Who Are You Calling A Pirate? Willful Infringement and Enhanced Damages In The Post- Halo World

1. Who Are You Calling A Pirate?Willful Infringement and Enhanced Damages In The Post-Halo World Michael Sacksteder Chair, Patent Litigation Group Fenwick & West LLP

2. What Behavior Deserves Enhancement? “ The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or –indeed– characteristic of a pirate.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932 (2016)

3. What Behavior Deserves Enhancement? “ The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or –indeed– characteristic of a pirate.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932 (2016)

4. Totality of the Circumstances

5. Totality of the Circumstances

6. Totality of the Circumstances

7. Totality of the Circumstances

8. Two Separate Analyses: • Willful infringement? • Was conduct sufficiently egregious to warrant enhanced damages?

9. Two (Three?) Separate Analyses: • Willful infringement? • Was conduct sufficiently egregious to warrant enhanced damages? • How much should damages be enhanced?

10. Willful Infringement – What Is It? Like Seagate Step 2: Whether the accused infringer “actually knew, or it was so obvious that [the accused infringer] should have known, that its actions constituted infringement of a valid patent claim.” WesternGeco LLC v. ION Geophysical Corp., 837 F.3d 1358 (Fed. Cir. 2016)

11. Willful Infringement – What Is It? Like Seagate Step 2: Whether the accused infringer “actually knew, or it was so obvious that [the accused infringer] should have known, that its actions constituted infringement of a valid patent claim.” WesternGeco LLC v. ION Geophysical Corp., 837 F.3d 1358 (Fed. Cir. 2016) “While the Court rejected Seagate’s requirement that a patentee prove objective recklessness in every case, Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness. … Rather, Halo emphasized that subjective willfulness alone can support an award of enhanced damages.” WCS Indus. V. IPS Corp., 721 Appx. 959 (Fed. Cir. 2018)

12. Willful Infringement – Who Decides? Jury Question: “We do not interpret Halo as changing the established law that the factual components of the willfulness question should be resolved by the jury. … There is a right to a jury trial on the willfulness question.” WBIP, LLC v. Kohler Co., 829 F.3d 1317 (Fed. Cir. 2016)

13. Willful Infringement – Who Decides? Jury Question: “We do not interpret Halo as changing the established law that the factual components of the willfulness question should be resolved by the jury. … There is a right to a jury trial on the willfulness question.” WBIP, LLC v. Kohler Co., 829 F.3d 1317 (Fed. Cir. 2016)

14. What Constitutes Willfulness?

15. Substantial Evidence Supporting Willfulness • Accused infringer: • “Knew about the patents before they issued” • “Conducted only a cursory analysis of the patents” • “Waited years before seeking advice of qualified and competent counsel” • “Unsuccessfully tried to buy the asserted patents through a third party” Arctic Cat v. Bombardier Recreational Prods., 876 F.3d 1350 (Fed Cir. 2017) (affirming willfulness finding and award of treble damages)

16. Pre-Suit Knowledge of Patent • Breyer – Knowledge of patent and nothing more not sufficient • Detailed communications regarding infringement theories supports willfulness finding • Finjan, Inc. v. SonicWall, Inc., 2018 U.S. Dist LEXIS 83546 (D. Del. May 16, 2018) • “These allegations allow a reasonable inference to be drawn that SonicWall not only knew about the existence of the Asserted Patents, but how its products infringed each Asserted Patent in detail.” • Motion to dismiss denied • Knowledge of patent applications and citation of patent-in-suit • Not sufficient by themselves to survive motion to dismiss • Corephotonics Ltd. V. Apple Inc., 2018 U.S. Dist. LEXIS 170408 (Oct. 1, 2018) • But alleged “willful blindness” was • “Please do not send any patents to us until further notice. Legal counsel might reach out with any questions.”

17. Knowledge of Patent Limited to Post-Suit? • In re Seagate • [A] willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer’s pre-filing conduct. By contrast, when an accused infringer’s post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for willful infringement.” • Dicta? • Mentor Graphics Corp. v. EVE-USA, Inc., 851 F3d 1275 (Fed. Cir. 2017) • District court precluded plaintiff from presenting willfulness evidence because no pre-suit notice, and no preliminary injunction motion • “[T]here is no rigid rule that a patentee must seek a preliminary injunction in order to seek enhanced damages.”

18. Other Evidence Regarding Willfulness • Ignoring an infringement allegation? • Failure to respond to an email about plaintiff’s patent and refusing to alter conduct alone is “a far cry from the ‘egregious’ conduct necessary to state a claim for willful infringement.” • Corephotonics, Ltd. v. Apple, Inc., 2018 U.S. Dist. LEXIS 170408 (N.D. Cal. October 1, 2018). • Ignoring the asserted patents and inducement of customers • Key employees’ failure to read the patents-in-suit until their depositions and the company’s instruction to its customers to use the products and services in an infringing manner will support a finding of willfulness. • SRI Int'l, Inc. v. Cisco Sys., 254 F. Supp. 3d 680 (D. Del. Jun. 1, 2017)

19. Other Evidence Regarding Willfulness • Copying product before patent issued • “ Deliberate copying of the commercial product of the patent owner before issuance of the patent . . . can be evidence of willfulness to the extent it demonstrates Defendant's state of mind after the [asserted patent] issued and after Defendant became aware of it.” • Nox Med. EHF v. Natus Neurology, Inc., 2018 U.S. Dist. LEXIS 145169 (D. Del. Aug. 27, 2018)

