This document summarizes a presentation on evaluating willful patent infringement after the 2007 In re Seagate case. The presentation establishes a two-prong test for willful infringement, requiring objective recklessness and subjective knowledge of risk. It analyzes factors that could demonstrate objective recklessness or culpability, such as reliance on invalidity defenses, obtaining an opinion of counsel, or failure to design around. The role of preliminary injunctions and reexaminations in establishing willful infringement is also discussed.

1. Evaluating Willful Patent Infringement After In re Seagate Technology, LLC Prof. David C. Berry Auburn Hills Campus October 5, 2010

2. Welcome to Cooley Law School Auburn Hills Campus

4. 35 U.S.C.§ 284 provides for “up to three times” actual damages in certain cases.

5. But Patent Act does not specify circumstances warranting enhanced damages.

7. Enhanced damages permitted only in cases of willful infringement. Finisar Corp. (Fed. Cir. 2007).

8. Potential factor in weighing patentee’s right to equitable relief

10. Willfulness found in 55% of infringement trials, including 67% of jury trials. Id.

11. CAFC affirmed USDC willfulness findings in 94% of appeals. Id.

12. In pre-Seagate study, willfulness was “never” decided on summary judgment. Id.

14. Defendant adopted patented apparatus based on opinion from non-patent attorney, who advised to proceed based on “bald” and “conclusory” assessment of risk.

15. Held that upon notice of patent, potential infringer has “affirmative duty to exercise due care to determine whether or not he is infringing.”

16. Affirmative duty includes “duty to seek and obtain competent legal advice from counsel before the initiation of potential infringing activity.”

18. Although no infringement proceeding record, CAFC takes opportunity to “revisit” willfulness doctrine:

19. Overrules Underwater Devices standard.

20. Abandons “affirmative duty of care” to avoid infringement.

21. Willfulness finding requires at least “objective recklessness.”

22. Substitutes new two-prong test for objective recklessness.

24. Prong #1 – Objective Test “[T]o establish willful infringement, 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.” Seagate, at 1371. “The state of mind of the accused infringer is not relevant to this objective inquiry.” Id.

25. Prong #2 – “Subjective” Test “If this threshold objective standard is satisfied, the patentee must 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.” Seagate, at 1371.

26. Seagate’s Focus on Pre-litigation Conduct Ordinarily “willfulness will depend on an infringer's prelitigation conduct,” since “a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer's pre-filing conduct.” “[W]hen an accused infringer's post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement.”

28. Prosser describes “Reckless” conduct as:

29. Within a “penumbra” of “quasi-intent” and an “aggravated form of negligence, differing in quality rather than in degree from ordinary lack of care.”

31. “Objective Recklessness” – “[C]ivil law generally calls a person reckless who acts or (if the person has a duty to act) fails to act in the face of an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Farmer v. Brennan (U.S. 1994)

32. “Subjective Recklessness” -- This variant requires actual knowledge of a substantial risk which the defendant disregards. Ewolski v. City of Brunswick (6th Cir. 2002).

34. Willfulness is issue of fact for jury.

35. Willfulness must be determined based on “the totality of the circumstances.”

36. Translating willfulness into enhanced damages award is a discretionary function of the court.

37. No willfulness if infringement not “highly likely,” even if defendant acted with actual intent to infringe patent.

39. Reasonable person in the infringer’s industry?

40. Person having ordinary skill in the art? (i.e., § 112)

42. Only publicly-known facts (i.e., “intrinsic” facts)?

43. Only facts known by the infringer?

45. Potential Factors Affecting Willfulness Similarity of products Extent of licensing by patentee Laches/delay in asserting claim Question of liability decided by jury “Questionable business practices” by infringer Defendant established escrow (in license dispute) Infringer continued activity after actual notice of accusation Infringer took steps to avoid infringement Patentee loses motion for preliminary injunction Expert testimony Opinion (or lack of one) Quality of opinion Litigation misconduct Suit based on ANDA filing Patentee’s commercial success

46. How Do Factors Drive The Analysis?

47. i4i L.P. v. Microsoft Corp. (Fed. Cir. 2010) Jury ruled that Microsoft willfully infringed. On appeal, CAFC cited evidence supporting jury finding that Microsoft proceeded despite objectively high likelihood of infringement (Prong #1): Microsoft designed accused product to perform same process as i4i’s product. Microsoft took no remedial action (e.g., designing-around or ceasing infringing activity). Microsoft did not make “good faith” effort to avoid infringement (internal emails cited goal of making i4i’s product “obsolete”). CAFC then held, “This same evidence supports the jury’s finding on the subjective prong of Seagate.”

48. Fact: Accused product resulted from Defendant’s attempt to design-around patent.

49. Fact: Patentee’s infringement case at trial is based solely on Doctrine of Equivalents theory.

50. Fact: At time of accused acts, USPTO had ordered reexamination of patent based on “substantial question of patentability.”

51. Proposed Post-Seagate Willfulness Model Notice

52. Reckless Conduct Cannot Occur Before Infringer Has Actual Notice Of Patent Infringement not willful where accused infringer had no notice (actual or constructive) of some patents and “minimal” awareness of others. LG Display Co. (D. Del. 2010). No willful infringement where infringer merely “should have known” about patents. Concordance Corp. (D. Del. 2009). Also suggests that citation of patent in infringer’s own pending application not necessarily sufficient notice. But see SEB, S.A(Fed. Cir. 2009)(considering active inducement claim, defendant charged with knowledge of patent when it “deliberately ignored” risk of infringement).

