Tag Archives: Seagate

Supreme Court Again Rewrites Patent Law on Enhanced Damages

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

SupremeCourtImage_1In a continuing trend of rejecting bright-line rules and multi-faceted tests created by the Federal Circuit, the Supreme Court last week issued an opinion in Halo Electronics, Inc. v. Pulse Electronics, Inc., (No. 14-1513) in which the Court unanimously vacated and remanded the Federal Circuit’s decision affirming the District Court’s decision not to award enhanced damages under the Federal Circuit’s precedent in In re Seagate Technology, LLC, 497 F.ed 1360 (Fed. Cir. 2007) (en banc). The Court found that the Seagate test was too rigid and did not give trial courts sufficient discretion to award enhanced damages under 35 U.S.C. § 284. Chief Justice Roberts wrote the decision for the Court.

Background

The Patent Act provides that the Court “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. In response to this language, the Federal Circuit has created various tests for courts and litigants to following, culminating with its most recent pronouncement in Seagate. Under the Seagate test, “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,”without regard to “[t]he state of mind of the accused infringer.” This objective prong is not satisfied if the accused infringer later developed a reasonably defense at trial, even if that defense was not known or relied on during the time of the infringing conduct.

If the patentee can demonstrate objective recklessness, it must show by clear and convincing evidence that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” If the patentee meets this subjective prong, the court is entitled to award enhanced damages.

The Supreme Court Rejects this 2-step Process

While initially recognizing that “[t]he Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under § 284 only in egregious cases,” it found that the test “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”

In particular, the Court was troubled by the fact that an accused infringer could avoid enhanced damages in cases where it intentionally ignored the patentee’s patent if its lawyers could later develop a reasonable defense during litigation that was never relied on previously. Under the Seagate test, a patentee could never get past the first objective prong.

Having said that, the Court also stressed that enhanced damages should still be the exception, and not the rule. It traced the history of enhanced damages and noted that they were typically reserved for egregious cases and were “vindictive or punitive” in nature. The Court cautioned that a trial court’s discretion to grant enhanced damages is not boundless and that the Federal Circuit is in a unique position to evaluate the exercise of that discretion based on its long history of dealing with patent cases.

Finally, the Court rejected a clear and convincing evidentiary standard for proving entitlement to enhanced damages. Under § 284, only a preponderance of the evidence is necessary to obtain enhanced damages.

The Court concluded by stating:

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. . . . Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement. The Seagate test, in contrast, unduly confines the ability of district courts to exercise the discretion conferred on them. Because both cases before us were decided under the Seagate framework, we vacate the judgments of the Federal Circuit and remand the cases for proceedings consistent with this opinion.

Justice Breyer’s Concurrence

While agreeing with the majority’s opinion, Justice Breyer wrote separately to caution that awards of enhanced damages should be made only in egregious circumstances.

He also noted that an award of enhanced damages requires conduct beyond simple knowledge of a patent by the infringer. Justice Breyer explained that there are several legitimate reasons why an infringer may be aware of a patent that do not rise to the level of willful misconduct required. He also noted that opinions of counsel of non-infringement or invalidity are not required to defeat a claim for enhanced damages. For one thing, they can be extremely expensive and can deter legitimate innovation or otherwise upset the proper balance between the patent laws and promoting the progress of the science and useful arts.

Finally, he noted that enhanced damages are not a mechanism for compensating patentees for litigation expenses or other infringement-related costs. There are difference statutory provisions that address those concerns.

Conclusion

This is yet another case in which the Supreme Court has struck down a bright-line rule or multi-faceted test developed by the Federal Circuit. The Federal Circuit has tended to create these rules and tests in an effort to provide more clarity and certainty in the patent arena, even if these rules and tests lack a strong statutory basis. In contrast, the Supreme Court seems less concerned about clarity and certainty, and is more concerned in treating the patent laws like any other area of the law. It has repeatedly rejected efforts by the Federal Circuit to treat the patent laws as somehow different than other laws or not bound by the same rules and procedures. The Halo decision is another decision that brings the patent laws closer to the rest of the law.

Federal Circuit Again Splits on Willful Infringement

by: Robert Wagner, intellectual property attorney at the Pittsburgh law firm of Picadio Sneath Miller & Norton, P.C. ()

6436135 ImageThe Federal Circuit issued another contentious decision on the subject of willful infringement on Tuesday in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., (No. 2014-1114), splitting 2-1 and with another judge calling for the Circuit to revisit the law in this area.

The Bard-Gore case has had a long and tortured past, beginning more than 40 years ago. Gore, which makes an ePTFE polymer under the brand name Gore-Tex®, invited Dr. David Goldfarb to its facilities in 1973 to participate in a study of Gore’s product for use as a vascular prosthesis. Gore was trying to find new uses for its product, including in the medical fields. Based on the materials that Gore provided to Dr. Goldfarb, Dr. Goldfarb filed a patent application on the structure of the most effective of the samples he tested back in 1974. Peter Cooper from Gore had previously filed a patent application, and the USPTO conducted an interference proceeding.

In the interference proceeding, the USPTO concluded that Cooper was the first to conceive of the subject matter of the invention, but Dr. Goldfarb was the first to reduce it to practice. Therefore, the USPTO awarded the patent to Dr. Goldfarb. The Federal Circuit affirmed, and the patent ultimately issued in 2002. During the pendency of this dispute, Gore continued to develop and sell ePTFE grafts and medical devices.

In 2003, Dr. Goldfarb and Bard sued Gore for infringement (previously, Dr. Goldfarb licensed the patent to Bard). The jury returned a verdict of willful infringement and awarded over $185 million in damages, which the district court doubled. The district court also awarded attorneys’ fees and costs. The Federal Circuit affirmed in a split panel, but the full Circuit vacated the decision in a rehearing en banc, ordering the district court to reconsider the willful infringement finding de novo. The district court reconsidered the evidence and reinstated its prior judgment. The Federal Circuit, in this decision, affirmed in a 2-1 decision with three separate opinions.

Judge Prost, writing the opinion of the Court, reviewed the evidence de novo and concluded that Gore’s defenses were not reasonable. In particular, the Court rejected the notion that the fact that a prior member of the panel at the Federal Circuit dissented does not mean that Gore’s position was reasonable. The Court did not want to create the precedent that a single dissenting view would preclude a finding of willful infringement as a matter of law.

Judge Hughes wrote a concurring opinion in which he called into question the Federal Circuit’s jurisprudence on willful infringement—in particular, the two-part objective-subjective test and the de novo standard of review. He believes that the full panel should reconsider the law in this area and should apply a deferential standard of review.

Finally, Judge Newman wrote a strong dissent in which she would have reversed the district court’s decision on willfulness. She was troubled by the majority’s failure to discuss what she believed to be relevant evidence supporting Gore’s position. She was also troubled by the fact that the district court refused to enjoin Gore from selling its products but then enhanced the damages.

This decision is another in which the judges on the Federal Circuit are openly questioning the current state of the law on willful infringement. It will be interesting to see if the Federal Circuit rehears one of these cases en banc to settle the disagreements that are brewing internally.