Wednesday, April 29, 2015

Federal Circuit Affirms Award of Provisional Damages, Reverses Finding of Willfulness

The case is Innovention Toys, LLC v. MGA Entertainment, Inc., available here.  The opinion, authored by Judge Taranto and joined by Judges Lourie and Plager, is nonprecedential but interesting nonetheless in part because there simply aren't many opinions addressing provisional damages (damages for the post-publication, pre-issuance unauthorized use of a patented invention).  The patent in suit is for a chess-like board game using laser beams, and methods for playing the game.  Innovention exhibited a protoype of the game (under the name "Deflexion") at a trade fair in 2005 and filed a patent application in February 2006.  The application was published in October 2006, after which Innovention made certain amendments to the claims.  The patent issued in September 2007.   Late in 2006, however, Innovention learned of an MGA game called "Laser Battle," and sent MGA a notice letter with a copy of the published application.  MGA did not respond, and after the patent issued Innovention filed suit.  A jury concluded that the invention was nonobvious and infringed, and awarded  $1,405,708 in lost profits damages and $167,455 in reasonable royalties for the pre-issuance period.  The district court then trebled the lost profits damages for willful infringement, and the defendants appealed.  On appeal, the Federal Circuit affirms the nonobviousness determination and then moves on to the damages questions.

Like many countries, the U.S. permits awards of reasonable royalties for the post-publication, pre-issuance use of a patented invention, subject to certain conditions.  In relevant part, section 154(d) of the U.S., Patent Act reads as follows:
(1) IN GENERAL.— In addition to other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122(b), or in the case of an international application filed under the treaty defined in section 351(a) designating the United States under Article 21(2)(a) of such treaty, the date of publication of the application, and ending on the date the patent is issued—
(A) (i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States; or
(ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and 
(B) had actual notice of the published patent application and, in a case in which the right arising under this paragraph is based upon an international application designating the United States that is published in a language other than English, had a translation of the international application into the English language.
(2) RIGHT BASED ON SUBSTANTIALLY IDENTICAL INVENTIONS.— The right under paragraph (1) to obtain a reasonable royalty shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application. . . .
The issue on appeal was whether the invention as claimed in the patent was "substantially identical" to the invention as  claimed in the published application. Affirming the district court, the Court of Appeals concluded that it was, stating (pp. 10-11):
“[C]laims are ‘identical’ to their original counterparts if they are ‘without substantive change.’” Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1346 (Fed. Cir. 1998) (quoting Seattle Box Co. v. Indus. Crating & Packing, 731 F.2d 818, 827–28 (Fed. Cir. 1984)) (interpreting “substantially identical” in the reissue context, 35 U.S.C. § 252). “[I]n determining whether substantive changes have been made, we must discern whether the scope of the claims are identical, not merely whether different words are used.” Id. We review de novo the ultimate legal conclusion that claims are identical in scope, id., and the parties have not suggested that there are any material underlying factual findings here, see Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 835 (2015).
MGA primarily argues against such so-called “provisional rights” damages on the ground that, because “no published [application] claim required movable key pieces while all of the [issued] patent claims do, the published and issued claims as a matter of law differ in scope.” . . . We reject that argument. For example, claim 31 of the published application required players to take turns “to move playing pieces.” . . . The movability requirement in no way excludes “key” game pieces (playing pieces): claim 31 itself refers to the piece to be illuminated as “a key playing piece,” J.A. 5026; and the written description makes express that (the to-be-illuminated) game piece 30 “is the key game piece” and describes “the moves that are available to a particular game piece 30 . . . .” J.A. 5021–22. We agree with the district court that the movability of key pieces was already present in the claims of the published application.
MGA argues in the alternative that some of the claims were subject to broadening amendments through a change of the transitional phrase “consisting of” to “comprising.” . . . But those amendments do not stand in the way of pre-issuance damages in this case. At least some of the claims found to infringe here retain their original scope, and MGA has not contended that any of the infringing acts here infringed only the broadened claims. See Aqua-Aerobic Sys., Inc. v. Richards of Rockford, Inc., 835 F.2d 871, at *1 (Fed. Cir. 1987) (unpublished) (“[T]he number of valid claims infringed here has no bearing on damages.”). That is sufficient reason to reject MGA’s contention. We need not further explore the effect of the transitional-language change in particular claims.
On willfulness, however, the court reversed, finding that the defendants' nonobviousness defense was objectively reasonable.  Perhaps hedging its bet that the standard of review for this aspect of willfulness (which currently is de novo) might change (see previous posts on this issue here, here and  here), the court specifically states that "regardless of the standard of review, we conclude that the district court erred in deeming MGA’s obviousness defense objectively unreasonable" (p.12).  The court therefore reversed the damages enhancement and the award of attorneys' fees, though it remanded for consideration of whether attorneys' fees might be appropriate "without reliance on the new-reversed willfulness finding" (p.14). 

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