Federal Circuit Reverses Injunction, Reverses and Remands on Willfulness

I resume blogging this week with a post about the Federal Circuit’s December 17 precedential decision in Wonderland Switzerland AG v. Evenflo Co., majority opinion by Chief Judge Moore joined by Judge Prost, with a separate opinion by Judge Reyna concurring in part and dissenting in part.  (Still to come are my promised posts on Acer, Inc. et al. v. Nokia Technologies Oy, [2025] WHC 3331 (Pat.) (Eng.) and related developments in the UPC, as well as the UPC COA’s damages decision in Bhagat Textile Engineers v. Oerlikon Textile GmbH & Co KG.  Meanwhile, I am heading to the Association of American Law School’s Annual Meeting in New Orleans tomorrow, and will be speaking there on Thursday on the remedy of destruction, which was the subject of a paper I coauthored with Professor Chung-Lun Shen in 2024; and I eagerly await publication of my book Remedies in IP Law, which should be out within the next week.)  

In Wonderland, the plaintiff filed suit for the infringement of two patents (ʼ043 and ʼ951) relating to child car seats.  The jury found that the accused products (referred to as the 3-in-1 and 4-in-1 seats) infringed; the Federal Circuit, in portions of the opinion I will omit here, reverses the finding that the 4-in-1 seats infringed ʼ043, but otherwise affirms on liability.  The court nevertheless concludes that the district court abused its discretion in granting a permanent injunction as to both patents.  As for ʼ951, the court concludes that the district court abused its discretion “because Wonderland expressly declined to request [injunctive] relief” (p.13).  Moreover, this was not harmless error, because “the injunction could affect Evenflo’s release of other products, which may not necessarily infringe the ʼ043 patent”—and because it was an abuse of discretion to enjoin the infringement of ʼ951 (p.13).  With regard to ʼ951, the district court erred in relying “solely on speculative and conclusory evidence that Wonderland suffered, and would continue to suffer, irreparable harm or injury that could not be compensated with monetary damages” (p.14).  More specifically:

. . .  the district court did not point to any non-speculative or non-conclusory evidence establishing Wonderland’s business partner, Graco Children’s Products Inc. (Graco), lost sales or market share of car seat products to Evenflo as opposed to the large number of other competitors in the market. . . . for non-car seat products, the district court improperly relied on speculative and conclusory testimony from Wonderland’s managing director, Renee Wang, that a lost car seat sale “naturally leads” to the loss of market share across other products. . . . This testimony was concededly based on “no[thing] more than [the notion that] the parents will buy other products under the same brand name.” . . . Without providing any evidence of such consumer behavior, Ms. Wang merely speculated that after buying a car seat, a parent “may” also choose to buy other products under the same brand. . . . Such speculative testimony is not sufficient to establish irreparable harm. . . .

 

With respect to reputational loss, the district court cited no record evidence to support its findings that “[t]he similarity between Graco’s products and Evenflo’s Accused Products has caused Graco’s products to lose some of their ‘distinctiveness and market allure’ and has also harmed Graco’s reputation as an innovator in the marketplace.” . . . Nor did the district court cite any evidence to support its finding that such reputational factors “cause Wonderland irreparable harm because of Graco and Wonderland’s close working relationship and exclusive supplier arrangement.” . . . Similarly, the district court failed to identify any evidence from the trial record supporting its assertions that “an average customer . . . [would] assume that Graco’s products do not contain unique or innovative technologies,” that such reputational harm would flow to Wonderland, or that Wonderland would suffer reputational harm because it “may be seen as failing to enforce its intellectual property rights.” . . (pp. 14-15).

The preceding analysis would seem to demonstrate the importance of eBay’s allocation to the plaintiff of the burden of proof on the eBay factors, in contrast with practice in other common-law countries where it would be the defendant’s burden to come forward with evidence showing why the court should deny permanent injunctive relief.

On the issue of willfulness, the district court invoked Federal Rule of Evidence 403 to exclude an email chain, in which “Evenflo’s affiliated corporation, Goodbbay Child Products Co., Ltd. . . . notified Evenlo employee that one of the accused products might fall with the scope of claim 1 of the ʼ043 patent and asked how to ‘avoided the claims of the patent’” (p.16), on the ground that the probative value of this evidence was substantially outweighed by the danger of unfair prejudice and confusion.  The majority concludes that this too was an abuse of discretion because portions of the email chain were highly probative of willfulness, and “not merely cumulative in view of Evenflo’s stipulation to awareness of the ʼ043 patent” (p.19).  Moreover, the majority concludes that the district court could have managed the risks of unfair prejudice and confusion by limiting instructions or redaction; the text of the email did not raise any privilege or hearsay concerns; and the error was not harmless.  So this issue is remanded for a new trial.  Judge Reyna dissents on this issue only, in view of the substantial deference normally accorded to Rule 403 rulings; in his view, the trial judge’s decision was neither irrational nor arbitrary.

