Enhanced Damages: Willful Infringement, "Should Have Known," Willful Blindness

As reported by Dennis Crouch recently on Patently-O, on October 2 the Supreme Court denied a petition for a writ of certiorari in Bombardier Recreational Producers Inc. v. Arctic Cat Inc., in which the question presented was

Whether a finding of willful infringement based on In re Seagate’s “should have been known” negligence standard violates the requirement that subjective willfulness must be “intentional or knowing,” as set forth by the Supreme Court in Halo Electronics Inc. v. Pulse Electronics Inc.

For previous discussion of the Federal Circuit opinion on this blog, see here; see also the Scotus Blog webpage for this case, here.  As Professor Crouch also noted, however, another petition raising essentially the same issue, plus one more, was filed in Corning Optical Communications v. PPC Broadband.  Here are the questions presented:

1. In determining whether to enhance damages for “egregious” infringement under §284, must courts consider all relevant circumstances, including evidence that the defendant’s position was objectively reasonable?

2. Does a finding of willful infringement based on a “should have known” standard violate the requirement that willfulness be “intentional or knowing”? 

It will be interesting to see if the Supreme Court decides to pick this one up.  On a related note, Professor Dmitry Karshtedt recently called to my attention an Order Denying Defendant's Motions to Dismiss in Corephotonics, Ltd. v. Apple, Inc., in which Judge Lucy Koh concludes that willful blindness is sufficient to satisfy the "intentional and knowing" standard:

. . . to state a claim for willful infringement, Corephotonics must allege that Apple knew of Corephotonics’ patents and then acted or continued to act even though it knew that it was infringing Corephotonics’ patents or that the risk of such infringement was obvious. Arctic Cat, 876 F.3d at 1371. . . .

. . . it has been well-established both before and after the Halo decision that knowledge of a pending patent application does not confer knowledge of an existing patent. . . .

However, Corephotonics also alleges that in 2016, Apple cited to one of Corephotonics’ issued patents. . . .

Moreover, Corephotonics also alleges in its pleadings that Apple was “willfully blind” to a high risk that it was infringing Corephotonics’ patents. . . . In Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011), the United States Supreme Court concluded that the doctrine of willful blindness applied to the requirement, in the induced infringement context, that a defendant know its induced acts constitute patent infringement. Id. at 768–69 & n.9. The Global-Tech Court stated that “a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” Id. at 769.

Apple contends that allowing willful infringement claims based on a defendant’s willful blindness contradicts the Federal Circuit’s statement that “[k]nowledge of the patent alleged to be willfully infringed continues to be a prerequisite for enhanced damages.” WBIP, 829 F.3d at 1341. . . . However, the United States Supreme Court made clear in Global-Tech that a finding of willful blindness is, in effect, a finding of knowledge. 563 U.S. at 770 (discussing how the willful blindness doctrine “permits a finding of knowledge”). Post-Halo, courts have recognized that allegations of willful blindness can satisfy the knowledge requirement for willful infringement. See Straight Path IP Grp., Inc. v. Apple Inc., 2017 WL 3967864, at *4 (N.D. Cal. Sept. 9, 2017) (denying motion for judgment on the pleadings on an enhanced damages claim predicated on plaintiff’s willful blindness allegation). The Court therefore considers Corephotonics’ willful blindness claims.

Here, Corephotonics contends that its allegations that Apple knew about Corephotonics’ technology, knew about Corephotonics’ patent applications, and then instructed Corephotonics not to share Corephotonics’ issued patents with Apple raise the inference that Apple “believed that there was a high probability that it was infringing the Asserted Patents, and that Apple took deliberate actions to avoid learning of that fact.” Opp. at 12. Specifically, Corephotonics alleges that after Corephotonics offered to share its patents with Apple’s technical and business personnel, Apple sent Corephotonics an email in October 2016 stating, “Please do not send any patents to us until further notice. Legal counsel might reach out with any questions.” FAC ¶ 35. At that time, Corephotonics’ ’291 and ’032 patents had issued. FAC ¶¶ 3, 5.

The Court agrees with Corephotonics that the allegations in the FAC and the ’18 Complaint raise the inference that Apple was at least willfully blind to a high risk that it was infringing Corephotonics’ patents. . . .

I'm inclined to think Judge Koh is right.  Whether courts will ever go farther, as Professor Karshtedt has urged, and conclude that a reckless failure to search for potentially relevant patents in advance of product launch is relevant to willfulness might be a tougher sell . . . .