Source: https://patentlyo.com/patent/2014/10/sorting-sections-285.html
Timestamp: 2019-11-19 15:35:53
Document Index: 472349686

Matched Legal Cases: ['§ 284', '§ 284', '§ 285', '§ 284', '§ 285', '§ 284', '§ 284', '§ 284']

Sorting Out Sections 284 and 285 | Patently-O
October 22, 2014 PatentDamages, Federal Circuit En Banc, obviousnessJason Rantanen
This opinions contains two important parts: a discussion of 271(a) in the context of multi-national transactions and Judge O’Malley’s concurrence on the issue of willful infringement. I’ll write more about the 271(a) issue in a separate post, but for now I wanted to focus on the points Judge O’Malley raises.
In this case, Halo accused Pulse of willfully infringing its patent, thus paving the way for enhanced damages under 35 U.S.C. § 284. That statute reads in relevant part:
Under longstanding Supreme Court precedent, enhancement of damages under this provision requires either willful or bad-faith infringement.
In countering the infringement claim, Pulse argued that the asserted patent was obvious. Ultimately, the jury rejected Pulse’s argument and found that the “it was highly probably that Pulse’s infringement was willful.” Slip Op. at 7. However, both the district judge and the Federal Circuit panel concluded that Pulse’s obviousness defense was not objectively unreasonable, thus precluding a finding of willfulness under In re Seagate‘s two-prong approach (which contains both objective and subjective components).
While concurring as to the panel outcome, Judge O’Malley (joined by Judge Hughes) wrote separately to issue a public call to “the full court to reevaluate our willfuness jurisprudence in light of the Supreme Court’s decisions in Highmark and Octane Fitness.
Judge O’Malley’s concurrence first notes the linking of the standards for exceptional case and willful infringement. Under Federal Circuit precedent, the test for willful infringement under § 284 parallels that for exceptional case determinations under § 285. The court has stated this explicitly: “The objective baselessness standard for enhanced damages and attorney’s fees against a non-prevailing plaintiff under Brooks Furniture is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for § 284 willful infringement actions under [Seagate].” iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1377 (Fed. Cir. 2011).
This linkage leads Judge O’Malley to three observations:
1) Both the test for willful infringement and the test for exceptional case determinations were based on the Federal Circuit’s interpretation of Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993). But, in Octane Fitness, the Supreme Court rejected the Federal Circuit’s interpretation of PRE in the exceptional case determination context. If the two tests are truly in parallel, then the Federal Circuit should revisit the test for willful infringement.
2) The evidentiary standard for willful infringement should also be revisited. “In Octane Fitness, the Supreme Court also rejected the requirement that patent litigants establish their entitlement to attorneys’ fees under § 285 by ‘clear and convincing evidence’. Id. at 1758. As we used to do for attorneys’ fees, we currently require patentees to prove willfulness by clear and convincing evidence. See Seagate, 497 F.3d at 1371. As the Supreme Court explained in Octane Fitness, however, the ordinary rule in civil cases, and specifically patent infringement cases, is proof by a preponderance of the evidence.” Concurrence at 4.
3) The Supreme Court also rejected a de novo standard of review for exceptional case determinations in Highmark. This is important because, although Judge O’Malley doesn’t directly state it, the “objective” prong of willful infringement is currently treated as a question of law, meaning that it is reviewed under a de novo standard. If the two standards are truly parallel, this is inconsistent with Highmark.
Finally, under both §§ 284 and 285, “the court” is the entity that makes the determination. However, the Federal Circuit’s caselaw currently sends some issues of willful infringement to a jury. In Judge O’Malley’s view, whether this is actually correct as a statutory matter should also be addressed by the court en banc.
I’m largely in agreement with Judge O’Malley. Like the judge, I see a tremendous tension between the existing willful infringement caselaw and Octane Fitness/Highmark that flows from the treatment of §§ 284 and 285 as being in parallel.
I also think the history here is important – and my sense is that much of the mucky precedent in this area actually comes from the just the last decade. One important piece of context to keep in mind is the totality of the circumstances analysis that comes after the threshold determination. Attorney’s fees and enhanced damages are not a binary question, but rather a multi-step inquiry where the initial determination is just the first part.