Judge Connolly on Willful Infringement

U.S. District Court Judge Colm Connolly’s October 14 opinion in Inari Medical, Inc. v. Inquis Medical, Inc., has received attention on both Bloomberg Law and Law360, and I thought I should say a few words about it myself.  (For those who are not familiar with him, Judge Connolly sits in the District of Delaware.  He is probably best known in patent circles for his standing orders, requiring parties to provide information concerning litigation financing arrangements.  According to the Law360 article, moreover, he is “the nation’s third-busiest judge for patent litigation.”)  His decision in Inari addresses two questions that have divided the federal district courts, and that the Federal Circuit has yet to take up.  Both involve what I have sometimes referred to as the “timing” question.

“The first issue is whether the complaint filed in a lawsuit can provide the required knowledge for claims asserted in the lawsuit of post-suit indirect infringement and demands for willfulness-based enhanced damages”; or whether, instead, such knowledge must exist prior to suit.  As Judge Connolly notes, some judges (including Judge Connolly himself in at least one previous decision, as well as Judge Alsup in the Sonos v. Google litigation) have held that knowledge must precede the filing of the lawsuit.  Others, including the District of Delaware’s Magistrate Judge Christopher Burke, have held that, while knowledge must exist prior to the filing of the lawsuit, judges should permit the patentee to amend its suit to allege willful infringement if the infringement continues after service.  And some—including Federal Circuit Judge Bryson, sitting by designation in the District of Delaware, and Judge Alan Albright) don’t even require an amendment.  On this issue, Judge Connolly sticks to his guns, reasoning that the plaintiff could file a second suit if the defendant continues infringing after service of the complaint.  This would be preferable, in his view, because it “avoid[s] thorny privilege and attorney work product issues that arise when a defendant relies on the opinions of its trial counsel to form its own opinion about whether it infringes the asserted patents”; in addition, “[t]he results of the first suit and estoppel doctrines would likely reduce substantially the scope of the second suit.”  Judge Connolly also isn’t persuaded by the plaintiff’s argument that his ruling is undesirable, insofar as it might induce more plaintiffs to send pre-suit notices of infringement, which in turn will enable accused infringers to file actions for declaratory judgments in the latter’s preferred venues; in the court’s view, this consequence appears neither unfair nor unwise.

“The second issue is whether a district court has the authority to address in the context of resolving a Rule 12(b)(6) motion a request by the defendant to preclude the plaintiff from pursuing enhanced damages under § 284 based on the plaintiff’s failure to plead adequately a claim of willful infringement.”  On this issue, Judge Connolly had previously held that the answer was yes, but he has now reconsidered, writing that “Regardless of whether a demand for enhanced damages under § 284 is based on willful conduct or on behavior that is wanton, malicious, deliberate, consciously wrongful, flagrant, done in bad faith, or characteristic of a pirate, such a demand is not a claim that can be dismissed pursuant to Rule 12(b)(6),” because enhanced damages are a remedy, not a claim upon which relief may be granted.  “Thus, assuming the complaint sufficiently alleges a claim of patent infringement, a plaintiff preserves its rights to seek enhanced damages for that infringement under § 284 with a simple demand for such damages in the complaint.”  As a practical matter, this would mean that if the plaintiff doesn’t have the factual basis for alleging pre-suit willful (or whatever) infringement in the complaint, but gains such information through discovery, it can elicit those facts at trial and request a finding of willfulness.  (It would have to amend its complaint to assert a claim for induced infringement, however, if it acquires facts it didn’t previously have that would support that type of claim going forward.)  Given the first holding above, however, in a given lawsuit willfulness cannot be based on the knowledge of the patent that the defendant gained solely from the filing of the complaint (though the latter might enable the plaintiff to file a second lawsuit seeking enhanced damages for post-complaint continuation of infringing conduct). The Bloomberg article suggests that this second holding could make it more difficult for parties to settle, since it increases the potential range of damages that could be awarded at trial, but also notes that some questions of potential entitlement to enhanced damages might be resolved post-discovery on a motion for summary judgment even if not on a motion to dismiss.    

Based on these holdings, the judge granted the defendant’s motion to dismiss a claim of induced infringement without prejudice and with leave to amend, and denied the motion to dismiss the “claim” for enhanced damages. 

