infringement was found. If a party is found to have willfully infringed, then a court may increase damages by a staggering factor of three.

What Is Willful Infringement?

The Court of Appeals for the Federal Circuit recently redefined willful infringement. Patent cases are heard by federal district courts, and appeals to patent cases are heard by the Federal Circuit. As such, the Federal Circuit creates much of the controlling precedent for patent cases.

On August 20, 2007, the Federal Circuit ruled on willful infringement in its decision, In re Seagate Tech., LLC., 497 F.3d 1360 (Fed. Cir. 2007). In the decision, the Federal Circuit overruled its own precedent and held that "proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness." (Previously, regarding willfulness, an infringer was only under a duty of care to avoid infringement.)

That is to say, for a court to increase a damages award on the basis of willful infringement, the patentee must show that the infringer was objectively reckless. The Federal Circuit explained this standard by stating:

a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.

Id.

Since this decision, the Federal Circuit has ruled on two additional cases in which it discussed willfulness.

Black & Decker v. Bosch

In Black & Decker, Inc. v. Robert Bosch Tool Corp., No. 2007–1243, 2007–1244, 2008 U.S. App. LEXIS 207 (Fed. Cir. Jan. 7, 2008), the Federal Circuit reviewed a case involving the "combination of a radio and a battery charger. The court discussed the possibility of a willfulness finding on remand and noted that "the district court … recognized that ‘Bosch had legitimate defenses to Black & Decker's infringement claims.'" Further, the jury found two claims invalid as obvious, showing that the appellant also made a credible invalidity argument." Id. at 18.

The Federal Circuit applied these findings to the new objective standard of willfulness, and concluded that "both legitimate defenses to infringement claims and credible invalidity arguments demonstrate the lack of an objectively high likelihood that a party took actions constituting infringement of a valid patent." Id. (Emphasis added.)

Innogenetics, N.V. v. Abbott Labs.

In Innogentics, N.V. v. Abbott Labs., 512 F.3d 1363 (Fed. Cir. 2008), the Federal Circuit, citing Seagate, upheld a district court's judgment that overturned the jury's verdict of willful infringement. The case involved a dispute over "diagnostic tools that not only detect but also classify Hepatitis C virus (HCV) genotypes in a biological sample." Id. at 1368. Conclusively, the Federal Circuit stated:

Our review of the record does not indicate how [defendant's] development and sale of its genotyping products were at risk of an objectively high likelihood of infringement. Accordingly, we affirm the lower court's grant of JMOL of no willful infringement.

Id. at 1381.

A court renders a judgment as a matter of law (JMOL) when "a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for that party on that issue." Fed. R. Civ. P. 50(a). In fact, in the following case, a federal district court in the Eastern District of Texas made a JMOL on willfulness, using the Seagate standard.

TGIP v. AT&T

In TGIP, Inc. v. AT&T Corp., 527 F. Supp. 2d 561 (E.D. Tex. 2007), TGIP sued AT&T for infringement of patents covering prepaid calling card technology. AT&T sought a JMOL on the matter of willfulness, and the court granted it. The court made this decision on the basis that AT&T's invalidity position was not objectively unreasonable, citing the fact that:

the patentee was concerned enough [about invalidity] to ask for reexamination of the '768 patent, and to delay taking action on the '114 patent for six years.

Id. at 579.

The court also relied on the fact that there was not an objectively high likelihood that AT&T's non-infringement position was incorrect, labeling the infringement issue a "close call." Thus, a court again used the heightened Seagate standard to decide against willfulness.

In the next case, a federal district court in the Northern District of California refused to enhance damages in the situation where Seagate had only recently issued and the jury did not have the Seagate standard to rely upon.

Informatica v. Business Objects Data Integration

In Informatica Corp. v. Business Objects Data Integration, Inc., 527 F. Supp. 2d 1076 (N.D. Cal. 2007), Informatica sued Business Objects for patent infringement, and the jury found willful infringement, awarding $25,240,000 in damages. Id. at 1078 (The award was subject to remittitur and reduced to $12,115,200.) However, the judge refused to increase the damages, in part because the jury considered willfulness on pre-Seagate instructions. The court stated:

Considering the totality of the circumstances in light of Seagate, which significantly raised the bar for a finding of willfulness, the Court now declines to award any enhancement in this case.

Id. at 1082.

Conclusion

In Seagate, the Federal Circuit defined willful infringement as occurring when the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. In both Black & Decker and Innogenetics, the Federal Circuit demonstrated that it is not afraid to apply this new standard for willful infringement. In both cases, the court negatively treated the patentees' claims of willful infringement, which was predictable, given the court's decision to raise the bar for willfulness in Seagate. Similarly, the district courts have been reluctant to enhance damages based on the Seagate standard of willfulness. That being said, businesses should always be cautious of willful infringement, but the new standard of willfulness, as set forth by Seagate, should allow businesses to rest a little easier.