Thursday, April 13, 2023

Is Recklessness the New Willfulness?

Last week the Federal Circuit handed down a precedential decision in Ironburg Inventions Ltd. v. Valve Corp., majority opinion by Judge Lourie (joined by Judge Stark), dissent by Judge Clevenger.  The patent in suit “is directed to a ‘hand held controller for a video game console” (p.3).  The jury found for the plaintiff and awarded damages in the amount of $4 million, which the district court declined to enhance.  Among the issues presented on appeal are whether two claim terms are indefinite (Judge Clevenger’s dissent addresses this issue, as to one of the terms); infringement; willful infringement; enhanced damages; and the scope of IPR estoppel.  The court affirms, for the most part, though it remands on a question of whether the defendant is estopped from asserting an invalidity argument on certain non-IPR-petitioned grounds.  I’ll focus on the willful infringement and damages issues.

The only evidence on willfulness, apparently, was that, after receiving a letter notifying the defendant of the plaintiff’s patent, the defendant’s general counsel did not forward to the relevant employees:

Valve . . . moved for judgment as a matter of law that any infringement was not willful or, in the alternative, for a new trial on willfulness. The district court erroneously struck this motion as moot, reasoning that because it was not going to exercise its discretion to enhance infringement damages, it did not matter whether the willfulness judgment remained or not. Willfulness and enhancement are separate issues . . .  and a finding of willful infringement may have collateral consequences even for a party not ordered to pay enhanced damages, such as reputational injuries and possible non-dischargeability of debts in bankruptcy, see In re Trantham, 304 B.R. 298, 305-06 (B.A.P. 6th Cir. 2004). Valve should have been provided a ruling on the merits of its motion.

Nevertheless, the district court’s error is harmless. . . . Valve does not seek remand for the district court to conduct any further review on the issue of willfulness; it seeks only reversal. Accordingly, both parties’ arguments are devoted entirely to the merits of the evidence for or against willfulness. In these circumstances, it is proper for us to follow the parties’ lead and assess whether there is substantial evidence of record to support the finding of willful infringement. . . . There is.

To prevail on its claim for willful infringement, Ironburg was required to prove, by a preponderance of the evidence, that Valve knew of the ’525 patent and then engaged in “deliberate or intentional infringement.” SRI Int’l, 14 F.4th at 1330. Cognizant of these required elements, the parties stipulated that Valve had notice of the patent – since Ironburg, “through its counsel, sent [Valve] a letter dated March 7, 2014, and provided [Valve] with notice of the ’525 patent” . . .  – and agreed to the court instructing the jury that it needed to determine whether Valve acted with “deliberate or reckless disregard of plaintiff’s patent rights” . . . . The jury heard Mr. Quackenbush’s admission that he never provided the ’525 patent to Valve’s designers, a point which the designers confirmed in their testimony, and learned that Valve did not attempt to design around the patent. . . . All of this provided the jury with substantial evidence to support a finding that Valve “recklessly” disregarded Ironburg’s patent rights and, therefore, willfully infringed (pp. 27-29).

The majority opinion reiterates the point about “reckless” behavior in the portion of the opinion concluding that the district court did not abuse its discretion in declining to award enhanced damages:

There is nothing unreasonable in the district court’s finding that this a “garden variety” case of infringement and that there was no evidence of copying, notwithstanding the jury’s finding of willfulness, which could have been based on evidence other than copying. . . . For example, consistent with the court’s instructions, the jury could have predicated its finding of willful infringement on “deliberate or reckless disregard of plaintiff’s patent rights” . . ., without necessarily finding that Valve copied Ironburg’s patent claims. The jury might, for instance, have concluded that Mr. Quackenbush’s decision to not notify Valve’s designers and engineers of Ironburg’s patent was reckless, and therefore that Valve’s infringement was willful. The jury could have found Valve did not copy, but was reckless in not trying to avoid copying, and, based on the court’s instructions, nevertheless still found Valve’s infringement was willful. . . .

Nor did the district court abuse its discretion in finding, as further reason not to enhance, that the only patent claim Ironburg alleged Valve infringed prior to suit was later cancelled by the PTAB in the IPR. . .  (pp. 37-38).

So . . . where exactly does this lead us?  Is “recklessness” now a substitute for “deliberate and intentional”/willful?  Did the court equate “recklessness” with “willful blindness”?  (For previous discussion on this blog, see here.)  Does the ultimate disposition of the enhanced damages issue suggest that, while recklessness gets you past the “willful infringement” hurdle, it’s not a sufficient basis for finding the infringement sufficiently egregious to merit an enhancement?  Or only that it’s not an abuse of discretion to find reckless infringement insufficiently egregious?   

Whatever the policy merits may be of (potentially) penalizing a defendant who deliberately ignores a letter notifying it of possible patent infringement, I worry that the language of this case is going to cause a lot of confusion going forward.


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