20. Willfulness – Summary Judgment Issue?

21. Willfulness – Summary Judgment Issue? • No knowledge of asserted patent • Knowledge of acquired company not imputed to acquirer • Summary judgment of pre-notice infringement • Plaintiff’s failure to oppose MSJ on 1 patent • Post-notice sales with “reasonable” MSJ of non-infringement • Egregiousness allegation based on willful blindness • Continued post-notice sales not egregious by themselves

22. When Should A Court Enhance Damages (and by how much)?

23. Read v. Portec Factors 1. Deliberate copying 2. Good faith belief of non-infringement 3. Defendant’s behavior during litigation 4. Duration of infringement 5. Closeness of the case 6. Defendant’s motivation of harm 7. Attempt to conceal 8. Defendant’s size and financial condition 9. Remedial action taken by Defendant

24. Read v. Portec Factors 1. Deliberate copying 2. Good faith belief of non-infringement 3. Defendant’s behavior during litigation 4. Duration of infringement 5. Closeness of the case 6. Defendant’s motivation of harm 7. Attempt to conceal 8. Defendant’s size and financial condition 9. Remedial action taken by Defendant “The list of nine factors outlined in Read are convenient guidelines for the Section 284 analysis, but they are not the only factors that may be relevant, and the district courts are not bound to apply them.” Johnstech Int’l Corp. v. JF Microtechnology Sdn Bhd, 2018 U.S. Dist. LEXIS 132019 ( N.D. Cal. Aug. 6, 2018).

25. Example – Damages Enhanced • Barry v. Medtronic, 250 F. Supp. 3d 107 (E.D. Tex. 2017) • Factors in favor of enhancement • Evidence of “deliberate or at least reckless copying” • Defendant’s chief medical surgical consultant told company to copy, “accidentally” listed plaintiff’s patents on his own CV. • No evidence of investigation of patents before trial • No opinion of counsel • Failure to take remedial action • Continued to sell infringing product and did not attempt to design around

26. Example – Damages Enhanced • Barry v. Medtronic, 250 F. Supp. 3d 107 (E.D. Tex. 2017) • Factors against Enhancement • Closeness of the case • Duration of infringement • 3+ years • No evidence of concealment • Damages enhanced by 20%

27. Example – No Enhancement • Nox Med. EHF v. Natus Neurology, Inc., 2018 U.S. Dist. LEXIS 145169 (D. Del. Aug. 27, 2018) • Deliberate copying • Defendant sent plaintiff’s product to manufacturer and told manufacturer to copy it • Pre-dated issuance of patent, but manufacturing continued thereafter • Referred to accused product as a “Nox knock off” • Failure to take remedial action • Duration of infringement • 3 years before litigation started

28. Example – No Enhancement • Nox Med. EHF v. Natus Neurology, Inc., 2018 U.S. Dist. LEXIS 145169 (D. Del. Aug. 27, 2018) • Deliberate copying • Defendant sent plaintiff’s product to manufacturer and told manufacturer to copy it • Pre-dated issuance of patent, but manufacturing continued thereafter • Referred to accused product as a “Nox knock off” • Failure to take remedial action • Duration of infringement • 3 years before litigation started • “Even though the evidence shows that Defendant deliberately copied Plaintiff’s product, it also shows that Defendant possessed a good faith belief that the [asserted patent] was invalid, a belief it had formed before the patent issued.”

29. Stryker on Remand • Federal Circuit • Re-affirmed jury’s finding of willfulness • Clear and convincing vs. preponderance • Remanded to district court re enhancement • District court • “[I]n its previous order finding enhanced damages were warranted, this Court noted that ‘because the Read factors so overwhelmingly favor enhancement, the real question is not whether enhancement is warranted, but how much enhancement is appropriate.’” • Deliberate copying • No evidence of investigation re infringement or invalidity • Not a close case • Infringement lasted more than a decade – even after verdict • Treble damages

30. Halo on Remand • Federal Circuit remanded to district court. • Pulse had waived ability to challenge subjective willfulness finding • Remand regarding enhancement of damages • District court declined to enhance damages • “Pulse is no pirate.” • Investigated whether products infringed upon learning of patent • Pursued non-frivolous defenses at trial • Had a basis for subjectively believing it did not infringe • Analysis by engineer • Two opinion letters – judge considered even though not before jury • “Even if I could not consider the contents of these opinions, I could consider the fact that Pulse obtained them and knew of them (because that, at least, was disclosed to Halo since the beginning of this case).”

31. What Aaarrrr We To Do Now?

32. What Aaarrrr We To Do Now? • No more “Seagate analysis”

33. What Aaarrrr We To Do Now? • No more “Seagate analysis” • View every lawsuit or demand as a potential risk for enhanced damages

34. What Aaarrrr We To Do Now? • No more “Seagate analysis” • View every lawsuit or demand as a potential risk for enhanced damages • Do not try to conceal infringing activities

35. What Aaarrrr We To Do Now? • No more “Seagate analysis” • View every lawsuit or demand as a potential risk for enhanced damages • Do not try to conceal infringing activities • Avoid unreasonable positions on the merits

36. What Aaarrrr We To Do Now? • No more “Seagate analysis” • View every lawsuit or demand as a potential risk for enhanced damages • Do not try to conceal infringing activities • Avoid unreasonable positions on the merits • Get an opinion letter?