Wednesday, February 14, 2018

Liability for Willful Infringement Without Knowledge of the Patent Prior to Suit?

On occasion I have posed the question whether, in the wake of the U.S. Supreme Court's decision in Halo, the trier of fact may find that the defendant willfully infringed if the defendant (1) lacked actual knowledge of the patent at the time the infringement began, but (2) continued to infringe after acquiring such knowledge, such as where the defendant continues to infringe after the patent owner sends a cease-and-desist letter or files suit.  (See, e.g., here, discussing an article by Feldman and Lemley.) On the one hand, the Court in Halo states that "culpability is generally measured against the knowledge of the actor at the time of the challenged conduct,” but does that necessarily mean that a defendant who continues to infringe once the lawsuit has been filed is potentially a willful infringer from that point forward?  Of course, the defendant may have a good faith basis for believing the patent is invalid or not infringed, in which case it probably isn't a willful infringer; so does the issue turn on the defendant's subjective state of mind once the suit is filed (or the cease-and-desist letter is received)?  Or might there be other considerations (such as the difficulty of designing around immediately) that should affect the analysis of willfulness?

Judge Lucy Koh effectively answered the question stated in the first sentence of the preceding paragraph in the affirmative in Apple Inc. v. Samsung Elecs. Corp., Case No. 12-CV-00630-LHK (N.D. Cal .June 23, 2017) (see previous discussion here); and now it appears that another court may have done so too, in Microsoft Corp. v. Corel Corp., Case No. 5:15-cv-05836-EJD (N.D. Cal. Feb. 9, 2018).  The jury verdict finds that Microsoft did not notify Corel of three of the design patents at issue prior to suit, but that Corel nonetheless willfully infringed those three design patents (as well as one other design patent and two utility patents).  (Here is a copy of the verdict.  Here is a link to a story about the case on Law360, and here is a link to one on IP Watchdog.) The jury awarded actual damages of $278,000, and I assume that it remains to be seen whether the judge will award an enhancement.  (I also infer from the Law360 article that the question of whether Microsoft notified Corel may have been relevant to the date on which actual damages began to accrue, under U.S. Patent Act section 287.  I gather that Microsoft was hoping for a larger damages award, based on the theory that damages started accruing several years prior to the initiation of litigation.  For discussion of section 287, see, e.g., here.)  Without knowing anything more about the case, I also can't say whether there was evidence that Corel had actual knowledge (as opposed to actual notice from Microsoft) of any of the patents pre-suit; and actual knowledge is irrelevant under section 287.  But if the case does stand for the proposition that willfulness can be based on a continuation of infringement post-filing, despite the defendant's lack of knowledge prior to that point, this could be an important precedent, assuming it withstands appellate review. 

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