Expert Commentary

Willful Patent Infringement after

The risk of companies being found liable for willful infringement may now be less likely because the threshold "objective prong" inquiry for willful infringement is decided by a judge rather than a jury.


Intellectual Property
July 2012

A finding of willful infringement in patent litigation that leads to enhanced damages can prove catastrophic to a company. For example, last year, Microsoft was hit with a $290 million judgment in light of a finding of willful infringement.1 See Microsoft Corp. v. i4i Ltd. P'ship,131 S. Ct. 2238 (2011).

The Federal Circuit's recent decision in Bard Peripheral Vascular Inc. v. W.L. Gore & Assocs. Inc., 405 Fed. Appx. 501 (2012), however, may reduce the risk of a willful infringement finding. In Bard, the Federal Circuit clarified the Seagate willful infringement two-prong test, making the threshold "objective prong" inquiry a question for the judge rather than a jury. As a result, a willful infringement finding may be a bit more predictable in the hands of a familiar judge, rather than a variable jury. Because both sides in a patent suit will be better able to predict the outcome, more suits may proceed to settlement quickly. Thus, Bard will likely reduce the number of patent cases having willful infringement verdicts.

Seagate's Willful Infringement Two-Prong Test

The Federal Circuit has held that a patentee may be entitled to increased damages for willful infringement if an infringer's actions constituted at least "objective recklessness." See In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc) (holding that the willful infringement damage increase under 35 U.S.C. § 284 "requires at least a showing of objective recklessness"). There, the court created a two-prong test for willful infringement:

  1. The objective prong—a showing "by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent."

  2. The subjective prong—a showing "that this objectively-defined risk ... was either known or so obvious that it should have been known to the accused infringer."

The objective prong is a threshold prong that must be met before considering the subjective prong. While setting out this standard, the court chose not to elaborate further on its meaning, saying: "We leave it to future cases to further develop the application of this standard." Id. Two recent cases, Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221 (Fed. Cir. 2011), and Bard, developed this standard further.

In Powell, 663 F.3d at 1236–37, the court emphasized that any questions of fact within the objective prong and the questions of fact within the subjective prong should be sent to a jury. But this should occur only after any questions of law within the objective prong are first decided by the court as a threshold inquiry. Bard clarified this question of law or question of fact distinction within the objective prong.

Bard Clarifies That the Objective Prong Is a Question of Law

In Bard, the Federal Circuit determined that the threshold objective prong is a question of law. Similar to issues of claim construction, the court reasoned that the objective prong of willful infringement would best be decided by a judge. The court explained:

When an "issue falls somewhere between a pristine legal standard and a simple historical fact, the fact/law distinction at times has turned on a determination that, as a matter of sound administration of justice, one judicial actor is better positioned than another to decide the issue in question."

Id. (citing Miller v. Fenton, 474 U.S. 104 (1985)).

Essentially, the court reasoned that a judge will better decide such a question because a judge has more expertise regarding patent suits than a jury. Thus, "objective recklessness" under the first prong of the Seagate willful infringement test is "best decided by the judge as a question of law subject to de novo review." Id.

As for the subjective prong of the Seagate test, the court reaffirmed Powell by noting that the subjective prong is a question of fact for a jury. Id. at *4.

Implications of Bard

Bard will likely reduce the number of willful infringement claims. Because a judge will decide whether a defendant's actions constitute "objective recklessness," both sides in a patent suit will be better able to predict the outcome of a willful infringement claim rather than leaving it to a jury, which could be less predictable. If a defendant's counsel thinks that a judge will rule as a matter of law that a client's actions were objectively reckless, that suit will proceed to settlement quickly. Thus, Bard may result in fewer suits proceeding to trial.

America Invents Act of 2011 and Willful Infringement

In Seagate, 497 F.3d at 1371, the Federal Circuit reemphasized that "there is no affirmative obligation to obtain opinion of counsel." The America Invents Act (AIA) essentially codified this holding in 35 U.S.C. § 298 (effective Sept. 16, 2012). "The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent … may not be used to prove that the accused infringer willfully infringed the patent...." Id. While Congress and the Federal Circuit have protected accused willful infringers this way, companies may still seek opinions of counsel to reduce their risk.

How To Reduce Your Risk of Willful Infringement

One measure that companies should take is to obtain opinions of counsel on patents learned of through infringement notices. While the AIA has clarified that not receiving an opinion of counsel cannot be used to prove willful infringement, opinions of counsel will be more likely to deter claims of willful infringement. In Seagate, 497 F.3d at 1373, the court described opinions of counsel as serving "to provide an objective assessment for making informed business decisions...." Thus, because an opinion of counsel provides "an objective assessment," a court would likely hold that receiving an opinion of counsel prevents a company from meeting the "objective recklessness" prong of the Seagate willful infringement test. Thus, companies that want to make "informed business decisions" should receive opinions of counsel on noninfringement and/or invalidity.

Conclusion

In Bard, the Federal Circuit clarified the Seagate willful infringement two-prong test by determining that the threshold "objective prong" is a question of law. Because a judge, not a jury, must now decide "objective recklessness" as a question of law under Bard, willful infringement is less likely to be found now than ever before. Because opinion of counsel is an "objective assessment" under Seagate, receiving an opinion of counsel will weigh in a defendant's favor under this threshold prong of the Seagate willful infringement test.


1Microsoft lost its appeal at the Supreme Court challenging willful infringement damages. See Richard Waters, "Microsoft loses Supreme Court patent appeal," Financial Times, June 10, 2011.


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