Federal Circuit Reverses Damages Award on Food Processing Machines

The case is Provisur Technologies, Inc. v. Weber, Inc., precedential opinion by Chief Judge Moore, joined by Judge Taranto and by District Judge Claire Cecchi, sitting by designation.  There were three patents in suit, all relating to food processing machinery.  The jury returned a verdict in favor of the patentee on all three and awarded damages for each, separately, in the $3-$4 million range.  The Court of Appeals holds that one of the three patents (’936) was noninfringed as a matter of law, so I will skip over that one and focus on the other two, ’436 and ’812.  The jury returned a verdict of willful infringement as to four claims of ’436 and three claims of ’812.  It awarded $3,747,046.50 for each of these, which the district court doubled.  The Court of Appeals reverses, finding that the evidence was insufficient to support the finding of willfulness, and that the damages award violated the entire market value rule (EMVR).  In regard to the latter, the court doubles down on the smallest-salable patent-practicing unit (SSPPU) rule.

            On willfulness, the court holds that the plaintiff introduced testimony in violation of 35 U.S.C. § 298, on the defendant’s failure to obtain an opinion of counsel:

Section 298 states:

 

The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent.

 

Patentees are prohibited from using the accused infringer’s failure to obtain the advice of counsel as an element of proof that the accused infringer willfully infringed. Prior to trial, Weber moved to exclude testimony from Provisur’s expert, Mr. John White, that Provisur asserted willful infringement based in part on Weber’s failure to present evidence of advice of counsel. J.A. 6. The district court granted Weber’s motion to exclude Mr. White’s testimony on Weber’s alleged failure to obtain advice of counsel. J.A. 8.

 

During trial, however, Mr. White testified about Weber’s failure to consult a third party to evaluate the allegedly infringed patents. . . . Specifically, Mr. White testified that Weber did not provide any evidence that it performed a number of evaluation steps, such as a freedom to operate analysis. In his expert report, Mr. White explained a freedom to operate analysis is “typically reviewed by a qualified patent attorney” which may include “‘opinions’ as to which patents may be problematic.” J.A. 9040–41 ¶ 57. Mr. White’s testimony referenced other potentially legal services that Weber allegedly failed to seek.

 

Mr. White’s testimony violated 35 U.S.C. § 298. Provisur argues Mr. White’s testimony is about industry standards for intellectual property management. . . . But Mr. White, an attorney, did not distinguish between legal and non-legal services when testifying about consulting a third party. Provisur cannot circumvent § 298 by substituting advice from a third party for advice of counsel. The district court thus erred in admitting the portion of Mr. White’s testimony related to seeking advice from a third party.

 

The remainder of Mr. White’s testimony is admissible, but insufficient as a matter of law to establish willfulness. Mr. White testified about Weber’s patent matrix that tracked patents in related food processing technologies, including the asserted patents. . . . He explained software and Weber personnel provided a rating out of 3 for each patent in the matrix. . . . These ratings were described as indicating whether the patent was relevant for purposes of further evaluation. . . . For the asserted patents, Mr. White testified each one was provided a high score of 3. . . .

 

At most, the patent matrix demonstrates Weber’s knowledge of the asserted patents and their relevance to Weber’s business in general. The patent matrix and corresponding testimony do not provide any level of specificity as to the relevance of the tracked patents for any of Weber’s products. There is no dispute Weber knew of the asserted patents. . . . The issue here is whether Weber knew of its alleged infringement and had a specific intent to infringe. . . . There is no evidence Weber knew of its alleged infringement. We have held “knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness.” Bayer Healthcare LLC v. Baxalta Inc., 989 F.3d 964, 988 (Fed. Cir. 2021). Provisur’s evidence as a matter of law is not enough to establish deliberate or intentional infringement. Id. The district court should have granted Weber’s motion for judgment as a matter of law. . . (pp. 11-13).

On the EMVR issue, the court notes that the patented features of the defendant’s machines “are parts of a larger component, either the slicer or automatic component, which themselves are each just one component of an entire multicomponent slicing line . . .” (p.13).  The court concludes that the district court should have granted a new trial on damages:

“A patentee is only entitled to a reasonable royalty attributable to the infringing features.” Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 904 F.3d 965, 977 (Fed. Cir. 2018). We have required any royalties be apportioned between infringing and noninfringing features of the accused product. Id. An apportionment analysis generally requires determining a royalty base to which a royalty rate will be applied. Id. For elements of multicomponent products accused of infringement, the royalty base should be based on the smallest salable patent-practicing unit. LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 67 (Fed. Cir. 2012). A necessary condition for using “an entire multi-component product” as the base is that the patentee proves the patented feature is the basis for customer demand. Id.; see also Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1336 (Fed. Cir. 2009).