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14 thoughts on “Sorting Out Sections 284 and 285”
O’Malley’s concurrence is the majority opinion — two of three judges joining makes it the majority. A party can now argue that the Federal Circuit has addressed the intervening Supreme Court decisions and has adjusted the Federal Circuit’s precedent.
Also, if two of the three judges want the full court to hear the case then why did the majority (remember the two of the three votes) fail to refer the case to the entire court as provided in the Court’s procedural rules.
Joe, from her opinion:
“I agree with the majority’s thoughtful conclusion that
we should affirm all aspects of the district court’s decision
in this case. I write separately because, although we are
bound by our precedent at the panel stage, I believe it is
time for the full court to reevaluate our standard for the
imposition of enhanced damages in light of the Supreme
Court’s recent decisions in Highmark Inc. v. Allcare
Health Management Systems, Inc., 134 S. Ct. 1744 (2014)
and Octane Fitness,…”
However, consider Troy v. Samson, No. 2013-1565 (Fed. Cir. July 11, 2014), that held that subsequent controlling authority can overrule the Federal Circuit if its reasoning is inconsistent with the reasoning of the Federal Circuit:
“[T]he issues decided by the higher court need not be identical to be controlling. Rather, the relevant court of last resort must have undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable.” Miller, 335 F.3d at 900. Indeed, lower courts are “bound not only by the holdings of higher courts’ decisions but also by their `mode of analysis.'” Id. (citing Antonin Scalia, The Rule of Law as the Law of Rules, 56 U. Chi. L. Rev. 1175, 1177 (1989)); see also United States v. Lindsey, 634 F.3d 541, 550 (9th Cir. 2011)
Troy cites Miller, and en banc 9th Circuit case for its holding.
It appears that this panel is not following controlling Federal Circuit authority — Troy, and is further not following the recent Supreme Court cases.
A comment from a patent attorney friend who spotted this issue well before the concurring judges published on it here:
“By rejecting the Brooks Furniture two pronged test of “subjective bad faith” AND “objective baselessness” for assessing 35 USC 285 enhanced damages in favor of a “totality of circumstances” test (in Octane Fitness), has the SCOTUS sent the implied message that the full Federal Circuit should now (via Halo Electronics) seriously consider mandating the “totality of circumstances” test for determining whether enhanced damages are to be granted under 35 USC 284? And, should deference be provided the lower courts in factual matters relating to the granting of 284 enhanced damages, as now mandated by Highmark for 285 enhanced damages decisions?”
I question the “long standing Supreme Court precedent” requires that infringement be willful? [i]Seagate[/i] cites [i]Aro Mfg[/i], which was pure dicta and the Court made the assertion without any citation. Seagate also cited [i]Seymour v. McCormick[/i] (1854), but that case does not say that willful infringement is required, only that the entirety of the circumstances should be considered. And [i]Dowling[/i] didn’t even handle patents, much less discuss § 284.
Historically, the enhanced damages have been used to “more fully” compensate patentees.
oops, I should use “<" instead of brackets for italics.
Why would a court more fully compensate the patent owner?
Because it was extremely difficult to prove damages in the 19th century. For example, in Peek v. Frame, 19 Fed. Cas. 97 (S.D.N.Y. 1871), the judge increased damages to take into account price erosion.
When I say “difficult to prove”, I mean that it was hard to get any recovery because any reward had to proven with a large amount of certainty, or nominal damages would be awarded.
J, is in that covered today by the requirement that no less than a reasonable royalty be awarded?
Some think that reasonable royalties are too high. Others think that reasonable royalties are too low.
Who the [French word] knows? Let experts plead and argue whatever they like, let the jury decide. If it is too low, the district court has the power to increase it up to three times (keeping in mind that equity may or may not fully compensate the plaintiff). Patent cases are so fact dependent.
Yes, if being able to prove willful infringement by a preponderance of the evidence [to get doubling or tripling of infringement damages] does get adopted by a majority of another Fed. Cir. panel, that could indeed be of serious concern to some infringement suit defendants.
But patent owner plaintiffs will argue that this is a valid tradeoff for usually not being able to get injunctions since the Sup. Ct. eBay decision unless they are direct competitors. [I.e., making willful infringement highly un-lucrative for some defendants, albeit far more lucrative for some NPEs.]
Historically, speculators were never entitled to enhanced damages.
Yikes! The infringer’s bar is going to have a heart attack.