53. Proposed Post-Seagate Willfulness Model Notice Risk

54. The “Risk” Test Based on information apparent at the time of the infringing act, would a person having ordinary skill in the art recognize that the act was highly likely to infringe a valid and enforceable patent?

56. Prosecution history

57. Accused product/process

58. Prior litigation (including claim construction)

59. Pertinent art known to the infringer

60. Other circumstances known to infringer that tend to support, or refute, basis for invalidity, unenforceability, or noninfringement

63. Brilliant Instrument (N.D. Cal. 2010): Infringer’s knowledge of invention may provide “context” for determining whether it acted despite high likelihood of infringement.

66. Effect of summary judgment practice?

68. The “Risk” Test – Substantial Defenses Some courts assess whether infringer has mounted a substantial defense regardless whether the defense arose pre- or post-litigation. See, e.g., Spine Solutions v. Medtronic (Fed. Cir. 2010)(obviousness defense raised a “substantial question[,]” and Medtronic “not objectively reckless in relying on this defense.”)

69. The “Risk” Test – Substantial Defenses Other Courts weigh defenses identified pre-litigation more heavily. Focus on pre-litigation conduct in first instance, but “also take into account whether infringer maintained plausible or credible liability defenses.” LG Display, Inc. (D. Del. 2010). Deemphasize defenses identified pre-litigation: “However, the Court understands the post-suit reasonableness of a parties' defenses to be only one factor among the totality of the circumstances . . . [A] contrary approach to willful infringement would negate the ability of a patentee to prove willful infringement in any hard fought and hotly contested patent litigation.” Power Integrations, Inc. (D. Del. 2010).

70. Krippelz v. Ford Motor Co. (N.D. Il. 2009) Suit for infringement of “puddle light” patent. Parties agreed to bench determination of willfulness. Court divided F’s conduct into 4 periods: From prior to filing of action to date of reexam request From F’s initial disclosure of invalidity contentions to BPAI ruling on reexam From BPAI ruling to F’s supp. invalidity disclosures From F’s suppl invalidity disclosures to trial. Court considered F’s conduct during each period, including whether its invalidity and noninfringement defenses were “objectively unreasonable” based on the circumstances in each time period.

75. Proposed Post-Seagate Willfulness Model Notice Risk Culpability

76. The “Culpability” Test Did Infringer’s proceed with either actual knowledge that infringement was highly likely to result from the accused acts, or under circumstances that would cause a reasonable person to recognize the high likelihood of infringement?

77. Contrasting “Risk” and “Culpability” Tests RISK = Probability That Defendant Infringes CULPABILITY = Reasonableness of Process Defendant Used In Deciding To Act Despite Risk

78. The “Culpability” Test What evidence is probative of Culpability? Reliance on competent opinion (quantifying risk as less than “high likelihood”) Response that conforms to commercial standards Obtaining opinion Redesigning product/process Withdrawing product from market Requesting reexamination Seeking license Actual good faith Other circumstances that reasonably suggest (or refute) that risk is not high or has been successfully mitigated.

79. Culpability Test – Role of Opinion Appears to be Dominant Factor in Prong #2 Seagate ruled that an opinion of counsel is not required, and is not “dispositive” on willfulness, but “it is crucial to the analysis.”

80. Culpability Test – Role of Opinion Is defendant’s failure to obtain an opinion evidence of culpability? “There is no affirmative obligation to obtain opinion of counsel.” Seagate, at 1370-71. USDC split on whether failure to obtain opinion is part of totality of circumstances Presidio Components (S.D. Cal. 2010)(no adverse inference, but still a factor) Spectralytics, Inc. (D.Minn. 2009)(granting motion in limineexcluding evidence); Anascape. Ltd. (E.D.Tex. 2008)(“the failure to obtain opinion of counsel is not a factor supporting willful infringement”).

81. Culpability Test – Commercial Standards Although expressly leaving “it to future cases to further develop the application” of new standard, Seagate endorses some role for commercial standards. Newman (concurring): “The standards of behavior by which a possible infringer evaluates adverse patents should be the standards of fair commerce, including reasonableness of the actions taken in the particular circumstances.” Majority: “We would expect, as suggested by Judge Newman, that the standards of commerce would be among the factors a court might consider.”

82. Culpability Test – Commercial Standards At least one court has cited commercial standards in willfulness analysis Goss Intern. America (N.D. Ill. 2010)(defendant’s “fair and reasonable commercial behavior,” including conducting investigation and obtaining opinion, applies to Prong #1). See Tyco Healthcare Group, LP (E.D. Tex. 2009)(denying motion to strike expert report opining, in part, on whether defendant’s patent clearance policy was “inconsistent with a commercially reasonable standard of care”).

84. Obtaining opinions

87. Courses on Auburn Hills, Michigan Campus

88. Courses available via DE in Lansing and Grand Rapids

89. Many courses available On-Line

90. www.cooley.edu/llm