 

Provisur’s use of the entire market value rule was impermissible because it failed to present sufficient evidence demonstrating the patented features drove the demand for the entire slicing line. Provisur’s damages expert, Ms. Julie Davis, used the value of the entire slicing line as the royalty base and applied a royalty rate to calculate the reasonable royalty damages. . . . Ms. Davis relied on Dr. Vorst’s testimony to support using the entire market value as the royalty base. . . . Dr. Vorst testified that the patented features drive the demand or substantially create the value of Weber’s accused products. . . . But Dr. Vorst’s testimony was conclusory and did not provide any evidence, e.g., evidence from customers, to show the patented features drove the demand for the entire slicing line. . . (pp. 14-15).

In short, “[t]he district court should have granted a new trial on damages because there is no evidence, apart from conclusory expert testimony, that supports invoking the entire market value rule” (p.16).

Postscript:  for further commentary, see posts on Patently-O, IPWatchdog, Law360, and Bloomberg. 

Surprise! Licensor’s Mid-Negotiation Transfer of Patents May Support Defense to Willful Infringement, but Not Breach-of-FRAND Counterclaim

In Law360 earlier this week, Dani Kass published an article titled Samsung DodgesWillfulness Claims Despite FRAND Setback, discussing a January 8, 2024 opinion by Judge Rodney Gilstrap (E.D. Tex.).  The opinion in interesting insofar as it sheds light on what would appear to be a privateering agreement between ZTE, the original owner of the patents in suit (all of which are declared SEPs that are subject, under the ETSI IPR Policy, to a FRAND commitment), and G+, its assignee.  As Erik Hovenkamp and I have previously noted, “’[p]rivateering’ is the term used when a practicing entity assigns patents to a nonpracticing third party who then seeks to enforce the patents. The third-party ‘privateer’ then distributes a portion of the resulting proceeds back to the assignor, in accordance with the terms of the assignment. . . .  The term ‘patent privateering’ was coined by Tom Ewing, who first drew an analogy between the practice described . . . above and the practice (long since abolished) under which sovereign states would authorize merchant vessels to plunder enemy vessels during time of war.”  According to the opinion, “[b]y its own admission, G+ was created in coordination with ZTE to license and enforce ZTE’s patents,” and “ZTE retains a 20% net royalty on all proceeds generated from G+’s licensing of the Asserted Patents” (pp. 2-3).  In 2019, ZTE and Samsung began negotiating a patent license, but the agreement was not completed until 2021.  Meanwhile, in October 2020 ZTE had transferred the patents in suit in this action to G+.  (According to an earlier opinion in this case, available on Westlaw, there are five patents in suit.)  Apparently Samsung thought that these patents were among the patents ZTE had licensed to Samsung, but they weren’t, and ZTE didn’t expressly inform Samsung of the transfer to G+ (though as the court states, "as a party to the ultimate ZTE-Samsung license, Samsung is assumed to have known the full scope and content of that license" (p.3).  G+ is now suing for, inter alia, patent infringement, and Samsung has counterclaimed for breach of contract (the FRAND commitment).

The upshot of the decision is that ZTE's alleged breach of its FRAND commitment is not attributable to G+, but that ZTE's alleged conduct may be relevant to defeating G+ claim of willful infringement.  From the opinion:

“In its briefing, Samsung argues that ZTE’s conduct runs with the Patents-in-Suit and is imputable to G+ because patents are property, and encumbrances run with the property. . . .

“None of [the] cases [cited by Samsung] establish why ZTE’s actions rise to the level of and constitute an encumbrance that burdens the Patents-in-Suit for purposes of a breach of FRAND. These cases, at most, establish that a predecessor’s actions may, in equity, prevent enforcement of the patents. They say nothing about why a predecessor’s actions would burden patents for all purposes, including for holding a successor-in-interest liable for a breach of contract. Neither party disputes and the Court finds that the FRAND commitment sounds in contract and is a legal obligation, not equitable in nature. . . .

“For all of the foregoing reasons, ZTE’s conduct may not be attributed to G+ for breach of FRAND purposes. . . .

“However, this holding does not mean that the facts identified by Samsung are irrelevant and may not be presented to the jury in support of other issues the jury will be asked to decide. . . .

“Indeed, the Court finds the facts identified by Samsung are relevant and probative as part of Samsung’s defense to G+’s charge of willful infringement. If Samsung reasonably believed that it was receiving a license to the Patents-in-Suit as part of the July 9, 2021 license from ZTE, only to later be surprised that G+ is asking for a license to the same patents, such could counter, to some degree, G+’s charge of willfulness. . . . These facts may also be relevant to Samsung’s general narrative of the case. . . .”

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.